Income Tax Severed Letters - 1999-03-19

Miscellaneous

12 March 1999 e9824685.txt - WAIVER OF INHERITANCE TAX

Unedited CRA Tags
n/a

Principal Issues: Is a waiver of inheritance tax required on a transfer of property which was owned by a deceased taxpayer?

Position: No.

Reasons: The "Consent" and "Lien" provisions of the Estate Tax Act were suspended as of May 28, 1980.

9 March 1999 e9829795.txt - MORTGAGES HELD IN AN RRSP

Unedited CRA Tags
reg 4900

Principal Issues:

Tax consequences of holding mortgages in an RRSP since 1980.

Position:

Explained relevant taxing authorities in general terms.

Reasons:

8 March 1999 e9824615.txt - RCA - EMPLOYEE KILLED ON DUTY

Unedited CRA Tags
248(1)

Principal Issues: Is an RCA created by virtue of an employer's lump sum payment to survivors of an employee who was killed while on duty?

Position: No.

Reasons: Payment because of employee's death. No obligation on the part of the employer to make the payment. No restrictions on use of funds by the survivors.

8 March 1999 e9833373.txt - STOCK OPTION, EXCHANGE, RIGHTS

Unedited CRA Tags
7(1)

Principal Issues: Can we rule that an employer has offended on employee’s rights under a particular stock option agreement?

Position: No.

Reasons: Can only be determined by the courts.

8 March 1999 e9827445.txt - REGULATION 6801(D): LOSS OF EMPLOYMENT

Unedited CRA Tags
6801(d)

Principal Issues: Whether 6801(d) rules apply to a person who ceased to be a corporation director and then re-hired by the corporation to perform employment duties?

Position: No.

Reasons: Wording of the Act.

4 March 1999 e9823865.txt - SDA, DEFERRED SIGNING BONUS

Unedited CRA Tags
248(1)

Principal Issues: Can a signing bonus to be paid over several years constitute a salary deferral arrangement for purposes of the Act?

Position: Maybe.

Reasons: Depends upon whether or not it represents salary or wages of the taxpayer for services rendered in the year.

4 March 1999 e9824125.txt - INTEREST - CONVERTIBLE DEBENETURES

Unedited CRA Tags
212(1)(b)(vii)

Principal Issues: Whether convertible debentures are exempt from 212(1)(b) withholding tax?

Position: No

Reasons: They are not convertible into a prescribed security.

3 March 1999 e9827105.txt - RRIF DETERMINATION OF MIN. AMOUNT

Unedited CRA Tags
146.3(1)

Principal Issues: Does the new definition of a minimum amount apply to an RRIF established before 1993?

Position: Subject to some grandfathering provisions, yes.

Reasons: The coming-into-force rules.

1 March 1999 e9821695.txt - PAY IN LIEU OF NOTICE, R/A

Unedited CRA Tags
248(1)

Principal Issues: Would we reconsider our position that payments in respect of a reasonable notice period is employment income for purposes of the Act?

Position: No.

Reasons: Amounts paid in respect of the terms of employment contracts are treated as employment income. Where an amount is not paid under the contract but is awarded as damages for wrongful dismissal, it falls into the retiring allowance definition..

26 February 1999 e9831975.txt - ICE STORM PAYMENTS

Unedited CRA Tags
13(7.1) 53(2)(k)

Principal Issues:
Tax treatment of Ice Storm Assistance payments.

Position:
No immediate tax consequences for payments respecting personal losses.

Business assistance payments respecting current expenses netted against the expenses incurred or included in income and the expenses incurred deducted. Assistance in respect of capital expenditures applied to reduce the cost of the property.

Reasons:
53(2)(k) and 13(7.1) of the Act.

25 February 1999 e9831807.txt - FLOOD ASSISTANCE

Unedited CRA Tags
53(2)(k) 13(7.1)

Principal Issues: Tax treatment of Flood Assistance Payments?

Position: Business assistance - assistance in respect of capital expenditures applied to reduce the capital cost of the property. Assistance in respect of current expenditures netted against expenses incurred or included in income and the expenses incurred deducted.

Assistance re personal expenses not subject to any immediate tax consequences and the expenses not deductible.

Reasons: Paragraph 53(2)(k), subsection 13(7.1).

23 February 1999 e9825695.txt - RETIRING ALLOWANCE - RELATED EMPLOYER

Unedited CRA Tags
60(j.1)

Principal Issues: Retiring Allowance; Years of Service with Related Employer

Position: Question of fact and general comments provided

Reasons: Per paragraph 60(j.1)

17 February 1999 e9900057.txt - AMENDED MORTGAGE. NEW AGREEMENT?

Unedited CRA Tags
54

Principal Issues: Whether an amended mortgage agreement results in the disposition of the original mortgage.

Position: No.

