Income Tax Severed Letters - 1996-12-27

Principal Issues:

The income tax treatment of investment management fees (administration fee) of an RCA when paid by the beneficiary of the RCA?

Position:

The payment should be regarded as a contribution by the beneficiary to the RCA.

Reasons:

Principal Issues:

what criteria used to determine if an allowance is reasonable and whether employee living in a bunkhouse can claim a deduction for amounts paid to the employer for board (work site is not in a prescribed zone but is sufficiently far from any established community as to prevent the employee from obtaining any other lodging)

Position:

reasonableness of an allowance is a question of fact to be determined in light of the expenses for which the allowance is paid - no deduction available to employee if this is the employee's regular work location

Reasons:

Principal Issues:

Whether alternate and spare parts could be included in Class 34 & 43.1?

Position:

Alternate parts may be included in Class 34 or 43.1.

Spare parts to be expensed when used.

Reasons:

Principal Issues:

can the non-taxable benefit from transportation between special work site and p/r of employee include travel costs of employee's spouse and children?

Position:

yes, provided that the conditions of the provision are otherwise met

Reasons:

Principal Issues:

why is only 50% of entertainment expenses deductible for commission salespersons? comments wanted on the meaning of "reasonable in the circumstances"

Position:

limitation reflects element of personal consumption in these amounts (originally introduced when the tax base was being broadened to permit lower tax rates). Reasonableness is determined on a case by case basis. Ordinary tests applied (at individual expense level and total expenses level) such as amount sought to be deducted, the purposes of the expenditure, the nature of the expenditure, the similarity to and amount of other such expenses claimed, expenses of other employees or officers employed in a similar capacity and so on.

Reasons:

Principal Issues:

Treatment of an "offshore" investment purchased by a non-resident individual with an "non-resident insurance company" under the Act when the individual later becomes a resident of Canada. Several questions are asked, some of a tax planning nature, treatment under section 128.1 of the Act and new foreign property reporting rules in draft sections 233.3 to 233.5.

Position:

The Department does not make recommendations in respect of tax planning initiatives. Other issues involve questions of fact, and legal form of investment is not clear. Also treaty issues may be involved - only very general comments can be provided.

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.

									962799
XXXXXXXXXX							M. Eisner

Attention: XXXXXXXXXX

November 7, 1996

Dear Sirs:

Re: Prescribed Prizes

This is in reply to your letter of August 17, 1996, concerning the above-noted subject.

Principales Questions:

Est-ce qu'une remorque de tracteurs lourds servant au transport de marchandises est admissible à la DPA au taux de 40%?

Position Adoptée:

Principal Issues:

If an arrangement does not qualify as an eligible funeral arrangement according to section 148.1 because the relevant contributions are over $15,000, who gets taxed on the interest income and when (the funeral home, the purchaser of the funeral arrangements?)

Position:

If the contract does not qualify as an eligible funeral arrangement according to section 148.1, the interest income is taxed annually either by the application of paragraph 12(1)(c), subsection 12(3) or subsection 12(4).

Reasons: