Non-Arm's Length Gifts
Gift to myself as a small business owner
I am incorporated, and I am the only one person in my home-based small business. Just wondering am I able or not to benefit from the tax deduction if I buy myself a gift which is under $500.
I am fairly certain the answer is no. Here's my reasoning.
Subsection 15(1) of the Income Tax Act reads as follows:
"Where at any time in a taxation year a benefit is conferred on a shareholder, or on a person in contemplation of the person becoming a shareholder, by a corporation ... the amount or value thereof shall ... be included in computing the income of the shareholder for the year."
David Nolke explains in a 2006 CGA Magazine article titled Shareholder Benefits: Beware of the perils of a subsection popular with auditors that subsection 15(1) "is a stand-alone subsection. The shareholder who receives a benefit from a corporation is taxed on the value of the benefit — there is no relieving provision somewhere else in the Act that allows the corporation to claim the value of the benefit as an expense."
Basically, I understand this to mean that CRA's gift and award policies don't apply to non-arm's length employees ... that would be you. Sorry.
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