Reasons: The determination of whether a change in the terms of a security is a substitution of a debt obligation for another should be made in accordance with the law of the relevant jurisdiction. In the common law jurisdictions, a rescission of a debt obligation will be implied when the parties have effected such an alteration of its terms as to substitute a new obligation in its place, which is entirely inconsistent with the old, or if not entirely inconsistent with it, inconsistent with it to an extent that goes to the very root of it.

16 February 1999 e9833287.txt - SUBSEQUENT PAYMENT BY DEBTOR

Unedited CRA Tags
79

Principal Issues: Are subsequent payments by a debtor deductible

Position: a capital loss when paid

Reasons: Position prior to amendment of section 79

16 February 1999 e9833315.txt - NORTHERN RESIDENT'S DEDUCTION

Unedited CRA Tags
110.7(1)(a)

Principal Issues: can a travel allowance be paid in advance on a per hour basis?

Position: YES,

Reasons: income tax guides and 110.7(1)

7 August 1998 e9818696.txt - INTERVIVOS VS. TESTAMENTARY TRUSTS

Unedited CRA Tags
108(1)

Principal Issues: intervivos vs. testamentary trust of particular trusts

Position: based on facts - trusts in this case are intervivos

Reasons: trust clearly established prior to taxpayer's death

Administrative Letter

11 February 1999 Administrative Letter 9811782 - CHARITABLE DONATION MADE BY A TRUST

Unedited CRA Tags
118.1(3) 118.1(5)

Principal Issues: Can a spousal trust claim a tax credit under subsection 118.1(3) of the Act to offset the income tax arising on death of the spouse when the terms of the will provide that the remaining assets of the trust are to be given to a registered charity on death of the spouse but the trustees have the power to encroach on capital of the trust?

Position: Yes.

Reasons: Subsection 118.1(5) does not apply pursuant to paragraph 6 of IT-226R because of the power to encroach on capital. The trust is making a gift pursuant to paragraph 3 of IT-226R when trust property distributed to a charity. The distribution by the trust to the charity constitutes a “voluntary transfer” as the power to encroach on capital gives the trustees discretion not to distribute any of the trust assets to any charity. Consistent with the T3 Guide and previous technical interpretations. XXXXXXXXXX . Consistent with Finance’s policy which is to encourage gifts to charities.

Ruling

8 March 1999 Ruling 9833373 - STOCK OPTION, EXCHANGE, RIGHTS

Unedited CRA Tags
7(1)

Principal Issues: Can we rule that an employer has offended on employee’s rights under a particular stock option agreement?

Position: No.

Reasons: Can only be determined by the courts.

30 November 1997 Ruling 9823353 - AMENDMENT TO BUTTERFLY

Unedited CRA Tags
55(3)(b)

Principal Issues: Minor amendment to proposed transaction

Position: No effect on rulings

Reasons: n/a

30 November 1997 Ruling 9807103 - SERIES OF LOANS AND REPAYMENTS

Unedited CRA Tags
214(3)(a) 15(2)

Principal Issues: Whether an arrangement whereby a loan is repaid or settled by offsetting against a dividend payment, should be considered "part of a series of loans or other transactions and repaynments" for purposes of subsection 15(2).

Position: No

Reasons: See detailed issued sheet for file control # 971764
XXXXXXXXXX 980710
XXXXXXXXXX

30 November 1997 Ruling 9801843 - XXXXXXXXXX

Unedited CRA Tags
XXXXXXXXXX

Principal Issues:
1. Will the proposed transfer of XXXXXXXXXX meet the XXXXXXXXXX requirements set forth in subsection XXXXXXXXXX of the Act?
2. Will subsections XXXXXXXXXX of the Act apply to the transfer after the proposed transfer of XXXXXXXXXX?
3. Will subsection 256(8) of the Act apply to the share purchase options provided as part of the proposed transfer?

Position:
1. Question of fact to be determined at the time of the transfer.
2. Question of fact to be determined on an ongoing basis.
3. No.

Reasons:
1. Based on a review of the corporation’s balance sheet and operations at XXXXXXXXXX it was concluded that in this case the determination would be made on the basis of XXXXXXXXXX of the relevant XXXXXXXXXX.
2. Provided the transferor carries on XXXXXXXXXX business in Canada, even though on a significantly reduced scale, subsections XXXXXXXXXX will apply.
3. In this case we not only agreed that there were valid business reasons for the use of the share purchase options, the income tax consequences arising as a result of the acquisition of control rules applying immediately as opposed to later were virtually identical. Therefore, subsection 256(8) will not apply.

30 November 1997 Ruling 9811713 - TRANSFER OF SHARES OF SUBSIDIARY BY PARENT

Unedited CRA Tags
85.1(3) 85(1)

Principal Issues:

1.
XXXXXXXXXX.

2. XXXXXXXXXX
Parent has recently incorporated a U.S. holding company (“Holdco”). A Canadian holding company (“CanHoldco”) is to be incorporated. Parent will sell the shares of Holdco to CanHoldco. Parent will elect under subsection 85(1) to roll the common shares of Opco to CanHoldco. CanHoldco in turn will sell the shares of Opco to Holdco for additional shares of Holdco. We were asked to rule that the cost of the additional common shares of Holdco to be acquired by CanHoldco will be equal to the cost of the common shares of Opco to CanHoldco.

Position:

1. XXXXXXXXXX.

2. We ruled that the cost of the additional common shares of Holdco to CanHoldco acquired by CanHoldco will be determined pursuant to paragraph 85.1(3)(b).

Reasons:

30 November 1997 Ruling 9802053 - partnership

Unedited CRA Tags
9

Principal Issues:

Do draft matchable expenditure rules apply to partnership?

Position:

yes

Reasons:

30 November 1997 Ruling 9812833 - ADJUSTED COST BASE

Unedited CRA Tags
54

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
XXXXXXXXXX 981283
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1998

Dear Sirs:

Re: XXXXXXXXXX ("Canco") - XXXXXXXXXX
Advance Income Tax Ruling

30 November 1997 Ruling E9823353 - AMENDMENT TO BUTTERFLY

Unedited CRA Tags
55(3)(b)

Principal Issues: Minor amendment to proposed transaction

Position: No effect on rulings

Reasons: n/a

30 November 1997 Ruling 9802993 - BUTTERFLY REORGANIZATION

Unedited CRA Tags
55(3)(b)

Principal Issues: butterfly exemption 55(3)(b) ruling

Position: favourable rulings given

Reasons: no unusual features

30 November 1997 Ruling 9813423 - BUTTERFLY

Unedited CRA Tags
55(3)(b)

Principal Issues:
butterfly reorganization

Position:
routine

Reasons:
routine

30 November 1997 Ruling 9805033 - KEY MAN FREEZE

Unedited CRA Tags
85(1)

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
XXXXXXXXXX 980503
XXXXXXXXXX

XXXXXXXXXX,1998

Dear Sirs:

Re: XXXXXXXXXX
XXXXXXXXXX

This is in reply to your letter of XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the above-noted taxpayers.

30 November 1997 Ruling 9727223 - XXXXXXXXXX DPS

Unedited CRA Tags
112(2.6)

Position:
Standard rulings given plus opinion on exclusion from "mark-to-market property" definition by virtue of proposed Reg. 9000(2).

30 November 1997 Ruling 9814273 - BUTTERFLY

Unedited CRA Tags
55(3)(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.

XXXXXXXXXX
XXXXXXXXXX 981427
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1998

Dear Sir:

Re: Request for advance income tax ruling on behalf of
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

30 November 1997 Ruling 9805113 - BUTTERFLY REORGANIZATION

Unedited CRA Tags
55(3)(b)

Principal Issues: A gross asset butterfly

Position: Favourable rulings given

Reasons: Meets the requirements under 55(3)(b)

30 November 1997 Ruling 9727253 - BUTTERFLY REORGANIZATION

Unedited CRA Tags
55(3)(b)

Principal Issues:butterfly reorganization

Position:routine

Reasons:routine

30 November 1997 Ruling 9818683 - 21-YEAR DEEMED DISPOSITION RULE

Unedited CRA Tags
104(4) 106 107(2) 245(2)

Principal Issues:

30 November 1997 Ruling 9716063 - BUTTERFLY

Unedited CRA Tags
55(3)(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.

XXXXXXXXXX
XXXXXXXXXX 971606
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1998

Dear Sirs:

Re: XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Advance Income Tax Ruling

30 November 1997 Ruling 9806133 - FOREIGN PROPERTY & LOAN TO SUBSIDIARY

Unedited CRA Tags
104(6) 206(1)

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
XXXXXXXXXX 		980613
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1998

Dear Sirs:

Re: XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

30 November 1997 Ruling 9731893 - 88(1)(D) BUMP - XXXXXXXXXX

Unedited CRA Tags
88(1)

Principal Issues: Availability of bump where sub sells assets prior to purchase by parent.

Position: Bump available.

Reasons: GAAR not applicable.

30 November 1996 Ruling 9722103 - DISTRESS PREFERRED SHARES - AMENDMENT

Unedited CRA Tags
112(1)

Principal Issues: Minor change to facts

Position: Amendment to one ruling

Reasons: Change to facts

30 November 1996 Ruling 9722793 - DISTRESS PREFERRED SHARES - AMENDMENT

Unedited CRA Tags
112(1)

Principal Issues:

Minor change to facts

Position:

Amendment to one ruling

Reasons:

30 November 1996 Ruling 9723253 - DISTERSS PREFERRED SHARES

Unedited CRA Tags
112(1)

Principal Issues:

1. Five year period re: DPS is being calculated from the date of the original ruling (XXXXXXXXXX, 1997).
2. Dividend will be paid on the date the DPS are actually issued which will cover the period from XXXXXXXXXX, 1997 to the date the shares are actually issued.
3. Interest charges on the debts will be waived for that same period.

