An Indian living on a reserve and performing a portion of his duties of employment on a reserve takes an unpaid leave of absence that is funded by a salary advance, that is required to be repaid over a number of years. Is the advance taxable? CRA stated:
[T]he fact that the duties of an employment are performed on a reserve is an important connecting factor. Consequently, in applying the prorating rule in Guideline #1 to an Indian's employment income, the issue is to determine where the duties are performed. In the situation of a salary advance, it is not possible to tie the employment income to the reserve since the employment duties have not yet been performed. Consequently, paragraph 81(1)(a) does not apply to this amount and the Indian will have to include the salary advances in income for the year under subsections 6(3) and 5(1).