An executor who receives fees for acting as such must include the fees in income, usually as income from an office (employment income). Can this result be avoided if the fees are called a “legacy” in the will that provides for their payment? Not according to Messier v. The Queen, 2008 TCC 349.The taxpayer’s uncle died leaving numerous legacies to various nieces and nephews. The taxpayer was appointed a “liquidator” under the will, for which the taxpayer was entitled to receive a “legacy” (ie a gift, so-called) “for fulfilling the duties of his office”. The notary who prepared the will also testified that if the taxpayer had not performed the duties of his office, he would not have been entitled to the “legacy”.
In light of this evidence, the Tax Court had little trouble concluding that the “legacy” was really a fee for performing the office of an executor or liquidator and that the CRA had been correct to reassess the taxpayer to require him to include the amount in income for tax purposes. The Court reached this conclusion despite the fact that the CRA had agreed that an identical “legacy” provided through the will of another of the taxpayer’s relatives was not taxable. (The Court referred to Klassen v. The Queen, 2007 FCA 339, for the proposition that “The Minister is not bound by a previous decision of one of its officials, if that decision was erroneous.”)
