Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
whether the Dept's admin position relating to gifts has been changed to permit gifts with a value up to $200 to not be included in employee's income and whether an amount is required to be included in an employee's income for an award if the award has a departmental or corporate logo permanently affixed or engraved on it
Position:
no change in $100 ceiling re. admin position. While a logo or engraving may reasonably lessen the value of an award, it does not mean that an award has no value because of the existence of a logo or engraving.
Reasons:971061
Correctional Service Canada,
Ontario Region Sandra Short
P.O. Box 1174 971069
440 King Street West
Kingston, Ontario
K7L 4Y8
Attention: L. Wong,
Regional Chief,
Financial Management and Accounting Systems
May 29, 1997
Dear Sirs:
Re: Instant non-cash awards
This is in reply to your correspondence of April 17, 1997, concerning the taxation of non-cash awards for excellent performance by employees. You have asked whether the value of an award or gift is required to be included in an employee's income if:
(1)the gift or award is the only one given to the employee in a taxation year and its value is less than $100 (or $200 if the limitation has been raised as has been suggested to you) or
(2)the gift or award has the departmental logo permanently affixed or engraved on it.
A gift, either in cash or in kind, from an employer to an employee, is a benefit derived "in respect of, in the course of, or by virtue of" an office or employment and is required to be included in income by virtue of paragraph 6(1)(a) of the Income Tax Act (the "Act"). Similarly, when an employee is rewarded by an employer with merchandise or other non-cash item, the fair market value of the award must be included in the employee's income. If an item is personalized with a corporate or departmental logo or engraved with the employee's name or a message, the fair market value of the item may be negatively affected. In such cases, the amount to be included in the employee's income may be reduced by a reasonable amount, having regard to the circumstances. Depending on the value of a particular award, the existence of a departmental logo may have little, if any, impact on the fair market value of the item. Each situation of this nature should be considered on its own merits. There is no position which provides that, so long as an award has a fair market value of less than a defined dollar limit, or so long as a logo is permanently affixed on the award, that no amount is required to be included in the employee's income. However, there are situations, such as when the award given is a plaque, trophy or other memento of nominal value for which there is no market, that a fair market value does not exist and it is not necessary to include any amount in an employee's income as a taxable benefit. The onus rests with the employer to reasonably determine when a market for a nominal item does not exist.
As mentioned above, a gift given by an employer to an employee results in a taxable benefit to that employee. However, as provided in paragraph 9 of Interpretation Bulletin IT-470R, when the value of a gift commemorating a wedding, Christmas or similar occasion does not exceed $100 and if the employer does not claim its cost as an expense in computing income, the gift is not required to be reported as income of the employee. This practice only applies to one gift to an employee in a year except in the year that an employee marries in which case it applies to two gifts if one of the gifts is a wedding present. This position is also publicized in the "Employer's Guide to Payroll Deductions, Taxable Benefits and Non-Resident Information." It is our understanding that there are no plans to expand this position to include incentive awards, performance awards or similar awards or to increase the $100 ceiling on the exemption to $200.
We trust our comments will be of assistance to you.
Yours truly,
R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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