Income Tax Severed Letters - 1998-02-20

Administrative Letter

10 November 1997 Administrative Letter 970972A - : Direct or Indirect Interest

Unedited CRA Tags
: 88(1)(c)

Principal Issues:
Whether a right, arising from the tendering of shares pursuant to a takeover bid, to acquire shares of a corporation, would constitute a direct or indirect interest in any issued shares of that corporation within the meaning of subparagraph 88(1)(c.2)(iii).

Position:
No.

Reasons:
To decide otherwise would lead to unintended results.

Ruling

30 November 1997 Ruling 9722893 - XXXXXXXXXX BUTTERFLY (SPLIT-UP/GROSS-ASSET)

Unedited CRA Tags
55(3)(b)

Principal Issues:

This was an amalgamation followed by a "split-up" gross-asset butterfly. The distributing corporation (Amalco) rolled its assets (farming business and certain investment assets) to its three shareholders (i.e. transferee corporations/Newcos). The three Newcos were created immediately prior to the butterfly at which time the parents and children transferred their shares of Amalco to each Newco.

Position:

The main issue involved a subsection 55(4) issue (i.e. the parents maintained control of all the Newcos, however, one of the Newcos had a trust as a shareholder) that arose as a consequence of a paragraph 55(3)(a) opinion which was being sought, in addition to the 55(3)(b) ruling, by the taxpayer's representative. Other routine butterfly issues also arose.

Reasons:

30 November 1996 Ruling 9725393 F - PAPILLON

Unedited CRA Tags
55

Principal Issues:

(1) Est-ce que les dividendes versés avant le papillon ont pour effet de contaminer le papillon? (2) Est-ce que les dividendes versés avant le papillon et qui ne sont pas exclus en vertu de 55(3)(b), sont visés par 55(2)?

Position:

(1) Non (2) Non

Reasons:

30 November 1996 Ruling 9728003 - SDA AND STOCK OPTION

Unedited CRA Tags
7(3)(a) 6(11)

Principal Issues:

Would an agreement to issue shares under section 7 result in the deferral of a benefit that could otherwise be considered a salary deferral arrangement?

Position:

Yes

Reasons:

30 November 1996 Ruling 9604823 - BUTTERFLY

Unedited CRA Tags
55(3)(b)

Principal Issues:

30 November 1996 Ruling 9729403 F - ALLOCATION RETRAITE

Unedited CRA Tags
60(j.1)

Principales Questions:

Le montant versé est-il une allocation de retraite.

Position Adoptée:

30 November 1996 Ruling 9729263 - TRUST DISTRIBUTIONS TO NON-RESIDENT BENEFICIARIES

Unedited CRA Tags
Art XXI Art XXII 212(1)(c) 212(13.1)(b)
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 11

Principal Issues:

Application of Articles XXI and XXII of Canada-U.S. Treaty in respect of distributions of income by a Canadian resident trust to U.S. resident beneficiaries (which beneficiaries are U.S. "tax exempts") where the income arises outside of Canada.

Position:

Subject to a proviso regarding the trust not carrying on business in Canada, favorable rulings were given.

Reasons:

30 November 1996 Ruling 9720193 - ESTATE PLANNING - 164(6)

Unedited CRA Tags
84.1 40(3.6) 245(2)

Principal Issues:

Application of 84.1, 40(3.6) and GAAR to transactions designed to facilitate 164(6) loss carry-back.

Position:

Not applicable.

Reasons:

30 November 1996 Ruling 9729283 - DISTRESS PREFERRED SHARES

Unedited CRA Tags
248(1)("T") 80(2) 20(1)(e.1) 112(2.1) 20(1)(c)

Principal Issues:

Is XXXXXXXXXX in distress position ?

Position:

Yes

Reasons:

30 November 1996 Ruling 9731333 - SUPP TO ATR 3-971631

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.

XXXXXXXXXX							973133
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1997

Dear Sirs:

Re: XXXXXXXXXX (“Opco”)
Advance Income Tax Ruling 3-971631

30 November 1996 Ruling 9724813 - EXTENDING TERMINATION DATE OF TRUST

Unedited CRA Tags
106(2) 122(2) 54

Principal Issues:

(1)Does the extention of the termination date of a trust result in:

(a) the disposition by the trust of the trust's property and the creation of new trusts?

(b) the disposition of property by the beneficiaries or a disposition of the beneficiaries capital or income interests in the trust?

(2)Will subsection 122(2) still apply to the trust? In particular, will the test in paragraph (a) still be met?

Position:

(1)(a) No. (1)(b) No. (2) subsection 122(2) will still apply.