Position:

1. OK
2. OK
3. OK

Reasons:

30 November 1996 Ruling 9723263 - DISTRESS PREFERRED SHARES

Unedited CRA Tags
112(1)

Principal Issues:

1. Five year period re: DPS is being calculated from the date of the original ruling (XXXXXXXXXX, 1997).
2. Dividend will be paid on the date the DPS are actually issued which will cover the period from XXXXXXXXXX, 1997 to the date the shares are actually issued.
3. Interest charges on the debts will be waived for that same period.

Position:

1. OK
2. OK
3. OK

Reasons:

30 November 1996 Ruling 9709173 - DISTRESS PREFERRED SHARES

Unedited CRA Tags
112(1)

Principal Issues:

Distress Preferrred Share Ruling
Distressco (a CCPC) will be taxable because of the DPS issue and, because the rental income is investment income, will not get a dividend refund because Newco will be paying the DPS dividends. Consequently, any taxable income (and the resulting tax liability) of Distressco will be shifted to Newco by continuing to accrue interest on the distress debt, however Newco will be able to waive this interest, in advance, on a monthly or quarterly basis.

Position:

OK

Reasons:

30 November 1996 Ruling 9713873 - DISTRESS PREFERRED SHARES

Unedited CRA Tags
112(1)

Principal Issues:

Distress Preferrred Share Ruling

1. Distressco (a CCPC) will be taxable because of the DPS issue and, because the rental income is investment income, will not get a dividend refund because Newco will be paying the DPS dividends. Consequently, any taxable income (and the resulting tax liability) of Distressco will be shifted to Newco by continuing to accrue interest on the distress debt, however Newco will be able to waive this interest, in advance, on a monthly or quarterly basis.
2. Distressco has a second business which earns approximately $XXXXXXXXXX per annum. Will we require Distressco to contribute its excess cash flow from this second business towards the DPS redemptions?

Position:

1. OK
2. No

Reasons:

Technical Interpretation - External

12 March 1999 External T.I. 9807495 - TRUSTS FOR MINORS

Unedited CRA Tags
104(18)

Principal Issues: 1. Whether the trustees’ discretion to use the income or capital of the trust for the benefit of the minor beneficiaries would preclude subsection 104(18) of the Act to apply when each beneficiary’s share in the capital is to be determined at the time of the testator’s death? 2. Would we maintain our position if each beneficiary’s share is to be determined by the number of children alive at some future date (distribution date)?

Position: 1. Such a discretionary power would not preclude the application of subsection 104(18) of the Act to the extent that the discretionary power does not affect the apportioning of the trust’s income among the beneficiaries for the year. 2. No. Subsection 104(18) of the Act would not apply.

Reasons: 1. Paragraph 104(18)(c) of the Act would apply and the beneficiaries’ rights to the trust income in the year would have vested before the end of the year if such discretionary power does not affect the apportioning of the trust’s income among the beneficiaries for the year. 2. Paragraph 104(18)(c) would not apply as the beneficiaries’ rights to the trust income would not have vested before the end of the year.

12 March 1999 External T.I. 9824685 - WAIVER OF INHERITANCE TAX

Unedited CRA Tags
n/a

Principal Issues: Is a waiver of inheritance tax required on a transfer of property which was owned by a deceased taxpayer?

Position: No.

Reasons: The "Consent" and "Lien" provisions of the Estate Tax Act were suspended as of May 28, 1980.

11 March 1999 External T.I. 9901605 - SPECIAL WORK SITE

Unedited CRA Tags
6(6)

Principal Issues: Whether allowances paid to stage managers are eligible for the special work site exemption under 6(6). If not, are they able to claim travel expenses in respect of their meal allowance in some situations.

Position: General answers given for the 9 examples submitted.

Reasons: Where subsection 6(6) does not apply, meal expenses paid by the employee may be claimed as travel expenses under paragraph 8(1)(h), subject to subsection 8(4) and the 50% limitation under subsection 67.1(1). If the meal allowance is unreasonable, the employee may include it in income and claim travel expenses. However, for purposes of subsection 8(4), the facts of each case have to be examined to determine where the employee ordinarily reports for work. Depending on the employment contract, they may ordinarily report to more than one employer establishment. The employment contracts may vary widely regarding travel requirements.

11 March 1999 External T.I. 9902355 F - GAIN DE JEU - GÉNÉRAL

Unedited CRA Tags
3

Principales Questions:

Est-ce que les personnes venant au Canada pour jouer au casino seront considérées par l’immigration comme des travailleurs clandestins ?

Position Adoptée:

9 March 1999 External T.I. 9829795 - MORTGAGES HELD IN AN RRSP

Unedited CRA Tags
reg 4900

Principal Issues:

Tax consequences of holding mortgages in an RRSP since 1980.

Position:

Explained relevant taxing authorities in general terms.

