Office

A lawyer who did not practice as an estate executor or trustee, was asked by the deceased to act as the executor of her estate primarily as she trusted him and he had represented her in prior cases. Are the lawyer's trustee fees income from a business or an office? CRA responded:

Where the estate trustee is a person who does not act in this capacity in the course of carrying on a business, the fee for acting as estate trustee is considered to be income from an office. Such a situation could exist even where the estate trustee is a lawyer if the normal practice does not include the administration of estates and the lawyer was appointed on personal grounds; for example, because he or she was a friend of the deceased.

…Where a trustee fee…is treated as income from an office the estate must withhold income tax and Canada Pension Plan contributions…and prepare a T4… . Generally, a person making a payment of fees, commissions or other amounts for services described in paragraph 153(1)(g)… is required…to make an information return in prescribed form (T4A)… .

The XX (who generally have had a professional practice) are appointed by order in council and receive a fixed amount per file. Does the incurring by them of unreimbursed expenses (e.g., for laptops) render their remuneration not fixed or ascertainable? In finding that the XX held an "office," CRA stated:

2011 FCA 314…and the Real Estate Council (Alberta) (2012 FCA 121)…stand for the position that it is not required for the number of sittings to be known in advance… . These FCA cases opine that a legal entitlement to a per diem rate of remuneration established in advance is sufficiently fixed or ascertainable to meet the definition of "office".

Since "stipend and remuneration" are considered to refer to gross (not net) amounts under the definition of "office", unreimbursed expenses (whether or not the nature or quantum of the expenses is known in advance by the individual) are not considered when determining whether a particular amount is fixed or ascertainable.

Where an executor of an estate in receipt of fees does not earn the fees in the course of a business, the fees will be considered to be income from an office.

CRA stated that, notwithstanding the archiving of IT-377R, it is still its view that:

Fees earned by a taxpayer for acting in the capacity of an executor in the course of a business are included in the business income of the taxpayer under subsection 9(1) of the Act. Where the taxpayer does not act in the course of carrying on a business, the executor fees are included in income under paragraph 6(1)(c) of the Act.

Per diem judges and per diem justices of the peace, who are former full-time judges and former full-time or part-time justices of the peace, are paid a fixed rate per day of work, and are not provided with an office space, office supplies or secretarial/administrative assistance. In finding that they hold an office, CRA stated that the:

case law on the subject...specifies that a legal entitlement to a per diem rate of remuneration established in advance is sufficiently "fixed or ascertainable" to meet the definition of an "office".

Before concluding that honoraria paid to board members should be reported on a T4 rather than T4A slip (and were subject to source deductions), CRA stated:

When an individual is a member of a board by virtue of being appointed in a representative capacity and a fixed or ascertainable honorarium or fee is paid, it is our view that the amount would be taxable as income from an office or employment. This position is consistent with case law on the subject, which specifies that a legal entitlement to a per diem rate of remuneration established in advance is sufficiently "fixed or ascertainable" to meet the definition of an "office".

In light of the definition of "office" in s. 248(1), remuneration paid to board members is considered to be income from an office and subject to withholding of tax at source.

Before finding that allowances and travel reimbursements paid by an NPO to volunteer directors were generally non-taxable, CRA stated that although “a director is generally considered to hold office, this is not the case for a director who works for a company solely on a voluntary basis,” which references the situation where “individuals who work on a volunteer basis receive no remuneration or at most minimal remuneration for services rendered on a volunteer basis” – with remuneration considered minimal where the remuneration paid to the individual is “significantly less than that which would have been paid to an employee or self-employed person rendering similar services,” so that “it is unlikely that minimal remuneration is sufficient to secure the volunteer's services.”

The trustees of a REIT (who in that regard were not acting in the course of a business) received fees from the REIT equaling $20,000 per year, plus $1,000 for each meeting attended in person (or $500 if attended by telephone) plus reimbursements for out-of-pocket expenses incurred in the performance of their duties as trustees. CRA concluded that such fees were from an “office,” and thus were salary and wages and, in support, quoted from the statement in Merchant that:

I am not convinced that at the time of taking office the taxpayer must know how much he will receive. It seems to me a per diem rate, or a specified amount per sitting renders the income sufficiently ascertainable to meet the definition in section 248(1).

A unionized employee who is temporarily released from the employee’s employment to take up a representative position with the union would hold an "office."