| November 14, 1990 | |
| TORONTO DISTRICT OFFICE | RULINGS DIRECTORATE |
| M. Eisner | |
| Attention: L. Murray | (613) 957-2138 |
| Appeals Division | |
| 902489 |
SUBJECT: Commissions on Personal Investments
This is in reply to your memorandum of September 17, 1990 concerning the Department's position, as set out in paragraph 27 of Interpretation Bulletin IT-470R, regarding the treatment of commissions earned on a life insurance salesperson's own policies as compared to commission amounts received by employee salespersons on security transactions completed for their own account.
Paragraph 27 states, in part, that "where a life insurance salesperson acquires a life insurance policy, a commission received by that salesperson on that policy is not taxable provided the salesperson owns that policy and is obligated to make the required premium payments thereon". That statement represents a long standing position and reflects the view that this type of transaction is analogous to chose mentioned earlier in paragraph 27; i.e., commissions received by a salesperson on merchandise acquired for his own use. However, the situation concerning securities salespeople is not regarded as analogous to that of life insurance salespeople because the securities, which they purchase through their employers, are not in the nature of merchandise (or life insurance policies) sold by the employer. Rather, they are properties acquired by the salespeople in the marketplace (stock exchange) with the brokerage assistance of the employer.
These comments are also applicable to commissions earned by real estate salespeople whose circumstances are similar to those of securities salespeople.
Accordingly, the Department is not prepared to extend the position set out in paragraph 27 of IT-470R intended to exempt product (merchandise) discounts and life insurance commissions to commissions earned by securities salespersons.
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch