The Meaning of Income
Author | Vern Krishna |
Profession | Professor of Common Law, University of Ottawa Barrister at Law |
Pages | 79-104 |
79
CHA PTER 4
The meanIng
ofIncome
“A word is not a crystal; trans parent and unchanged, it is the skin of a
living thought and m ay vary in colour and content according t o the
circumsta nces and the t ime in which it is used.”1
A. INT RODUCTION
We turn now to the second of our five questions: what is taxable? The
answer to this que stion is the sine qua non of every ta xing statute. In
the Income Tax Act, however, the answer is both obvious and obscure.
The income tax is a tax on income. Thus, the concept of income
determines the size of the tax base and, implicitly, the structure of the
system. We must answer two fundamenta l questions:
1) What is income for tax purpose s? and
2) What is the source of the income?
In answering t hese questions, we start with the general concept of eco-
nomic income and then see how our jurisprudence has modified the
concept for prag matic considerations .
It may be surprisi ng, but the Act does not define the term “income”
for tax purposes. Although the Act sometimes speaks of what we must
1 Justice Holmes in Towne v Eisn er, 245 US 418 at 425.
Income Tax L aw80
include in, or can exclude from, income, it neither identifies nor de-
scribes the legal ch aracteristics of income.2
We include a receipt in the taxable base if it is income unles s, even
though of an income nature, the Act specifically excludes it. The statute
may exempt income because of the status of t he recipient (for example,
the Governor General’s salary a nd allowances are exempt from income)3
or the location where the taxpayer earns it (for example, income of an
Indian on a reserve.)
The following figure is a bird’s eye view of the Act’s characteriz ation
of receipts i nto taxable a nd non-taxable components:
2 For example, in t he Income Tax Act, RSC 1985, c 1 (5th Supp) [ITA], para 6(1)(a)
specifies t hat the value of board and lodgi ng is included in employment income; s
7 deems cert ain stock option benefits to be employ ment income; subs 6(9) deems
imputed interest f rom an interest-free loan to be inc ome, etc. See, for example,
paras 12(1)(c) (interest), 12(1)(j) (dividends) and 12(1)(m) (benefits from tr usts).
3 Ibid, pa ra 81(1)(n).
Receipts
Taxable
Partially
Taxable
Capital
Gains
General
Personal
Use and
Property
Other
Listed
Personal
Property
Fully
Taxable
Oce and
Employment Business Property Other
Non-taxable
Capital Exempt
(s)
Gifts Windfall
Gains
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