Revenue Canada Taxation Head Office
XXX
Peter K. Noack (613) 957-8963
January 8, 1988
Dear Sirs:
We reply to your letter of November 20 concerning a proposed payment of a bonus by a corporation to the estate of the principal shareholder as part of his remuneration for services rendered during the corporation's fiscal year in which he died.
We do not express opinions on proposed specific transactions other than by way of an advance income tax ruling. Nevertheless, we offer the following general comments.
In our view, a bonus that is determined at the end of a corporation's taxation year and paid in the following year is as much a periodic payment of remuneration as periodic payments of a fixed salary. If such an amount is paid to the estate of the employee who would have received it had he lived, subsection 70(1) of the Income Tax Act applies to include the amount in the income of the deceased for the year of death.
The above general comments do not constitute a binding ruling.
Yours truly,
for Director Financial Industries Division Rulings Directorate