Income Tax Severed Letters - 2000-01-07

Principal Issues: Can proposed transaction preserve "excluded interest " status in a partnership?

Position: Question of Fact

Reasons: Require full review

Principales Questions : Savoir si un bien donné est un bien agricole admissible au sens défini au paragraphe 110.6(1) de la Loi.

Position Adoptée : Il s'agit d'une question de fait.

Raisons : Voir 9821269, 9822875, 9832245, 9900153, 9919475, 9709285, 9709965, 9715205, 9802093, 9811605, 9818025.

Principales Questions: Les contributions effectuées en faveur d'une fiducie entraînent-elles la perte du statut de « fiducie personnelle » lorsque ces contributions sont effectuées d'une part, par l'auteur de la fiducie et d'autre part, par les bénéficiaires de la fiducie.

Position Adoptée: La fiducie non testamentaire décrite dans la demande conservera son statut de «fiducie personnelle » aux contributions effectuées par l'auteur de la fiducie puisque d'une part, le seul droit de bénéficiaire qui a été acquis pour une contrepartie payable directement ou indirectement à la fiducie ou à une autre personne est celui de l'auteur et d'autre part, ce droit de bénéficiaire est réputé acquis à titre gratuit en vertu de l'alinéa (i) de la définition de « fiducie personnelle » (ou du nouvel alinéa 108(7)a) de la Loi tel que proposé ). La fiducie non testamentaire décrite dans la demande conservera également son statut de « fiducie personnelle » si les seules autres personnes qui font un apport à la fiducie sont l'épouse de M.A et leur fils qui sont également bénéficiaire de cette fiducie.

Position Adoptée:

Principal Issues:
Appropriate CCA class for geothermal energy equipment installed on leased land.

Position: Class 13 unless Reg. 1102(5) applies.

Reasons: Reg. 1102(4) provides that it is all included in Class 13 unless Reg. 1102(5) applies.

Principal Issues: The taxability of certain awards under 56(1)(n), 56(1)(o), or 5(1), employment income.

Position: The awards are income from employment. Taxable in the hands of Canadian residents. International section will reply regarding taxation of non-resident recipients.

Reasons: There is an employment relationship between the company and the recipients.

Principal Issues: To correct E9921445 dated November 10, 1999. Prescribed amount should be reported on 1999 return, not 2000 return as provided in the example.

Position:

Reasons:

Principal Issues: Tax treatment of prior years expenses paid under a PHSP.

Position: Plan must provide for carry forward to the immediately following period of expenses otherwise eligible but for the annual ceiling limit.

Reasons: Pursuant to definition of PHSP plan must be in nature of insurance.

Principales Questions:
Est-ce qu'un remboursement de frais relatifs à des études (formation terminée avant le début de l'emploi et avant toute entente de remboursement), constitue un avantage imposable pour le futur employé?

Position Adoptée:
Généralement oui.

Principal Issues: Whether paragraph 27 of IT-470R applies to exempt from taxation the commission received by a salesperson on the acquisition of segregated funds for personal investment.

Position: Commission is taxable.

Reasons: Paragraph 27 of IT-470R does not apply. Purchase of segregated fund is for investment reasons and not for 'personal purpose'. Similar treatment accorded to commission received by stockbrokers purchasing securities for personal investment.

Principal Issues:
1. Has the 1999 adverse decision by the FCTD in the Shilling case resulted in any change to the Indian Act Exemption for Employment Income Guidelines?
2. What is the effect of the Shilling case on the comments made in the Department's letter of December 28, 1994, addressed to the XXXXXXXXXX (file 943147) which dealt with the application of the Guidelines to leased employees?

Position:
1. No changes to the Guidelines.
2. No effect.

Reasons:
1. Since the judgement in Shilling has been appealed by CCRA, no changes will be made to the Guidelines until the issues are resolved by the courts.

Principales Questions:

Est-ce que le revenu d'entreprise généré par le transport d'Indiens entre la réserve et des établissements de santé hors réserve, de même que le transport de ces mêmes Indiens durant leur séjour hors réserve est assujetti à l'impôt sur le revenu ?

Position Adoptée:

Principal Issues: 1. General questions regarding the taxation of Indian fishermen.
2. Whether certain waters are part of Treaty # 5.

Position: 1. General comments provided on employment, business income and connecting factors. 2. Waters can be part of a reserve if so stated in the treaty.

Reasons: N/A

Principal Issues: Whether a lump-sum contribution to a health and welfare trust to provide for the life-insurance coverage of a retired employee is deductible by the employer, where the trust purchases one-year term insurance during the remaining life of the employee.

