Words and Phrases - "service"
7 October 2022 APFF Financial Strategies and Instruments Roundtable Q. 5, 2022-0936301C6 F - Guarantee fee
An individual, a sole shareholder of a corporation, borrows money in order to earn business or property income. To secure his personal loan, his corporation grants a mortgage on a building it owns. The shareholder makes all principal and interest payments on his loan, and also pays his corporation a reasonable fee for the grant of the security (a “guarantee fee”).
Regarding whether the fee would give rise to income from property or a business to the subsidiary, CRA stated that it “generally considers that [a] guarantee fee is received for a service,” that Timmins held that “the provision of services under contract for a fee may be a business within the meaning of subsection 248(1) by virtue of being an undertaking of any kind whatever,” and that whether a business was carried on (i.e., there was an ongoing conduct or carriage of the business) was a question of fact.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e.1) | one-time fee to subsidiary for mortgaging its property as security for a bank loan to the shareholder would not qualify under s. 20(1)(e.1) | 139 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) | one-time fee to subsidiary for mortgaging its property as security for a bank loan to the shareholder could qualify under s. 20(1)(e) | 175 |
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | no shareholder benefit where corporation receives a reasonable pledge (or “guarantee”) fee from its shareholder | 124 |
12 November 2013 Internal T.I. 2013-0497611I7 F - Feuillet T1204
Should reimbursements for travel expenses of external consultants to a federal agency be included on the T1204 form? The Directorate responded:
[I]t is imperative to validate that the amount was paid or reimbursed under a services contract … . [I]f the relationship between the federal agency and the recipient of a payment is not contractual in nature, the form does not have to be filed.
…The term service generally refers to manual or intellectual work that has a certain value in the eyes of a customer. In our view, if to provide the service, the supplier must travel, the latter would be part of the service and would be included on the T1204 form.
...[A]ssuming that a contractual relationship exists between the consultants and the federal agency payer … reimbursements for travel expenses should be disclosed on the T1204 form.