Principal Issues: [TaxInterpretations translation] Could collection automobiles owned by a corporation result in a taxable benefit to an individual for the purposes of section 6 or subsections 15(1) and (5) in a particular situation?
Position: Question of fact.
Reasons: General comments.
XXXXXXXXXX I. Landry, M. Fisc. 2011-042346
February 23, 2012
Dear Sir,
Subject: Collector automobiles owned by a corporation
This is in response to your fax of October 4, 2011 in which you asked us if collector automobiles owned by a corporation may give rise to a taxable benefit to an individual for the purposes of section 6 or subsections 15(1) and 15(5) of the Income Tax Act (the "Act") in the following particular situation.
You described a situation where an individual is the sole shareholder, director and officer of a corporation ("Autoco"). Autoco owns a number of collector automobiles that it has acquired as a long-term investment in order to realize a gain on their future disposition. Autoco does not use them in the course of a business carried on by it. Autoco has occasionally disposed of or exchanged certain collector automobiles in accordance with the investment strategy of the individual.
The individual uses each of the automobiles owned by Autoco for a maximum of 500 kilometers per year. The individual uses the automobiles exclusively in order to go to collector automobile shows, to perform automobile maintenance or to avoid damage to the mechanical parts of these automobiles that may occur when they do not travel a minimum number of kilometers per year. The individual personally owns other automobiles that he uses for all his personal travel.
It is our understanding that for the purposes hereof, collector automobiles are automobiles within the meaning of that term in subsection 248(1).
All legislative references herein are to the provisions of the Act.
Our Comments
The situation that you submitted to us appears to be an actual situation for which we cannot give you a definitive opinion. However, we are able to offer the following general comments that may be helpful to you.
The question of whether an individual receives a benefit in a particular situation and whether any such benefit is received by a taxpayer in the capacity of shareholder or of employee of a corporation, can only be determined after an examination of all the facts and circumstances specific to that particular situation. The same applies to determining the quantum of that benefit. It is therefore impossible for us in this response quest to pronounce definitively on this subject.
Where an automobile, collector or otherwise, is made available to an individual in the capacity of employee and the employee uses it in part for personal purposes, a taxable benefit under paragraph 6(1)(e), in the form of a reasonable standby charge, must generally be included in the employee’s income. In addition, if an amount is paid or payable in respect of the operation of the automobile related to the individual’s personal use, the individual must include a taxable benefit in that individual capacity under paragraph 6(1)(k). If the benefit is received by the individual in the capacity of shareholder, section 15 will apply rather than section 6.
For an automobile to be made available to an employee or shareholder, the employee or shareholder must have access to it or control over it. In order for a benefit to be included in computing an individual's income under section 6 or section 15, the employee or shareholder must however have the right to use the automobile for personal purposes, which is essentially a question of fact which can only be resolved in the light of the particular circumstances of each situation.
Where a person is both a shareholder and an employee of a corporation and receives a benefit from that corporation, the Canada Revenue Agency generally considers that there is a presumption that the person benefited from that benefit as a shareholder where that person exercises significant influence over the conduct of the affairs of the corporation. However, where a similar benefit is offered by the corporation to all of its employees, including those who are also shareholders, the latter are usually considered to have received a benefit by reason of their employment. Finally, when all employees of a corporation are shareholders and it is reasonable to conclude that the benefit was conferred under a compensation plan, the benefit is then considered to be conferred because of their employment.
For more details on this subject, we invite you to consult Interpretation Bulletins IT-432R2, Benefits Conferred on Shareholders and IT-63R5, Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer - After 1992.
In closing, we would like to point out that we make no comment in this response with respect to determining the nature of the income or loss that may arise from the sale of collector automobiles. That question can only be answered after considering all the relevant facts.
Best regards,
Michel Lambert, CA, M. Fisc.
for the Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and
Regulatory Affairs Branch