Position: The employer's contributions to the health and welfare trust that relate to term-insurance premiums that will be paid by the Trust in future years will not be deductible by the employer by virtue of subsection 18(9) of the Act.

Reasons: In this situation, the exception in clause 18(9)(a)(iii)(B) does not apply since the employer's pre-funding of its required contributions to the Trust cannot be deemed consideration for life insurance in respect of a period that ends more than 13 months after the consideration is paid.

Principales Questions:
Lorsqu'une société ne réclame pas de déductions pour amortissement, doit-on rajuster à la baisse le revenu gagné ou réalisé après 1971 (le ®revenu protégé() au cours de la période de détention d'une action par un montant correspondant à ces déductions afin d'éviter la création d'un revenu artificiel aux fins du paragraphe 55(2)?

Position Adoptée:
La création d'un revenu protégé artificiel pourrait donner lieu à un rajustement du revenu protégé.

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 992857
F. Francis
December 10, 1999

Dear Sir:

Principal Issues: What the income tax treatment would be of an additional amount received 9 years after the initial disposition of property, which amount was conditional on the purchaser obtaining permission to expand the landfill site on the property.

Position: In the circumstances described, it is our view that the right to the additional amount would be considered a separate property having an adjusted cost base of zero. Accordingly, a capital gain of $50,000, equal to the difference between the proceeds of disposition ($50,000) and the nil adjusted cost base, would result. Since a right does not meet the definition of a qualified farm property in subsection 110.6(1), this capital gain would not be eligible for the capital gains deduction under subsection 110.6(2).

Principal Issues:

1. What constitutes a "gift by will" for purposes of subsection 118.1(5) of the Act.
2. Where a will stipulates that a donation be made to specified charities for specific percentages of the residual of the estate, but the amount of the "residual" depends upon certain discretionary actions of trustees with respect to tax elections does ss.118.1(5) apply to the deceased or ss.118.1(3) apply to estate.
3. Where a will stipulates that a gift is to be made to one several specified charities in an amount that is within a dollar range, would ss. 118.1(5) apply to deceased or ss.118.1(3) apply to the estate. Also, if a non-depreciable capital property is donated, would ss.107(2) apply.
4. When does ss.118.1(3) apply and when does ss.104(6) apply when trustees make a payment to a charity, out of the income of a trust?
5. When does ss.118.1(3) apply and when does ss.107(2) apply when trustees make distributions from an inter-vivos trust which lists charities as discretionary capital beneficiaries.

Position

1. Question of fact.
2. Generally, ss.118.1(5) would apply to deceased, provided actions of trustees and computation of residual are reasonable and in accordance with the terms of the will and provided no person has a discretionary right to encroach on capital of the estate.
3. If the charity is not specified, ss.118.1(5) will not apply. If charity is specified in the will, ss.118.1(5) would generally apply with respect to the minimum amount stipulated in the will. Any donation in excess of the minimum would generally be a tax credit to the estate under ss.118.1(3). Ss.107(2) will generally apply where non-depreciable capital property is transferred to a charity in satisfaction of a capital interest in estate that was created by the decision ( by will or by trustees) to make a donation to the charity. It is noted that the issue of the charity needing to be specifically named in the will is under consultation XXXXXXXXXX .
4. Whether the distribution to the charity is a payment in satisfaction of the charity's income interest in the estate and is therefore eligible for a deduction under ss.104(6), or whether the distribution is a charitable donation eligible for a tax credit under ss.118.1(3), is a question of fact that depends upon the wording in the will and the intentions of the trustees in making the distribution.
5. As in (4), question of fact to be determined based upon the wording in the trust agreement and intentions of trustees in making the distribution to the charity.

Reasons:

1. It is a question of fact whether a particular transfer or designation in a will that property is to be transferred to a charitable organization is a gift at law. A determination could only be made after a thorough review of all relevant documents.
2. Previous positions - if charity to receive the gift is not specified in the will, then not a gift by will. Where terms of will are clear as to charity to receive donation and actions to be taken by trustees in arriving at the amount of the donation (i.e. the residual), generally, the trustees discretion with respect to the use of permissive tax elections not considered sufficient to disallow tax credit from coming under ss.118.1(5)

3. The donation of the minimum would come within the previous positions taken with respect to the intent of ss.118.1(5), and the excess is clearly a decision made by the trustees to make a donation from the estate and therefore ss. 118.1(3) should apply. Also, wording of ss.107(2).
4. Question of fact.
5. Question of fact.

XXXXXXXXXX 991821

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                                             		 992262
                                                                                 Denise Dalphy
                                                                                 (613) 957-9231
Attention:  XXXXXXXXXX 

October 13, 1999