Principal Issues: An automobile is personally leased by a shareholder/employee in order to obtain preferential pricing and the employer corporation pays all the operating and lease costs.
Position: Whether a standby charge and operating cost benefit applies to the shareholder/employee.
Reasons: No because the corporation is not the lessee.
May 6, 2008
Ms. Kathleen Houselander HEADQUARTERS Examination and Taxable Benefits Section Kathryn McCarthy CA Trust Accounts Division
Attention: K. Houselander
2007-026336
Employee/Shareholder Automobile Benefit
We are writing in response to your e-mail of December 19, 2007, concerning the above noted subject and further to subsequent telephone conversations between Joanne Leblang of the Windsor TSO and Kathryn McCarthy and Renée Shields of the Income Tax Rulings Directorate.
You described an automobile leased in the name of a shareholder/employee ("Shareholder A") and used exclusively by Shareholder A. The lease agreement describes the primary use of the automobile as "personal, family or household" and the lease was entered into for the purpose of obtaining a reduced lease rate that is only available to individuals. The employer corporation ("Corporation A") pays all the operating and lease costs.
You enquired as to whether a standby charge and operating cost benefit applies pursuant to paragraphs 6(1)(e) and (k) and subsection 15(5) of the Income Tax Act ("the Act").
In our opinion, since the lease is in the name of Shareholder A, a standby charge and operating cost benefit do not apply. However Shareholder A would be subject to benefits determined under paragraph 6(1)(a) of the Act with respect to the lease costs and under paragraph 6(1)(l) of the Act with respect to the operating costs.
We trust our comments will be of assistance to you.
Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
c.c. JoAnn Leblang, Windsor TSO
c.c. Dian Hardiman, Trust Accounts HQ