[MrBlackhill]

Otherwise CRA would arguably be getting into territory of taxing you on the fair value of goods you purchase instead of the actual cash paid.

Yet if I have a principal residence which is 2 floors: main floor and basement, and I rent to a friend/family the full basement for 1$/month, then I could deduct 50% of mortgage interest, taxes, utility bills, internet, etc, reducing my income.

But CRA wouldn't like this because I'm not charging the fair value market value, right?

So the CRA in this case would debate the fair market value.

Now, how do I know that I'm not charging too low to get into trouble? I mean, what if I charge $100/month? Still too low? $200/month? ...

 

[fireseeker]

I don't believe this is classified as 'income', it is more of a company specific sales reward. You don't get taxed on things like cash back on purchases from credit cards, Travel points , Shoppers Optimum or Diamond and other purchase rewards programs, fees waived for holding cash balances, no tax sales events , no interest for a year, BOGO free etc or other programs.

The comparison with credit card rewards is interesting.
I buy a TV for $1,000 from Best Buy, and my credit card company gifts me with $10. What is the $10?
It is not a discount, because I didn't buy the TV from the credit card company.
Perhaps it's a discount or inducement for borrowing money? Maybe, but I'm not paying interest if I settle my CC bill in time.
In fact, one could argue that the 21-day grace period for borrowing is itself another discount or inducement. The CC company offers it in the hope that I will borrow money for longer than 21 days. Regardless, I pocket a 1% bonus that is not taxable.

And isn't that what brokerage transfer bonuses are?
They are an upfront discount or inducement in the expectation or hope that the customer will one day conduct business with them that is profitable. There is a long history of such bonuses or gifts from banks and brokerages (and other companies). There is tax code language that says "a promotional incentive under a program offered to a broad class of persons in a normal commercial or investment context and not established mainly for tax purposes" is not taxable.
The CRA has further opined: "We would expect that market constraints will generally ensure that incentive programs are in fact commercially reasonable if offered to a broad class of investors."
(The above quote was offered in response to questions about advantages gained in registered accounts, but seems broadly applicable. SOURCE)

I am no tax expert, but I am not aware of the CRA issuing a bulletin clarifying the nature of these payments. If they are properly taxable, a simple bulletin would be in order, along with direction to banks and brokerages to issue the appropriate T slips.
But the CRA has been silent. Even tax pros say the issue is not clear.

The fact that the brokerage bonuses are one-time in nature (even if paid out over time) suggests they are not income, unlike recurring interest, but are marketing bonuses.
Just like those made by credit card companies.
And note the typical size of such offers: 1% in each case.

 

[Covariance]

Yet if I have a principal residence which is 2 floors: main floor and basement, and I rent to a friend/family the full basement for 1$/month, then I could deduct 50% of mortgage interest, taxes, utility bills, internet, etc, reducing my income.

But CRA wouldn't like this because I'm not charging the fair value market value, right?

So the CRA in this case would debate the fair market value.

Now, how do I know that I'm not charging too low to get into trouble? I mean, what if I charge $100/month? Still too low? $200/month? ...

They will make you prove the rent being charged is market rent. There is no specific test, it is up to them whether they will accept your explanation. If it were to go to court a third party assessment from an expert witness would likely suffice.

 

[Covariance]

The comparison with credit card rewards is interesting.
I buy a TV for $1,000 from Best Buy, and my credit card company gifts me with $10. What is the $10?
It is not a discount, because I didn't buy the TV from the credit card company.

It is not relevent as you are buying the TV with after tax dollars. You are not claiming the cost of the TV as deduction against revenue to arrive at taxable income. If you were, then you would only be permitted to claim what you paid. If it were anything else it should be intuitively obvious that no company would ever claim to make a profit because all expenses would be inflated.

 

[fireseeker]

It is not relevent as you are buying the TV with after tax dollars. You are not claiming the cost of the TV as deduction against revenue to arrive at taxable income. If you were, then you would only be permitted to claim what you paid. If it were anything else it should be intuitively obvious that no company would ever claim to make a profit because all expenses would be inflated.

Sorry, I'm not following this.
The thread is about bonuses offered for moving investment assets. Expenses are not germane.

 

[MaxedOut]

Sorry, I'm not following this.
The thread is about bonuses offered for moving investment assets. Expenses are not germane.

If you came to the conclusion that expenses are not relevant to the argument of whether these bank bonuses are taxable then you are following perfectly well and think we all agree.

 

[fireseeker]

Getting a discount on shreddies at the grocery store does not imply you don't have to report income from a bank promotion.

I get how you can see it this way but in my opinion the logic is not related. The incentives you describe above are a discount on expenses.

The promotions from the bank are directly related to investing your money with them over a specific period of time (otherwise known as interest).

I don't see how credit card bonuses are a discount on expenses. The expense was not incurred with the credit card company. The CC company is not discounting anything. Instead, it is inducing you to borrow from them. Which may cost you nothing. In which case there is nothing to discount. And, AFAIK, the CC bonus is not taxable. It's a marketing gambit, like handing out a toaster.

Or take time share pitches. You give the sales guy your time, and they give you and your partner a $100 steak dinner. They expense the dinner, but do you have to declare it as income?

 

[MaxedOut]

I don't see how credit card bonuses are a discount on expenses. The expense was not incurred with the credit card company. The CC company is not discounting anything. Instead, it is inducing you to borrow from them. Which may cost you nothing. In which case there is nothing to discount. And, AFAIK, the CC bonus is not taxable. It's a marketing gambit, like handing out a toaster.

Or take time share pitches. You give the sales guy your time, and they give you and your partner a $100 steak dinner. They expense the dinner, but do you have to declare it as income?

The cc company collects a fee from the retailer for providing the payment service. Part of that fee gets passed on in points or promotions as a discount. Its directly related to expenses paid. It is not related to an investment of a specific amount for a specific period of time and is not the same thing.

The burden is on you to prove it's not taxable not the other way around as the general requirement to declare income without slips is clear.

 

[Covariance]

Sorry, I'm not following this.
The thread is about bonuses offered for moving investment assets. Expenses are not germane.

It was your example to buy a TV, not mine.

 

[Retiredguy]

What about the car dealers that say we’ll give you $500 if you’re a member of the armed services or as a loyalty for previous owners of the brand. These amounts are received after pst/gst or hst tax is paid on the full sale amount. Maybe that 500 is taxable income? I have no idea and wouldn’t report the 500 as income. I have always wondered why the 500 is applied only after the prov/ fed sales tax has been applied?

Seems to me these inducements to transfer investment accounts is similar.

 

[AltaRed]

The fact that the brokerage bonuses are one-time in nature (even if paid out over time) suggests they are not income, unlike recurring interest, but are marketing bonuses.
Just like those made by credit card companies.
And note the typical size of such offers: 1% in each case.

I agree. Credit card issuers are bribing consumers all the time with bonuses to move accounts to them. Sometimes a straight up bonus, other times higher cashback for a limited period. I don't see how that is different from bribes from discount brokerages as an incentive to move accounts to them, or banks for moving savings/chequing accounts to them. ISTM this practice has been going on for decades and CRA, to my knowledge, has not said 'boo' to any of this.

 

[Covariance]

Bringing this back on the original question in post 1 from @MrBlackhill , repeated in quotes below;
” There's a lot of promotions going on where institutions are competing to get clients and offer a transfer bonus which can be 1% to 2% of the value of assets transfered. Some of these offers can get you up to $20k bonus from transferring $1M.

I've seen people debating whether this was taxable”

In my opinion if an FI gives an account owner $20K because they transferred and maintained a $1M balance that should be brought into income by the account holder.

 

[Jimmy]

Getting a discount on shreddies at the grocery store does not imply you don't have to report income from a bank promotion.

I get how you can see it this way but in my opinion the logic is not related. The incentives you describe above are a discount on expenses.

The promotions from the bank are directly related to investing your money with them over a specific period of time (otherwise known as interest).

I studied taxation ages ago. These sales inducement programs were not mentioned or in the ITA as far as I can recall. Mr. Blackhill listed a section of the ITA for inducements that relate to property or business income. Taxable benefits too were generally only from the employer so I dont think this is a taxable event. Someone can call the CRA to confirm.

 

[saver777]

I will likely have over $10k of transfer bonuses earned this year. Asked my tax accountant friends. The one who works at the CRA (CPA, CA trained at a Big 4 firm) says that she can’t see this as non taxable income, and that it’s just a matter of time they get to auditing these. Of course that was just conversation; no research was done.

So I tried digging myself.

Under another topic re how it will impact RRSP room when a bank (e.g., TD) pays the transfer bonus directly into RRSP account - Canada.ca states that since it’s considered a return on investment, it doesn’t impact RRSP room. But the fact that the CRA considers it a return on investment from that perspective leads me to believe that it’s also a return on investment for tax purposes.

Link: Income Tax Folio S3-F10-C3, Advantages – RRSPs, RESPs, RRIFs, RDSPs, FHSAs and TFSAs - Canada.ca

Excerpt:

Promotional incentives
3.12 It is common practice for financial institutions and other firms in the investment industry to offer fee waivers, preferential pricing, bonus interest, and other promotional incentives. Often these incentives require the customer to satisfy certain criteria such as maintaining a minimum investment balance, having a minimum number of products, opening a new account, or investing additional funds. Where a customer’s registered plan is taken into account in determining eligibility, the incentive could be viewed as conditional on the existence of the plan. However, most conventional incentives are accommodated by one or more of the exceptions described in ¶3.7(a), (d), or (e). Examples 2 to 6 demonstrate common situations that are covered by these exceptions. In addition to not being treated as an advantage, the payments described in Examples 4 and 6 do not constitute a premium, gift, or contribution to the plan (as they are considered a return on investment). This ensures that such payments will not affect contribution limits or the registered status of the plans. In contrast, if a controlling individual directs that a referral bonus be paid into their registered plan, the payment will be considered to be a contribution or premium to the plan. A referral bonus is paid as a consequence of the relationship between the existing investor and the new investor. When a registered plan is involved, it is actually the controlling individual who earns the referral bonus, not the plan itself.

 

[saver777]

I agree. Credit card issuers are bribing consumers all the time with bonuses to move accounts to them. Sometimes a straight up bonus, other times higher cashback for a limited period. I don't see how that is different from bribes from discount brokerages as an incentive to move accounts to them, or banks for moving savings/chequing accounts to them. ISTM this practice has been going on for decades and CRA, to my knowledge, has not said 'boo' to any of this.

The difference is the nature of the product. Credit cards are providing incentives to spend (therefore can be seen as a discount on the spending the customer does), whereas brokerages are offering you extra money to bring over your income-generating assets.