Income Tax Severed Letters - 2000-03-17

Miscellaneous

1 March 2000 1999-000941A - Locally engaged staff deemed resident

Unedited CRA Tags
250(1)(g) 115(2)(c) art 19\

Principal Issues: Non-resident persons are hired as locally engaged employees (LES) at Canadian embassies in countries which do not impose an income tax on the wages paid to them and such persons are former residents of Canada. The issue is whether the wages paid to such LES are taxable under paragraph 115(2)(c) of the Act.

Position: no. paragraph 115(2)(c)(iii) does not apply to such LES

Reasons: As a result of the 1999 amendments to paragraph 115(2)(c) of the Act, and in particular the enactment of subparagraph 115(2)(c)(iii), paragraph 115(2)(c) of the Act no longer applies to such LES and the result is that the wages paid to such LES is no longer taxable under part I of the Act.

7 December 1999 1999-0014010 - INTEREST DEDUCTIBILITY

Unedited CRA Tags
20(1)(c)

Principal Issues: interest deductibility after Ludco

Position: Ludco reasoning is confined to those particular facts

Reasons:

7 December 1999 1999-0007810 - Application of subsection 17(2)

Unedited CRA Tags
17(2)

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.

TEI Conference
December 7, 1999

Question XX.

WITHHOLDING TAXES ON DIRECTOR'S FEES

Ruling

6 March 2000 Ruling 1999-0006730 - EMPLOYEE RELOCATIONS-TEI QUESTIONS

Unedited CRA Tags
6(23)

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.

Tax Executive Institute
1999
Section 23
file # 1999-000673

Question XXVII: Employer Provision of Duplicate Housing Costs During an Employee Relocation

7 December 1999 Ruling 1999-0014030 - INTEREST DEDUCTIBILITY

Unedited CRA Tags
20(1)(c)

Principal Issues: interest deductibility following CRB Logging

Position: no change in our positions

Reasons: we would no have ruled favourably on CRB scenario

1999 Ruling 9928313 - CLONE FUND - ARE UNITS FOREIGN PROPERTY

Unedited CRA Tags
206(1) 245(2) 132(6)

Principal Issues:
1) Will the units of a mutual fund trust (the "Fund"), which holds units of another mutual fund trust (the "Reference Fund") and which also uses derivative investments to mimic the return of the Reference Fund, be "foreign property" as defined in subsection 206(1). Under the proposals, the cost amount to the Fund of all its foreign property will not exceed 20% of the cost amount to the Fund of all the property held by it.

2) Will subsection 245(2) apply to the proposed transactions.

Position: 1) No 2) No.

Reasons:
Paragraph 206(1)(i) provides that except as prescribed by regulation, any interest in a trust (other than a registered investment), is foreign property. However, subsection 5000(1) provides that an interest in a mutual fund trust will not be foreign property provided that the cost amount to the trust of foreign property held by it does not exceed 20% of the cost amount to the mutual fund trust of all property held by it. As set out in the proposed transactions, the cost amount to the Fund of its foreign property will not exceed the 20% limitation, therefore, as long as the Fund qualifies as a mutual fund trust under subsection 132(6), its units will not be foreign property.
The application of subsection 245(2) to similar transactions was previously considered by the GAAR Committee and it was their view that GAAR was not applicable to the proposed transactions. See 9914583, 991395, 991774, 992288, 992304, and 992307.

1999 Ruling 9932263 - PARTNERSHIP REORGANIZATION

Unedited CRA Tags
53(1) 103 143.2
transferor may be partnership

Principal Issues:

1) Can a partnership that is a member of a partnership elect under subsection 97(2)?

2) Do the interest free loans and the agreement to pay interest on the debt instrument cause any member of the partnership to be a limited partner or a specified member?

3) Are the partnerships a "tax shelter" as per section 237.1?

4) Is the debt instrument "foreign property" to specified pension funds?

5) Will subsection 103(1) apply to redetermine the allocation of partnership income?

6) Will subparagraphs 53(1)(e)(i) and 53(2)(c)(i) be applied so as to avoid double taxation?