Reasons:

9 March 1999 External T.I. 9808345 - ELIGIBLE FUNERAL ARRANGEMENT

Unedited CRA Tags
148.1
Summary Under
Tax Topics - Income Tax Act - Section 148.1 - Subsection 148.1(3)

Principal Issues: Whether a parent having funds in an EFA for his or her benefit can transfer excess funds from it to another EFA with a related person as beneficiary without any tax consequences?

Position: No 148.1(3) income inclusion. However, the amount of the excess funds will not be treated as a relevant contribution in respect of the other EFA.

Reasons: No 148.1(3) income inclusion as the direct transfer does not constitute a "distribution" under this subsection. The excess funds would not constitute a relevant contribution in subsection 148.1(1) in respect of the second EFA. This would make sure that 148.1(3) will apply on a subsequent distribution of these funds out of the second EFA to the beneficiary.

8 March 1999 External T.I. 9816785 F - DÉPENSE D'EXPLOITATION OU EN CAPITAL

Unedited CRA Tags
9(1) 18(1)a)

Position Adoptée:

8 March 1999 External T.I. E9828815 - MUNICIPAL CORPORATIONS AND NPO

Unedited CRA Tags
149(1)(d.5) 149(1.1) 149(1.2) 149(1.3) 149(1)(l)

Principal Issues: To provide information on the tax exempt status of municipal corporations and non-profit organizations

Position: No position taken

Reasons: Question of fact. Determination can be made only in particular cases

8 March 1999 External T.I. 9827445 - REGULATION 6801(D): LOSS OF EMPLOYMENT

Unedited CRA Tags
6801(d)

Principal Issues: Whether 6801(d) rules apply to a person who ceased to be a corporation director and then re-hired by the corporation to perform employment duties?

Position: No.

Reasons: Wording of the Act.

8 March 1999 External T.I. 9828815 - MUNICIPAL CORPORATIONS AND NPO

Unedited CRA Tags
149(1)(d.5) 149(1.1) 149(1.2) 149(1.3) 149(1)(l)

Principal Issues: To provide information on the tax exempt status of municipal corporations and non-profit organizations

Position: No position taken

Reasons: Question of fact. Determination can be made only in particular cases

8 March 1999 External T.I. 9904415 - TUTORING COSTS FOR LEARNING DISABILITY.

Unedited CRA Tags
118.2(2)

Principal Issues: Whether tutoring costs for a child with a learning disability qualifies as a medical expense.

Position: No. However, Parliament has introduced legislation which would address this type situation.

Reasons: Subsection 118.2(2) contains the list of eligible medical expense. Tutoring costs is not on the list.

8 March 1999 External T.I. 9824615 - RCA - EMPLOYEE KILLED ON DUTY

Unedited CRA Tags
248(1)

Principal Issues: Is an RCA created by virtue of an employer's lump sum payment to survivors of an employee who was killed while on duty?

Position: No.

Reasons: Payment because of employee's death. No obligation on the part of the employer to make the payment. No restrictions on use of funds by the survivors.

5 March 1999 External T.I. 9904085 F - 8(1)A) DÉDUCTION POUR VOLONTAIRES

Unedited CRA Tags
8(1)a)

Principales Questions:

Est-ce que le nouvel alinéa 8(1)a) de la Loi s’applique aux employés de municipalités qui, durant la tempête de verglas, ont été affectés à des tâches autres que celles qu’ils effectuent habituellement ?

Position Adoptée:

4 March 1999 External T.I. 9900455 - TRANSFERS OF FUNDS TO AN RESP

Unedited CRA Tags
146.1(1)

Principal Issues: How to transfer funds to an RESP.

Position: General comments on this issue were provided.

Reasons: Specific replies can only be provided in respect of ruling requests.

4 March 1999 External T.I. 9823865 - SDA, DEFERRED SIGNING BONUS

Unedited CRA Tags
248(1)

Principal Issues: Can a signing bonus to be paid over several years constitute a salary deferral arrangement for purposes of the Act?

Position: Maybe.

Reasons: Depends upon whether or not it represents salary or wages of the taxpayer for services rendered in the year.

4 March 1999 External T.I. 9824125 - INTEREST - CONVERTIBLE DEBENETURES

Unedited CRA Tags
212(1)(b)(vii)

Principal Issues: Whether convertible debentures are exempt from 212(1)(b) withholding tax?

Position: No

Reasons: They are not convertible into a prescribed security.

3 March 1999 External T.I. 9827105 - RRIF DETERMINATION OF MIN. AMOUNT

Unedited CRA Tags
146.3(1)

Principal Issues: Does the new definition of a minimum amount apply to an RRIF established before 1993?

Position: Subject to some grandfathering provisions, yes.

Reasons: The coming-into-force rules.

3 March 1999 External T.I. 9903235 - NON-PROFIT ORGANIZATION - TAXABLE CORP.

Unedited CRA Tags
149(1)(l)

Principal Issues: Clarification of Position concerning NPO's and taxable corporations.

Position: Postion applies even if the taxable corporation is non-resident.

