A corporation provides an automobile to the shareholder of corporation that carries on a “personal services business” (“PSB”). The corporation is related to another corporation that is a client of the PSB. The corporation issues a T4A to the PSB for the fair market value of the automobile benefit provided. How should this amount be reported by the PSB, and are there any implications to the PSB’s shareholder? CRA responded:
The arrangement … appears to be one of bartering whereby the PSB provides services to its client in exchange for the use of an automobile and possibly other consideration paid by the client. In this case, the value of the services provided by the PSB must be brought into its income under subsection 9(1) where they are of the kind generally provided by the PSB in the course of earning income from its business. In arm’s length transactions, where an amount must be brought into income, that amount is the price which the PSB would normally have charged a stranger for its services. …
If the individual shareholder of the PSB is using the automobile for his/her own personal-use, a benefit under one of subsection 6(1), 15(1), 56(2) or 246(1) of the Act may need to be included in the individual shareholder’s income.