7) Will subsection 85(1) and 88(1) be available so as to have all assets held in the entity with the latter year end?

8) Will GAAR apply to recharacterize any of these rulings?

Position:

1) Yes.

2) No.

3) No, provided that no representations are made.

4) Not in this fact situation.

5) Not in this fact situation.

6) Yes.

7) Yes.

8) No.

Reasons:

1999 Ruling 9927263 F - MODIFICATION ACTE DE FIDUCIE

Unedited CRA Tags
54 248(1)

Principales Questions:

1. Est-ce qu'il y aura disposition des unités des fonds, aux fins de la Loi, en raison des modifications apportées à la Convention de fiducie?

2. Est-ce qu'il y aura rachat des unités des fonds en raison des modifications apportées à la Convention de fiducie?

3. Est-ce qu'il y aura disposition, achat ou rachat des unités du XXXXXXXXXX, en raison de la subdivision ou de la consolidation des unités de ce fonds?

Position Adoptée:

1999 Ruling 9927653 F - ALLOCATION DE RETRAITE

Unedited CRA Tags
60j.1) 56(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.

PRINCIPALE QUESTION

Le montant versé est-il une allocation de retraite déductible dans le calcul du revenu imposable du contribuable en vertu de l'alinéa 60j.1) de la Loi?

Position Adoptée

Oui.

RAISON POUR POSITION ADOPTÉE

1999 Ruling 992361A - BUTTERFLY REORGANIZATION

Unedited CRA Tags
55

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 992361
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX,1999

Dear Sirs:

Re: XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Advance Income Tax Ruling 990013

1999 Ruling 9924013 - RULING - RESERVES

Unedited CRA Tags
12(1)(a) 20(1)(m)

Principal Issues:
1) Would amounts received as XXXXXXXXXX be included in income under 12(1)(a)?
2) If such amounts are included in income under 12(1)(a) is a reserve under paragraph 20(1)(m) available?

Position:
1) Yes.
2) Yes.

Reasons:
1) The earnings process has not been complete on initial receipt of the XXXXXXXXXX payments and the amounts should not be included in income under section 9 of the Act. The amounts should be included under paragraph 12(1)(a)(i) as it is received on account of services not yet rendered.
2) Where amounts are included in income under paragraph 12(1)(a) a reserve is available pursuant to paragraph 20(1)(m) in respect of services that are reasonably anticipated to be rendered after the end of the year. The requirement to provide XXXXXXXXXX can be considered a service for purposes of paragraph 20(1)(m)(i)

Ministerial Correspondence

6 March 2000 Ministerial Correspondence 1999-0006740 - employee awards & gifts

Unedited CRA Tags
6(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.

Tax Executive Institute
1999
Section 23
file # 1999-000674

Question XXXI: Valuation of Employee Achievement Awards and Gifts

19 November 1999 Ministerial Correspondence 1999-0010440 - Exempt surplus - compensatory payments

Unedited CRA Tags
5907(1.1)

Principal Issues: Will the CCRA provide administrative relief regarding the application of Regulation 5907(1.1) in the circumstances described in the attached round table question?

Position: No, there is no apparent need to consider administrative relief in the circumstances set out in the question

Reasons: See CCRA response for detailed analysis of the issues.

Technical Interpretation - External

13 March 2000 External T.I. 2000-0000775 - EMPLOYEE HOUSING REPURCHASE

Unedited CRA Tags
6(21) 6(19) 6(1)(a) 6(22)

Principal Issues: Whether reimbursement of a particular housing loss and a subsequent repurchase would be required to be included in income under paragraph 6(1)(a) as determined under paragraph 6(20)?

Position: No

Reasons: The situation involved a move to, and commencement of work in, a remote location many years before under a housing plan by which an employee bought a house under a buy-back guarantee. Provided the original move meets the criteria in the definition of an eligible relocation, the new housing loss rules will only apply to amounts paid after December 31, 2000. Accordingly, the old rules apply to payments made before January 1, 2001, such that payments under a buy-back arrangement, without retirement from employment in a remote region, should not result in a taxable benefit. Repurchase by an employee at fair market value should not result in a benefit.