Reasons: The dividends from the after tax profits will be used to carry out non-profit activities.

3 March 1999 External T.I. 9727195 - INTERACTION 13(7)(E), 110.6(19) AND 85

Unedited CRA Tags
13(7)(e) 85(5) 110.6(19)

Principal Issues: Interaction between paragraph 13(7)(e), subsections 85(5) and 110.6(19)

Position: The capital cost of a depreciable property to the transferor that must be used for the purposes of 85(5) is the capital cost to the transferor as determined pursuant to paragraph 13(7)(e) rather than the deemed capital cost under 110.6(19) and (21).

Reasons: See the analysis

3 March 1999 External T.I. 9902535 F - RÉGIME DE RETRAITE AMÉRICAIN 403(B)

Unedited CRA Tags
6(1)g)

Position Adoptée:

2 March 1999 External T.I. 9810755 - GIFT BY WILL

Unedited CRA Tags
118.1

Principal Issues: FMV of gift to be put on receipt.

Position: The FMV immediately before death

Reasons: The gift is deemed to have been made immediately before death under 118.1(5).

1 March 1999 External T.I. 9821695 - PAY IN LIEU OF NOTICE, R/A

Unedited CRA Tags
248(1)
Summary Under
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)

Principal Issues: Would we reconsider our position that payments in respect of a reasonable notice period is employment income for purposes of the Act?

Position: No.

Reasons: Amounts paid in respect of the terms of employment contracts are treated as employment income. Where an amount is not paid under the contract but is awarded as damages for wrongful dismissal, it falls into the retiring allowance definition..

26 February 1999 External T.I. 9807395 F - DÉBUT EXPLOITATION ENTREPRISE ACTIVE

Unedited CRA Tags
110.6(1) 125(7)

Principales Questions:

À quel moment a débuté l’exploitation active de l’entreprise d’une société si la société a été constituée en janvier 1996, que de janvier à novembre 1996, la société a procédé principalement à la construction de l’immeuble devant servir exclusivement aux activités de l’entreprise et que l’entreprise a ouvert officiellement ses portes en novembre 1996.

Position Adoptée:

26 February 1999 External T.I. 9831975 - ICE STORM PAYMENTS

Unedited CRA Tags
13(7.1) 53(2)(k)

Principal Issues:
Tax treatment of Ice Storm Assistance payments.

Position:
No immediate tax consequences for payments respecting personal losses.

Business assistance payments respecting current expenses netted against the expenses incurred or included in income and the expenses incurred deducted. Assistance in respect of capital expenditures applied to reduce the cost of the property.

Reasons:
53(2)(k) and 13(7.1) of the Act.

23 February 1999 External T.I. 9809755 - IN-TRUST ACCOUNTS

Unedited CRA Tags
104 75(2) 74.1(2) 74.3(1)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(2)

Principal Issues:
How are "in-trust" accounts taxed?

Position:
Depends on facts of case.

Reasons:
If the three certainties are present, tax as trust. I.e. The attribution rule of subsection 74.1(2), subject to subsection 74.3(1), may apply with respect to income, but (pursuant to section 74.2) taxable capital gains are not subject to attribution. Subsection 75(2) could apply with respect to income (or losses) or taxable capital gains (or allowable capital losses).
If not a trust but a gift, attribution of income (or losses) but not taxable capital gains (or allowable capital losses).
If neither trust nor gift, tax in parent's hands since there would be no transfer of property.

23 February 1999 External T.I. 9825695 - RETIRING ALLOWANCE - RELATED EMPLOYER

Unedited CRA Tags
60(j.1)

Principal Issues: Retiring Allowance; Years of Service with Related Employer

Position: Question of fact and general comments provided

Reasons: Per paragraph 60(j.1)

19 February 1999 External T.I. 9821205 F - FRAIS DE DÉPLACEMENT

Unedited CRA Tags
8(1)h

Principales Questions:

Est-ce qu’une allocation non payée à titre de frais de déplacement peut réduire la rémunération qu’un administrateur reçoit pour assister à des réunions du conseil d’administration ?

Position Adoptée:

16 February 1999 External T.I. 9833315 - NORTHERN RESIDENT'S DEDUCTION

Unedited CRA Tags
110.7(1)(a)

Principal Issues: can a travel allowance be paid in advance on a per hour basis?

Position: YES,

Reasons: income tax guides and 110.7(1)

29 January 1999 External T.I. 9825105 F - EQUIPEMENT ET OUTILLAGE

Unedited CRA Tags
13(21) 45(1)a)(i)

Principales Questions:

Est-ce que des outils cumulés au fil des ans pour une valeur approximative de 35 000$ peuvent être transférés à la juste valeur marchande selon le paragraphe 69 de la L.I.R. ?

Position Adoptée:

Conference

9 December 1997 TEI Roundtable, 9729670 - INTEREST EXPENSE FOR AMOUNT PAID

Unedited CRA Tags
20(1)(c)

Principal Issues: Whether amount for interest expense disallowed in the year accrued can be deducted subsequently for year paid.

Position: No.

Reasons: As held in Barbican Properties, where the taxpayer computes income on the accrual basis, if amount is not payable in the year (because of an unsatisfied contingency that permits deferral of payment), no deduction is permitted under 20(1)(c) since there is no amount payable in respect of the year pursuant to a legal obligation to pay; when actually paid, the amount of interest is not an amount payable "in respect of the year".

Technical Interpretation - Internal

1 March 1999 Internal T.I. 9904117 F - OPTION D'ACHAT D'ACTION - 20(1)(E)(II)

Unedited CRA Tags
20(1)e)(ii)

Position Adoptée:

1 March 1999 Internal T.I. 9830017 F - 18(12), EST-CE QUE C/T RÉSIDE

Unedited CRA Tags
18(12) 110.7

Principales Questions:

Est-ce que Madame X "réside" à XXXXXXXXXX , où elle exploite son entreprise de "Bed & Breakfast", pour les fins de l'application du paragraphe 18(12) de la Loi si elle demeure à XXXXXXXXXX durant la semaine pour le travail et qu'elle retourne à XXXXXXXXXX pour les fins de semaine et les congés?

Position Adoptée:

25 February 1999 Internal T.I. 9831807 - FLOOD ASSISTANCE

Unedited CRA Tags
53(2)(k) 13(7.1)

Principal Issues: Tax treatment of Flood Assistance Payments?

Position: Business assistance - assistance in respect of capital expenditures applied to reduce the capital cost of the property. Assistance in respect of current expenditures netted against expenses incurred or included in income and the expenses incurred deducted.

Assistance re personal expenses not subject to any immediate tax consequences and the expenses not deductible.

Reasons: Paragraph 53(2)(k), subsection 13(7.1).

18 February 1999 Internal T.I. 9900816 - STOCK OPTIONS, 7(3)(B), U.S. PARENT

Unedited CRA Tags
7(3)(b)
Summary Under
Tax Topics - Income Tax Act - Section 7 - Subsection 7(3) - Paragraph 7(3)(b)
non-deductibility of reimbursements by Cdn employer to US parent
Summary Under
Tax Topics - Income Tax Act - Section 7 - Subsection 7(3) - Paragraph 7(3)(a)

Principal Issues: Can a corporation deduct payments made to a parent corporation for its lost profit on shares issued by the parent corporation to employees of the corporation?

Position: No.

Reasons: It is clear that 7(3)(b) should apply to the payments made by the corporation and there is no reason to apply our administrative position that where corporation pays cash a deduction will be allowed.

17 February 1999 Internal T.I. 9900057 - AMENDED MORTGAGE. NEW AGREEMENT?

Unedited CRA Tags
54

Principal Issues: Whether an amended mortgage agreement results in the disposition of the original mortgage.

Position: No.

Reasons: The determination of whether a change in the terms of a security is a substitution of a debt obligation for another should be made in accordance with the law of the relevant jurisdiction. In the common law jurisdictions, a rescission of a debt obligation will be implied when the parties have effected such an alteration of its terms as to substitute a new obligation in its place, which is entirely inconsistent with the old, or if not entirely inconsistent with it, inconsistent with it to an extent that goes to the very root of it.

16 February 1999 Internal T.I. 9833287 - SUBSEQUENT PAYMENT BY DEBTOR

Unedited CRA Tags
79

Principal Issues: Are subsequent payments by a debtor deductible

Position: a capital loss when paid

Reasons: Position prior to amendment of section 79

3 February 1999 Internal T.I. 9901327 - FARM SUPPORT PAYMENTS (ARIF; ADIP)

Unedited CRA Tags
Reg 234(2)

Principal Issues: Are AGR-1 slips required for payments under the ARIF and ADIP programs initiated by PEI?

Position: Yes for all ADIP payments.
Yes for ARIF payments made to farm producers.

Reasons: ARIF payments made to farm producers and all ADIP payments meet the definition of farm support payment in Reg. 234(2).

29 January 1999 Internal T.I. 9900477 - FOREIGN CURRENCY, 85(1) ROLLOVER

Unedited CRA Tags
85(1)
Summary Under
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Foreign Exchange
U.S. currency used in operations

Principal Issues: (1) Whether capital property that is US currency which is transferred under 85(1) remains capital in nature since it is used in the transferee's operations. (2) whether the exchange gain incurred by the transferee on the use of the US funds in its day-to-day operations is on account of capital or income.

Position: (1) no. (2) income

Reasons: (1) It is a question of fact whether the property retains its capital nature which reflects position of court in Hickman. (2) Based on paragraph 2 of IT-95R and courts (see cases below), exchange gain is on account of income.

27 January 1999 Internal T.I. E9833327 - LEGAL EXPENSES

Unedited CRA Tags
8(2) 8(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.