Reasons:

30 November 1996 Ruling 9731423 - XXXXXXXXXX RULING

Unedited CRA Tags
9(1) 12(4)

Principal Issues:

30 November 1996 Ruling 9727543 - SHARE FOR SHARE EXCHANGE (WHOLLY-OWNED)

Unedited CRA Tags
15(1) 86(2)

Principal Issues:

Would subsections 15(1) and 86(2) apply to a share for share exchange where inadequate consideration is taken back but the shareholder owns 100% of the issued share capital of the corporation.

Position:

No.

Reasons:

30 November 1996 Ruling 9733573 - ITAR 26(5)

Unedited CRA Tags
26(5)

Principal Issues: Application of ITAR 26(5).

Position: N/A - shares were not owned on June 18, 1971.

Reasons:

30 November 1996 Ruling 9727733 - 55(3)(A) OF THE ACT

Unedited CRA Tags
55(3)(a)

Principal Issues:

Father owns nominal controlling voting shares in both Opco1 and Opco2. Is subsection 55(4) of the Act applicable with respect to Father's ownership of Opco2's voting shares ?

Position:

No.

Reasons:

Technical Interpretation - External

13 February 1998 External T.I. 9709965 - QUALIFIED FARM PROPERTY

Unedited CRA Tags
110.6(1)

Principal Issues:

Whether the land owned by a taxpayer is considered to be "qualified farm property?"

Position:

Perhaps.

Reasons:

12 February 1998 External T.I. 9730335 - DEDUCTIBILITY OF MOTOR VEHICLE TRAVEL EXPENSES

Unedited CRA Tags
8(1)(h.1) 8(10)
Summary Under
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(h)

Position: No.

11 February 1998 External T.I. 9722085 - INDIAN ACT INCOME TAX EXEMPTION

Unedited CRA Tags
2

Principal Issues:

Indian Act Tax Exemption: does the Federal Court of Appeal's decision to allow Mrs. Marianne Folster's appeal (Mrs. Folster was entitled to the exemption sought) change our opinion with respect to 970659.

Position:

The taxpayer's income, received form duties performed off a reserve would be subject to income tax.

Reasons:

6 February 1998 External T.I. 9722525 - CHILD TAX BENEFIT

Unedited CRA Tags
122.6

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.

972252
XXXXXXXXXX M. Eisner

February 6, 1998

Dear XXXXXXXXXX:

Re: Child Tax Benefit

5 February 1998 External T.I. 9802405 - CCPC SHARES, QUALIFIED INVESTMENT

Unedited CRA Tags
4900(6) 4900(12)

Principal Issues:

Will a share be a qualified investment if it meets 4900(12) but does not meet 4900(6)?

Position:

Yes

Reasons:

2 February 1998 External T.I. 9728795 - CHILD SUPPORT PAYMENTS FROM A US RESIDENT

Unedited CRA Tags
60.1 XVIII of US treaty

Principal Issues:

Whether paragraph 6(b) of Article XVIII of the Canada-U.S. convention will continue to apply now that new rules for child support have been legislated.

Position:

Paragraph 6(b) will continue to apply to child support payments made under orders or agreements made before May, 1997. Orders or agreements providing for child support amounts made after April, 1997 will no longer need treaty protection to make the payments non-taxable.

Reasons:

23 January 1998 External T.I. 9727895 - PAYMENTS TO METIS FOR TRAINING

Unedited CRA Tags
56(1)(n) 56(1)(a)(iv)

Principal Issues:

taxation of training benefits being received by Metis. funding is (1) section 63 of EI Act and (2) Consolidated Revenue Fund. All funding rec'd from Human Resources Development Canada

Position:

tax as (1) 56(1)(a)(iv), applicable withholdings (not taxed to extent payments relate to the cost of a course or program designed to facilitate the re-entry into the labour force of a claimant under the EI Act) or (2) appears to be bursary 56(1)(n), no withholding but T4-T4A summary and supplementaries needed

Reasons:

23 January 1998 External T.I. 9729845 - PARAGRAPH 37 OF IT-474R (U.I. PREMIUMS)

Principal Issues:

Whether the Department's position in paragraph 37 of Interpretation Bulletin IT-474R applies equally to the Employment Insurance Act?

Position:Yes.

Reasons:

19 January 1998 External T.I. 9729855 - DIVIDEND REFUND ARISING FROM DEEMED DIVIDENDS

Unedited CRA Tags
84.1(1)(b) 129(1)(a)(i)

Principal Issues:

Will a dividend deemed under paragraph 84.1(1)(b) of the Act be considered a "taxable dividend" for purposes of subparagraph 129(1)(a)(i) of the Act?

Position: Yes.

Reasons:

16 January 1998 External T.I. 9731585 - DIVIDEND IN KIND - FOREIGN SPIN-OFFS

Unedited CRA Tags
90

Principal Issues:

What are the tax consequences to a Canadian shareholder as a result of a U.S. spin-off (or divestiture) where stock of subsidiaries is distributed to shareholders?

