Bradley v. The Queen, 2006 TCC 500, is something of a surprise. The appellant paid salaries to her young children and attempted to deduct them. The CRA reassessed, and the Tax Court upheld the reassessment because, in the Court’s view, the appellant never really paid anything to the children. She merely deposited amounts to “in trust” accounts for the children over which the appellant had complete control.
The Court wrote:
[8] But to the Court, the key fact is that none could be withdrawn or used by the children unless the Appellant did so. Moreover, the amounts allegedly paid did not vary in the two years in question. Thus it would seem that the children’s work and/or the Appellant’s agency income did not vary.
[9] But in a related family, parent-child situation, payment must be made and deposited as it would be to a stranger. The payee must receive and control the alleged payment in his or her name and be able to use it for his or her benefit without any further control by the payer. That did not happen in this case.