27 January 1999 Internal T.I. 9832187 F - UTILISATION DE PERTES - 40(2)G)(II)

Unedited CRA Tags
40(2)(g)(ii)

Position Adoptée:

27 January 1999 Internal T.I. 9833327 - LEGAL EXPENSES

Unedited CRA Tags
8(2) 8(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.

16 November 1998 Internal T.I. 9814506 - LABOUR EXPENDITURE

Unedited CRA Tags
125.4 18(1)(a)

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.

20 October 1998 Internal T.I. E9825487 - TAXATION OF TRAINING COSTS

Unedited CRA Tags
56(1)(r) 56(1)(n)

Principal Issues:

1. Is the tuition assistance provided by XXXXXXXXXX taxable?
2. Are the related allowances provided by XXXXXXXXXX taxable?
3. Can the students claim the tuition credit?
4. Can the students claim the education tax credit?
5. Should the educational institution issue a T2200 even when the fees have been paid by someone other than the student?
6. How should XXXXXXXXXX be reporting these amount?

Position:

1. Yes
2. Yes
3. Yes
4. No
5. Yes
6. On T4A's

Reasons:

20 October 1998 Internal T.I. 9825487 - TAXATION OF TRAINING COSTS

Unedited CRA Tags
56(1)(r) 56(1)(n)

Principal Issues:

1. Is the tuition assistance provided by XXXXXXXXXX taxable?
2. Are the related allowances provided by XXXXXXXXXX taxable?
3. Can the students claim the tuition credit?
4. Can the students claim the education tax credit?
5. Should the educational institution issue a T2200 even when the fees have been paid by someone other than the student?
6. How should XXXXXXXXXX be reporting these amount?

Position:

1. Yes
2. Yes
3. Yes
4. No
5. Yes
6. On T4A's

Reasons:

7 August 1998 Internal T.I. 9815227 - ATTRIBUTION TO SETTLOR

Unedited CRA Tags
75(2)

Principal Issues: cessation of 75(2) on death or emmigration

Position: applicable up to date of death or emmigration

Reasons: per legislation

7 August 1998 Internal T.I. 9818696 - INTERVIVOS VS. TESTAMENTARY TRUSTS

Unedited CRA Tags
108(1)

Principal Issues: intervivos vs. testamentary trust of particular trusts

Position: based on facts - trusts in this case are intervivos

Reasons: trust clearly established prior to taxpayer's death

28 May 1998 Internal T.I. 9811667 - PARTS I AND I.3 - NOTICE OF REASSESSMENT

Unedited CRA Tags
181 152(4)
Summary Under
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1)

Principal Issues:
Where a single notice of reassessment is issued for reassessments under Parts I and I.3 of the Act, whether a reassessment under Part I would automatically result in a reassessment under Part I.3 if the amount of Part I.3 tax is restated on the notice of reassessment even though no changes have been made to the current Part I.3 reassessment.

Position:
No. It is the Department’s position that an assessment under each Part of the Act should be regarded as separate assessments notwithstanding the fact that the Department generally uses a single notice of assessment to inform a taxpayer of assessments under more than one Part of the Act. Accordingly, in the circumstances described, where a nil notice of reassessment is issued to reflect changes to the taxpayer’s non-capital loss under Part I, the current Part I.3 reassessment will not be jeopardized merely because the amount of Part I.3 tax is restated on the nil notice of reassessment.

Reasons:
Legislation, previous Departmental positions and jurisprudence.

1 May 1998 Internal T.I. 9807736 - EMPLOYER'S PRE-98 LIMIT ON EMP MEALS

Unedited CRA Tags
67.2

Principal Issues:
whether 98 budget proposal on 67.1(2)(e) impacts on our position with respect to the lack of exemption for meals provided at a special work site

Position:
no, the 98 budget proposal is consistent with our understanding of the provision as it applies before Feb 24, 1998

Reasons:
clarified that our position in respect of (e) in previous memoranda was not based on whether the meal was provided at a festive occasion rather than a business occasion but whether the meal was made available to all employees who worked at the same location - which is not normally the case in respect of meals provided at a special work site

Ministerial Letter

8 March 1999 Ministerial Letter 9903558 - SPDRS AS QUALIFIED INVESTMENTS FOR RRSPS

Unedited CRA Tags
146(1) reg 4900

Principal Issues:

Request that SPDRs be allowed as qualified investments for RRSPs

Position:

Finance has announced that it will change the law to ensure they are qualified investments.

Reasons:

1 March 1999 Ministerial Letter 9901728 - RRSP EARNED INCOME

Unedited CRA Tags
146(1)

Principal Issues: Is it appropriate that the term “earned income” used in the Act be defined differently than a similar term used in Employment Insurance legislation?

Position: Yes.

Reasons: The terms are similar but the term “earned income” is defined for tax purposes while the similar term used in the EI legislation is defined for purposes of that legislation. We must conclude that the different classifications are therefore not inconsistent and are warranted.