10 March 2000 External T.I. 2000-0006935 - STOCK OPTIONS-EMPLOYEES AND CONTRACTORS

Unedited CRA Tags
7(1) 9 248(1)

Principal Issues:
What are the tax consequences in respect of the issue and exercise of stock options issued as part of an arrangement designed to establish a new corporation and implement a consulting agreement with an individual?

Position:
Explanations and references to publications were provided with respect to the possible tax consequences of receiving and exercising options held by employees, independent contractors and shareholders.

Reasons:
The tax consequences and their timing will depend on whether the option holder receives the options as an employee or as an independent contractor.

9 March 2000 External T.I. 1999-0009365 - Dividends and discretionary trusts

Unedited CRA Tags
56 73

Principal Issues: Whether subsection 56(2) applies to dividends received by a discretionary trust.

Position: General position on subsection 56(2).

The attribution rules in section 74.1 and section 74.3 may apply.

Proposed section 120.4 may apply.

Reasons: Interpretation of the law.

9 March 2000 External T.I. 2000-0005165 - Existence of a Trust and 75(2)

Unedited CRA Tags
75(2) 120.4

Principal Issues:
1. Whether there is a trust for purposes of subsection 75(2) of the Act.

2. If the answer to the first question is yes, whether subsection 75(2) would apply.

Position:
1. No position taken

2. In the circumstances described in the letter, paragraph 75(2)(b) would apply if a trust exists under the relevant laws of the province.

Reasons:
1. It depends on the relevant laws of the province and not the Act.

2. Question of fact

8 March 2000 External T.I. 1999-0008415 - INDIAN EMPLOY. INCOME - XXXXXXXXXX

Unedited CRA Tags
81(1)(a)

Principal Issues: Whether a status Indian employee is exempt form tax on his employment income.

Position: No

Reasons: The employee does not live on reserve, he does not perform more than 50% of his duties of employment on reserve and the employer is involved in commercial activities.

8 March 2000 External T.I. 2000-0003885 - EXCHANGEABLE SHARE FOREIGN PROPERTY

Unedited CRA Tags
206(1)(d.1)

Principal Issues: Would a share that meets 206(1)(d.1) be a foreign property if it is excluded under 206(1)(f) of the same definition?

Position: No.

Reasons: Each of the paragraphs of the definition of foreign property is applied separately.

8 March 2000 External T.I. 2000-0004225 - STANDBY CHARGE BENEFIT

Unedited CRA Tags
6(2)

Principal Issues: . Is the standby charge applicable where the employer's vehicle is available to the employee but the employer's policy is to forbid the use of the vehicle for personal use other than driving to and from work?

Position: Yes.

Reasons: In general terms, an automobile is considered to have been made available to an employee until such time as the employee is required by the employer to relinquish control over the vehicle back to the employer. A personal use policy in which the employer prohibits personal usage of the vehicle, other than driving to and from work, does not constitute making the automobile unavailable to the employee.

8 March 2000 External T.I. 2000-0004305 - SMALL BUSINESS SHARE IN RRSP

Unedited CRA Tags
REG 4900(12)

Principal Issues: Will shares of a certain private corporation be qualified investments for an RRSP?

Position: Question of fact.

Reasons: We need to see all of the facts to determine whether the shares would meet 4900(6) or (12) of the Regulations.

8 March 2000 External T.I. 2000-0004695 - UK PENSION CONTRIBUTIONS

Unedited CRA Tags
147.2(4)

Principal Issues: A Canadian resident originally from the U.K. is allowed to make additional contributions to the U.K. Pension Department in order to increase the pension he will receive from the U.K. pension when he reaches 65 years of age, can he deduct these additional contributions in computing his Canadian income taxes?

Position: No.

Reasons: There is no provision in the Act that provides for a deduction.

8 March 2000 External T.I. 2000-0005225 - QUALIFIED FARM PROPERTY-PTSHP

Unedited CRA Tags
110.6(1)

Principal Issues: Whether or not the disposition of an interest in a partnership in a particular hypothetical situation is a disposition of a "qualified farm property" that would qualify for the capital gains exemption in subsection 110.6(2) of the Act.

