Determine the tax consequences of each of the following independent
situations. All relate to the current taxation year. Cite an ITA or IT reference where
(a) During the year, Susan won an expense paid holiday to Las Vegas in a contest
sponsored by her employer. Her prize was for out-performing her fellow workers. Both
she and John, her husband, went on the trip. The cost to the company was $4,000.
John and Susan would have had to pay $6,000 for a similar trip.
IT-75 and IT-470 indicate that the fair market value of prizes won in a work-related
situation is the amount to be included in the employee’s income. According to IT-
470, the cost to the employer of an employer-paid vacation trip is considered the
amount of the taxable benefit.
Even though Susan and John would have had to pay $6,000 for the trip, since the
cost to the company is $4,000, the CRA would view $4,000 as the amount of the
Therefore, Susan reports $4,000 as a benefit enjoyed by virtue of her
(b) Jacob eats daily in his company’s cafeteria. He estimates that this arrangement
saves him at least $500 a year.
Jacob’s saving is not considered a taxable benefit by the CRA, provided that
Jacob pays a reasonable amount for each meal (IT-470).
(c) On January 2, 20X5, Bridget’s employer made an interest-free loan of $10,000 to
Bridget, allowing her to pay a number of personal debts. She repaid $4,000 of the
principal on January 31, 20X6. (Assume the prescribed rate is 4%.)
Bridget’s taxable benefit is the amount of the prescribed rate of interest, times the
principal outstanding, less her interest payments during the year and within the
following 30 days. Therefore, her taxable benefit is $400 (4% X $10,000).