10 June 1991 Income Tax Severed Letter

24(1)                              911227
                                             S. Short
                                             (613) 957-2134

          19(1)

June 10, 1991

Dear Sirs:

Re: Employer Paid Scholarships and Bursaries

This is in reply to your letter of March 14, 1991 which queries the deductibility to an employer of amounts paid as bursaries and scholarships to the children of employees. You have asked that we include comments addressing those instances where the employee is related to the employer, for example, where the recipient of the scholarship or bursary is the child of a principal member of a corporate employer.

Where a scholarship or bursary program is set up by an employer, with eligibility to participate being open to all employees, payments under the program would be considered made in respect of, in the course of, or by virtue of the office or employment of the employees and, consequently such payments would be considered business outlays or expenses for the purposes of paragraph 18(1)(a) of the Act. Where the program is not operated as above and assistance under the program is provided to an individual by virtue of his or her shareholdings, no deduction is permitted to the employer. In circumstances where all employees in a corporation are also shareholders, there is a presumption that the employee/shareholder receives the benefit in the capacity of shareholder.

We trust our comments will be of assistance to you.

Yours truly

for Director Business and General Division Legislative and Intergovernmental Affairs Branch

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