Position:

Dividend to the Canadian shareholder, equal to the fair market value of the distributed shares at the time they are received.

Reasons:

15 January 1998 External T.I. 9729215 - DESIGNATION OF DIFFERENT AMOUNTS UNDER 104(13.1)

Unedited CRA Tags
104(13) 104(13.1) 104(6)(b)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(13.1)

Principal Issues:

Whether subsection 104(13.1) permits different amounts to be designated for each beneficiary.

Position:

Yes, but only to the maximum amount determined by formula.

Reasons:

13 January 1998 External T.I. 9708735 - PAYMENTS TO A SUB-TRUST

Unedited CRA Tags
104(6) 104(13) 104(18)

Principal Issues:

Are payments to a trust meeting the criteria in subsection 104(18) deductible by the trust under paragraph 104(6)(b) as a payment to the minor beneficiary?

Position:

Generally no.

Reasons:

31 December 1997 External T.I. 9724745 - SAFE INCOME - CONSOLIDATED APPROACH

Unedited CRA Tags
55(2) 84(1) 88(1)(d) 53(1)(b)

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.

972474
XXXXXXXXXX T. Harris
(613) 957-2114

Attention: XXXXXXXXXX

December 31, 1997

Dear Sirs:

22 December 1997 External T.I. 9729515 - CHILD SUPPORT COURT ORDERS

Unedited CRA Tags
56 56.1 60 60.1

Principal Issues:

1- Whether the old rules apply to a permanent order made after April 1997 in the same terms as an interim order made before May 1997.
2- Whether the old rules apply if payments are made pursuant to an interim order made before May 1997.
3- Can subsections 56.1(3) and 60.1(3) apply to a permanent order made after April 1997 with respect to amounts paid pursuant to an interim order made before May 1997?

Position:

1- No
2- Yes
3- Yes

Reasons:

20 November 1997 External T.I. 9726145 F - SOCIETES ASSOCIEES

Unedited CRA Tags
256(2.1)

Principales Questions:

Réorganisation permettant à des sociétés de ne plus être associées

Position Adoptée:

19 November 1997 External T.I. 9717815 - SETTLOR/TRUSTEE & MAJORITY DECISIONS

Unedited CRA Tags
75(2)(b)

Principal Issues:

Will paragraph 75(2)(b) apply where trustee' decisions require a majority vote and the settlor-trustee is not required to be part of the majority?

Position:

Generally, no.

Reasons:

Technical Interpretation - Internal

30 January 1998 Internal T.I. 9800747 - PARAGRAPH 20(1)(L)

Unedited CRA Tags
20(1)(l)

Principal Issues:

The computation of a general reserve pursuant to paragraph 20(1)(l).

Position:

A general reserve is not permitted under paragraph 20(1)(l).

Reasons:

15 January 1998 Internal T.I. 9719827 F - VENTE D'UNE LISTE DE CLIENTS - XXXXXXXXXX

Unedited CRA Tags
9(1) 18(1)(b) 12(1)(g)

Position Adoptée:

7 January 1998 Internal T.I. 9716117 F - ORGANISATION A BUT NON LUCRATIF - GÉNÉRAL

Unedited CRA Tags
149(1)l)

Principales Questions:

Est-ce que l'organisation peut se qualifier à titre d'organisation à but non lucratif en vertu de l'alinéa 149(1)l) de la Loi?

Position Adoptée:

19 December 1997 Internal T.I. 9724127 - LEASING

Unedited CRA Tags
181.2(4)

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.

PRINCIPAL ISSUE

Whether a leasing contract with an automatic transfer of title upon the last rental payment constitutes a lease for Part I.3 tax purposes.

Position

Yes.

Reasons

Ministerial Letter

20 February 1998 Ministerial Letter 963358A - REVISED MGMT & INV COUNSEL FEE POSITION

Unedited CRA Tags
146(1)

Principal Issues:

Can management fees related to the property in an RRSP or RRIF be paid by the annuitant and investment counsel fees related to an RRSP or RRIF be paid by the trust without any tax ramifications?

Position:

Yes (reversal of positions taken since late 1996)

Reasons:

29 January 1998 Ministerial Letter 9728278 - STRIKE PAY, DED'N OF UNION DUES

Unedited CRA Tags
5 6 8

Principal Issues:

deductibility of union dues and taxation of strike pay

Position:

strike pay not taxable, union dues to support reasonable costs during a legal strike are deductible

Reasons:

25 November 1997 Ministerial Letter 9724828 - 44(1) DOESN'T APPLY TO VOLUNTARY DISP OF FRANCHISE

Unedited CRA Tags
44(1) 248(1)

Principal Issues:

Replacement Property rules - voluntary disposition of Franchise

Position:

eligible only in the event of an involuntary disposition, which is unlikely as franchises are not normally subject to destruction, theft or expropriation

Reasons: