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The Canada Revenue Agency has long held a policy that the personal use of a corporately owned airplane by shareholders and employees can give rise to taxable benefits.

Depending on the circumstances, the benefit can be computed in either of three ways:

• where there is both a business and personal purpose to the flight: the highest priced ticket available in the marketplace for an equivalent commercial flight;
• where there is no business purpose for the flight: the price of the charter of an equivalent aircraft for an equivalent flight;
• where the airplane is used primarily for personal purposes during the year: the personal use portion of the aircraft's operating costs plus an imputed available-for-use amount.

Corporate taxpayers would do well to maintain a detailed logbook and records to substantiate the use of the airplane in order to minimize potential taxes on a benefit. CRA is also generally reluctant to recognize a valid business expense for trips to remote locations for client development purposes. A taxable benefit will often be reassessed and expenses denied in such situations.

A litigation with the tax authorities on such issues can be costly and complex. Taxpayers should do well to consult their tax advisors.