2017-0693761E5 Commission income - corporation

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.

Principal Issues: Whether an individual can earn commission income through a corporation.

Position: Question of fact. Possibly yes.

Reasons: See below.

Author: Robinson, Katie
Section: 9(1)

XXXXXXXXXX                                                                                                                                             2017-069376
                                                                                                                                                                     K. Robinson
July 11, 2017
 
Dear XXXXXXXXXX:
 
Re: Commission income earned by a corporation
 
This is in reply to your correspondence dated March 13, 2017, wherein you requested our views on whether an individual in the business of trading in securities can earn commission income through a corporation under the Income Tax Act (“Act”).
 
Our Comments
 
This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced).  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination.  The income tax treatment of a particular transaction proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R7, “Advance Income Tax Rulings and Technical Interpretations.”
 
In Income Tax Technical News 22, we stated the following:
 
“If insurance agents, realtors, mutual fund salespersons, or other professionals are legally, whether contractually or by statute, precluded from assigning their commissions to a corporation, then the commission income must be reported by the individuals, and cannot be reported through a corporation, regardless of the documentation provided.”
However, based on the comments in Interpretation Bulletin IT-189R2, “Corporations Used by Practicing Members of Professions,” the CRA would generally accept that an individual in the business of trading in securities could earn such income through a corporation provided:
 
* the individual is not otherwise legally, whether contractually or by statute, precluded from earning such income through the corporation, and
* the corporation is factually carrying on that business.
 
Whether a corporation is factually carrying on that business is a question of fact that must be determined on a case-by-case basis and in our view, requires more than a mere assignment of income.
 
We trust that these comments will be of assistance.
 
Yours truly,

Michael Cooke, CPA, CA
Manager
Business Income and Capital Transaction Section
Business and Employment Division
Income Tax Rulings Directorate
 

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