A. Humenuk (613) 957-2135
JAN 23 1989
Dear Sirs:
Re: Taxable Benefits and Director's Liability
We are responding to your letter dated October 17, 1988, wherein you requested our views on the tax implications of a reimbursement to an employee in the situation described in your letter.
As we understand the situation, the employee in question became a director of corporation B as required by his employment with corporation A and has been successfully sued for $100,000 in his capacity as a director of corporation B. You have asked whether a taxable benefit will arise if corporation A reimburses its employee for the amount of the judgement.
You have not provided us with enough detail to give you a definitive response. The facts and circumstances surrounding a particular situation such as you have described may vary widely in detal1 and tax implications. However, in general, it is our view that the amount would likely represent a taxable benefit to the employee. If you have a factual situation which you feel warrants a different treatment, we suggest that you outline the facts in as much detail as possible to your local District Taxation Office in order to obtain their view of your particular situation.
Yours truly,
ORIGINAL SIGNED BY ORIGINAL SIGNÉ PAR
P.D. FUOCO
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch