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.

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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.

P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

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