Income Tax Severed Letters - 1997-10-31

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.

972731
XXXXXXXXXX T. Harris

October 20, 1997

Dear Sirs:

Re: Section 84.1 of the Income Tax Act (the "Act")

Principal Issues:

Whether interest incurred on a loan to acquire vacant land that is not deductible under ss. 18(2) would be subject to ss. 78(1) if it remained unpaid but included in the cost of the land inventory. Also, whether the base level deduction permitted under 18(2)(f) would be subject to 78(1) even though it is added to inventory.

Position:

An amount is not subject to 78(1) if it is not "deductible". Such an amount includes an amount deduction of which is denied under 18(2) or an amount that is added to the cost of inventory. Even though an amount is deductible but, on an administrative basis, is added to inventory, it will cease to be deductible for the purposes of 78(1).

Reasons:

Principales Questions:

Calcul des années de service pour 60(j.1)

Position Adoptée:

Principal Issues:

Whether amount received "in respect of an outlay or expense" under 12(1)(x)(iv) must relate to a deductible outlay or expense (same issue with respect to 12(2.2)(a)).

Position:

No.

Reasons:

Principal Issues:

Whether payments to students under the Saskatchewan Provincial Training Allowance program are taxable as social assistance or bursary.

Position:

General comments on meaning of "social assistance" and "bursary" and reporting requirements for each.

Reasons:

Principal Issues:

Can a significant capital gain result where subsection 7(1.3) defers the recognition of any 7(1.1) benefit and subsection 47(1) requires the averaging of existing adjusted cost bases when dealing with identical properties?

Position:

Yes

Reasons:

Principal Issues:Will

a specific German pension plan be a foreign plan under the Act.

Position:

No

Reasons:

Principal Issues:

A terminally ill taxpayer wishes to terminate his prescribed annuity contract ("PAC"). What are the tax consequences?

Position:

To qualify as a PAC, a requirement is that the holder's rights in the annuity contract cannot be disposed of otherwise than on the holder's death. However, there is no provision in the Act or the Regulations which specifically prevents holders from renegotiating the terms of the PAC such that it no longer qualifies as a PAC. If the PAC is terminated prior to the holder's death and the commuted value is paid to the holder, any gain resulting from the disposition would be included in the holder's income under subsection 148(1).

Reasons:

Principal Issues:

Est-ce que l'article 94.1 s'applique à une SICAV du Luxembourg si les modalités de la SICAV prévoient que celle-ci distribue annuellement son revenu net?

Position:

Question de faits.

Reasons:

Principal Issues:

Is the Income Tax Act constitutional ?

Position:

Yes

Reasons:

Principal Issues:

Whether in specific fact situation cogen property qualifies for Class 34.

Position:

No.

Reasons:

Principal Issues:

Application of subsection 94(1) where investment funds are provided to a non-resident corporation owned by a non-resident trust.

Position:

Subsection 94(1) applies.

Reasons:

Position Adoptée:

Principales Questions:

1.a)Est-ce que les frais payés à des entités corporatives dont l'entreprise consiste à fournir des services médicaux à domicile par le biais de leurs employés (qui sont par ailleurs des médecins, dentistes ou infirmiers autorisés) sont visés par l'alinéa 118.2(2)a) de la Loi ?

b)Dans l'affirmative, la réponse à la question a) ci-dessus serait-elle la même si les services médicaux étaient fournis par le biais de travailleurs autonomes qui exécutent des contrats pour l'entité corporative ?

2.a)Est-ce que les honoraires versés à une entité corporative, dans le genre de celle mentionnée à la question 1.a) ci-dessus, constituent une "rémunération" au sens des alinéas 118.2(2)b), b.1) et c) de la Loi ?

b)Quels sont les critères applicables aux fins de déterminer si un préposé est à "plein temps" pour l'application des alinéas 118.2(2)b) et c) de la Loi ?

c)Quelle est la nature des soins visés aux alinéas 118.2(2)b), b.1) et c) de la Loi ?

Position Adoptée:

Principal Issues:

whether a specific case is similar enough to facts in Hoefele so that the Depart. will not assess a benefit to the employee under 80.4(1) or 6(1)(a) of the Act. Difference is that employer provides loan directly to the employee, the employer being in the business of making loans.

Position:

In fact situations similar to those found in Hoefele or Siwik, i.e. where:

(a)an employee is transferred to an area with higher housing costs;
(b)the employee owns a house immediately prior to relocation and purchases a house at the new location; and
(c)the amount of the loan is based on a reasonable market differential between the locations for comparable houses,

no benefit will be assessed in the employee's hands under paragraph 6(1)(a) or subsection 6(9) as a benefit determined under section 80.4 of the Income Tax Act.

Reasons:

Principal Issues:

chelation therapy and the cost related to medical travel by automobile that is not supported by receipts

Position:

cost of prescription drugs & fees to physician for chelation therapy qualify as a medical expense. Although 118.2(1) requires receipts to be submitted, $.10 per km can be allowed for 97 as a reasonable approximation of the out-of-pocket costs for medical travel - fuel only

Reasons:

Principal Issues:

whether a particular school is a school, institution or other place which specially provides equipment, facilities or personnel for the care and training of individuals with a specific disability for the purpose of 118.2(2)(e)

Position:

based on the info provided, no

Reasons: