11 August 1997 Internal T.I. 9711857 - TAXABLE BENEFIT - SERVICES PROVIDED BY EMPLOYER

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 a taxable employee benefit for services provided free by a dentist to his employees would be a deductible business expense to the dentist.

Position:

Only outlays or expenses, if any, incurred in providing the free dental services to the employees can be deducted in computing income. No deduction can be claimed with respect to the value of the dentist's labour.

Reasons:

The dentist's labour is not an outlay or expense incurred in providing these services.

					August 11, 1997

	London Tax Services Office	HEADQUARTERS
	Client Services		J. Gibbons
	Dan Phillips, Assistant Director    (613) 957-8953

Attention: C. Fanset
Technical Advisor
7-971185

Taxable Benefit Expense

This is in answer to your memorandum of April 25, 1997, wherein you requested our comments as to whether a taxable employee benefit for services provided free by a dentist to his employees would be a deductible business expense to the dentist.

According to paragraph 6(1)(a) of the Income Tax Act (the "Act"), subject to the Department's administrative policies set out in Interpretation Bulletin IT-470R, the value of benefits of any kind whatever received by a taxpayer in the year in respect of employment must be included in income, unless specifically excepted. Since neither IT-470R nor the Act exempts free dental services provided by a dentist to his or her employees, we agree that such services would constitute a taxable benefit to the employees.

With respect to the dentist, as provided in paragraph 18(1)(a) of the Act, an outlay or expense can be deducted in computing income from a business if it was made or incurred by the taxpayer for the purpose of gaining or producing income from the business. Therefore, the outlays or expenses, if any, incurred in providing the free dental services to the employees could be deducted in computing income, if not otherwise deducted. However, since the dentist's labour would not be an outlay or expense incurred in providing these services, no deduction could be claimed with respect to the value of such labour.

C. Chouinard
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch