Income Tax Severed Letters - 1996-11-29

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

									5-961313
XXXXXXXXXX							(613) 957-8953

Attention: XXXXXXXXXX

November 19, 1996

Dear Sir\Madam:

Re: Medical Expenses Reimbursement within Testamentary Trust

Principal Issues:

Followup to previous file. Writer wants further clarification of interpretation of certain legislative provisions regarding the tax treatment of certain members of the clergy and religious orders.

Position:

No change in position, more detailed explanation of applicable provisions which include 5(1), 6(1), 110(2).

Reasons:N/A

Principal Issues:

Mandatory Inventory Adjustment

Position:

Where an amount of a purchase price has been allocated to unharvested trees, these trees would be considered purchased inventory for purposes of paragraph 28(1)(c)

Reasons:

Principal Issues:

Principal Issues:

whether a unit in a money market fund can be considered cash for the purpose of 108(2)(b), 204.4(2)(a) and the def'n of pooled fund trust in ss 5000(7) of the Regs

Position:

no

Reasons:

Principal Issues:

whether military employee can deduct as travel costs for relocation the difference between DND per kilometre amount (9.5 cents per km.) and the amount paid for federal civil servants

Position:

no but can deduct any actual travel costs over and above the amount of the allowance/reimbursement

Reasons:

Principal Issues:

Option sold giving the right to acquire interest-bearing bonds with interest rate higher than the market rate. Option is on capital account.

1.Does section 49 apply only and not paragraph 12(1)(x) and subsection 9(1)?

2.Is paragraph 20(1)(c) applicable?

Position:

1.Section 49 applies to a bona fide option. In a factual situation, paragraph 12(1)(x) could apply depending on the particular facts and circumstances.

2.20(1)(c) could not apply to the portion of the interest that may be considered as a compensation for the premium paid on the acquisition of the option.

Reasons:

Principal Issues:

Work in Exchange for Tuition Fee Reduction

Position:

Taxable

Reasons:

Principal Issues:

Whether section 19 or 19.1 of the Act applies to deny a deduction for expenses to be incurred by a Canadian taxpayer to advertise on a foreign owned web site.

Position:

No

Reasons:

Principal Issues:

Deductibility of employee relocation expenses by a corporation where employee will become employee of a wholly-owned subsidiary of the corporation.

Position:

Generally not deductible.

Reasons:

Principal Issues:

1.Whether partnership that includes an individual or a professional corporation as a partner must adopt calendar year as fiscal period.

2.Whether partnership may have to include up to 24 months income and losses in computing Dec 31, 1995 income.

3.Whether postamble of 249.1(1)(b), which contains an exception to the rule in 249.1(1)(b), applies re a property of a partnership.

4.Whether Reg 1100(3) applies to the short (stub) fiscal period ending in 1995.

5.Whether form T5013 was redesigned for 1995.

6.Whether Reg 1100(11) applies at the partner or partnership level.

Position:

1.Yes, unless alternative method in 249.1(4) applies.

2.Yes.

3.No.

4.Yes.

5.No.

6.CCA generally must be claimed by the owner of the property.

Reasons:

Principal Issues:

What guidelines are used in determining if businesses in service industry are similar?

Position:

Q of F

Reasons:

Principal Issues:

1)Would a granddaughter-in-law be considered a child for purposes of subsection 70(9) and 70(9.2)
2)Would she still be considered a child if grandson predeceases taxpayer

Position:

1)Yes
2)No as she would no longer be a spouse of grandson and would no longer meet the extended definition of child pursuant to 252(4)

Reasons:

Principal Issues:

Whether a section 22 election can be made in certain specific situations.

Position:

Question of fact

Reasons:

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

									960435
XXXXXXXXXX							Cal Brown
(613) 957-8980

Attention: XXXXXXXXXX

October 9, 1996

Dear Sirs:

Re: Subsection 34.2(3) of the Income Tax Act (the "Act")

Principal Issues:

Transfer of rights under an "prescribed annuity contract" before death of the original holder to a spouse. Is there a disposition and how does taxation of annuity occur? Can attribution rules apply?

Position:

Such a transfer would result in there being a disposition of the annuity contract. Attribution rules could apply. However, the particular annuity would not have qualified as a PAC in the first place due to clause 304(1)(c)(iv)(D) of the Regulations.

Reasons:

Principal Issues:

1)RRIF admin fees;
2)RRIF investment management fees

Position:

1)Confirming position that administration fees paid inside RRIF trust do not constitute benefit or amount received to annuitant;
2)Confirming position that investment management fees paid by annuitant is forbidden by 146.3(2)(f) and would cause income inclusion under 146.3(11); and that payment of fees by plan does not constitute income or any part of "minimum amount" to annuitant.

Reasons:

Principal Issues:

Whether "benefit" to annuitant occurs where RRSP or RRIF funds used to pay administration fees.

Position:

No.

Reasons:

Principal Issues:

tax liability of an "unincorporated business trust organization" (a term relevant for US tax administration)

Position:

taxed as a trust unless the relationship is actually one of agency

Reasons: