Principal Issues: [TaxInterpretations translation] Is a given transportation allowance paid by a school board taxable?
Position: Not taxable.
Reasons: That allowance is not income from a source that is required to be included in computing income under paragraph 3(a) and is not required to be included in computing income under any other provision of the Act.
XXXXXXXXXX 2010-038960 I. Landry, M.Fisc.
February 3, 2011
Dear Mr. XXXXXXXXXX,
Subject: Transportation allowance
This is in response to your letter of December 6, 2010, asking whether a transportation allowance paid by the XXXXXXXXXX School Board is taxable.
More specifically, you wrote to us that the XXXXXXXXXX School Board provides free transportation to all of its students for their daily travel to and from their classes between their residence and the school. However, the XXXXXXXXXXXX has entered into an agreement for the 2010-2011 school year, automatically renewable, with XXXXXXXXXXXX. Under that agreement, the parent must personally arrange for the transportation of his or her child in consideration for an amount of $XXXXXXXXXXXX per day paid to the parent by the XXXXXXXXXXXX School Board as a transportation allowance.
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
Section 3 sets out the basic rule for determining a taxpayer's income for a particular taxation year. In particular, paragraph 3(a) includes in computing a taxpayer's income for a particular taxation year the total of all amounts each of which is the taxpayer’s income for the year from a source inside or outside Canada, including, without restricting the generality of the foregoing, the taxpayer’s income for the year from each office, employment, business and property.
However, where a payment is a reimbursement of personal expenses, it is our view that the payment would not be taxable.
Although the transportation allowance in this situation is not strictly speaking a reimbursement of expenses, we are still of the view that it is intended to compensate parents for an expense that would normally be borne by the XXXXXXXX School Board and not to generate income to them.
Consequently, we are of the view that the transportation allowance described above is not taxable under the Act since it is not income from a source to be included in computing income under paragraph 3(a) and is not required to be included in computing the parent's income under any other provisions of the Act.
Best regards,
Guy Goulet CA, M. Fisc.
for the Director
Ontario Corporations Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch