Income Tax Severed Letters - 2010-11-05

Principal Issues: What is Canada Revenue Agency's ("CRA") basis for calculating the personal use taxable benefit of a corporate asset?

Position: It is a question of fact. Generally, fair market value.

Reasons: The CRA's general position on the taxable status of employee benefits is discussed in Interpretation Bulletin IT-470R (Consolidated) - "Employees' Fringe Benefits" and the Employer's Guide T4130. Generally speaking, it is accepted that the value of an employment benefit is its fair market value. As noted in paragraph 10 of IT-470R, where a vacation property owned by an employer is used for vacation purposes by an employee, the employee's family or both, there is a taxable benefit conferred on the employee under paragraph 6(1)(a) the value of which is equivalent to the fair market value of the accommodation less any amount which the employee paid to the employer.

Principal Issues: Whether the following expenses are eligible medical expenses for the purposes of the medical expense tax credit: 1) a dock landing gate as a safety measure associated with the use of a wheelchair, 2) the application of 3M window film on all interior windows of a house to filter out UV rays, 3) an air purifier for a house because of asthma and a compromised immune system

Position: 1) Yes 2) no 3) Yes

Reasons: 1) Paragraph 118.2(2)(l.2) of the Act provides for reasonable expenses relating to renovations or alterations (including extensions) to a dwelling of the patient who lacks normal physical development or has a severe and prolonged mobility impairment, to enable the patient to gain access to, or to be mobile or functional within, the dwelling. 2) The application of 3M window film on all interior windows of a house to filter out UV rays is not a prescribed device under paragraph 5700(i) of the Regulations. There is also no other provision under subsection 118.2(2) of the Act which would permit the cost of the 3M window film to be claimed as an eligible medical expense for the purposes of the METC. 3) Under the list of prescribed devices or equipment in section 5700 of the Regulations, paragraph (c.1) describes an "air or water filter or purifier for use by an individual who is suffering from a severe chronic respiratory ailment or a severe chronic immune system disregulation to cope with or overcome that ailment or disregulation".

Principal Issues: Can separated parents each claim the wholly dependent person tax credit for a child they have custody of?

Position: Yes.

Reasons: Assuming all conditions of paragraph 118(1)(b) of the Act are met and none of the limitations in subsections 118(4) and (5) apply, each parent would be able to claim the wholly dependent person tax credit for the child they have custody of.

Principal Issues: What is Canada Revenue Agency's ("CRA") accepted method for calculating a taxable employment benefit regarding reduced student tuitions?

Position: It is a question of fact.

Reasons: The CRA's general position on the taxable status of employee benefits is discussed in Interpretation Bulletin IT-470R (Consolidated) - Employees' Fringe Benefits and the Employer's Guide T4130. As noted in paragraph 20 of IT-470R, where an educational institution that charges tuition fees provides tuition free of charge or at a reduced amount to an employee of the institution, or to the spouse or children of the employee, the fair market value of the benefit must be included in the employee's income.

Principal Issues: Are amounts paid to a radiation oncologist, clinical fellow included in income as employment income, research grant or fellowship?

Position: It is a question of fact. The CRA would likely consider that the amounts paid would be taxable as employment income.

Reasons: The CRA would likely consider that the amounts paid to the radiation oncologist, clinical fellow would be taxable as employment income but we do not have all the facts.