professional receives gift from client

QUESTION: I am a self-employed, Canadian professional with a client who, as a result of a 
recent business success, wants to provide me a substantial cash gift as thanks. 
 
Is there a way to receive this amount without having to claim it as taxable income?

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david ingram replies:

It is a good question.  When 'does' a busines deal become a friendship gift? It can certainly happen but requires the wisdom of Soloman to figure it out.  I guess the start of the answer would depend upon what that client was going to do with the payment.  If the client is treating it as a business expense, there is no doubt that it is taxable to you.

It gets a little less clear if your bonus is from the sale of a tax free principal residence.  For instance, if you are a professional stager and  'staged' a house for sale and it took top dollar and the seller paid you an extra $5,000 bonus, it would be taxable for sure. On the other hand, if your profession is a naturopathic physician and you helped a client stage their house because they are also a friend and you like decorating, and they gave you a $5,000 windfall gift that you had no expectation of receiving, it is likely tax free.

However, you state a business success and the implication is that it is somehow or other involved with your profession.  If that is the case, I say it is taxable and there is no way to detaxify it. �