Position: Only one comment offered with respect to subparagraph (a)(i) of the definition "interest in a family farm partnership".

Reasons: The facts given in the hypothetical situations are very specific and seem to deal with a proposed transaction that should only be dealt with as an advance income tax ruling.

7 March 2000 External T.I. 1999-0011335 - Cash Basis

Unedited CRA Tags
28(5) 85(1) 98(5) 98(3)

Principal Issues: 1. on transfer of partnership interest to corporation is there any minimum time that corporation must be partner before 98(5) apply?

2. If farmer transfers assets to corp including A\R does he report income no matter the consideration?

3.On wind-up of partnership pursuant to 98(3) or (5) will A\R be included in income of partnership.

Position: 1. 98(5) will apply provided corporate transferee continues to carry on the business of the partnership and uses the partnership property.

2.Income no matter nature of the consideration.

3.Income to partners when realized.

Reasons: 1.Previous rulings.

7 March 2000 External T.I. 2000-0007195 - RRSP - BENEFICIARY DESIGNATION

Unedited CRA Tags
146 12(4) 212(1)(b)

Principal Issues: a) Can a non-resident annuitant designate a beneficiary of an RRSP?
b) How does an RRSP annuitant declare annual accrued income on a market-linked GIC held in an RRSP, when the yield is not known until the maturity?

Position: a) Yes
b) No requirement to report until amounts are paid to annuitant.

Reasons: a) Nothing in the Act to prevent this but refer to provincial legislation.
b) Non-resident annuitant is taxable under 212(1)(l) when amounts paid out of the RRSP to annuitant or to annuitant's credit.

6 March 2000 External T.I. 1999-0013555 - CROSS DEFAULTS

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

Principal Issues: Whether Defaults by members of a corporate group not party to a loan agreement an acceptable event of default for purposes of subparagraph 212(1)(b)(vii)?

Position: depends on particular facts - rulings have been issued where defaults of sister or subsidiary corps would cause default in borrower's own loans

Reasons: Paragraph 15 of IT-361R3 which states that defaults by persons not parties to the agreement would usually not be considered a failure or default is based on R.J. Read's 1983 comments to the CTF where the persons not party to the agreement were governments, regulatory bodies, and courts

3 March 2000 External T.I. 2000-0005235 - TREAT. OF PROFIT-NO REOP IN PRI YEARS

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

Principal Issues:
1. The impact that the recent court decisions in Michael Mastri et al. v. The Queen, The Attorney General of Canada v. Enno Tonn et al., R. Buvyer v. The Queen, and J. Walls v. The Queen has on the Agency's application of the reasonable expectation of profit test.
2. Whether profits are taxable where the Agency previously determined that an activity or undertaking had no reasonable expectation of profit, but in a subsequent taxation year the particular activity or undertaking earns a profit.

Position:
1. If there is no personal or non-business motivation behind the losses, the reasonable expectation of profit test will be applied less rigorously. (IT Technical News 16.)
2. It is our view that when an undertaking or activity results in receipts of revenue in excess of expenses, that fact is a strong indication that the undertaking or activity is a venture with an expectation of profit. Thus, the net income may be taxed as income from a business.

Reasons:
1. Interpretation of court decisions.
2. The fact that a taxpayer had or appeared to have no reasonable expectation of profit in previous years may be a factor in determining whether or not the taxpayer was carrying on a business. However, it is not conclusive evidence in itself that the taxpayer was not engaged in a business in that year. Other factors, in addition to the fact that the activity generated a profit, may support the conclusion that the taxpayer was in fact engaged in a business.

3 March 2000 External T.I. 2000-0008665 - medical expenses-travel

Unedited CRA Tags
118.2(2)(a) 118.2(2)(h)

Principal Issues: Whether travel costs are eligible for the medical expense tax credit

Position: General comments were provided

Reasons: All the relevant information was not provided

3 March 2000 External T.I. 1999-0013935 - RETROACTIVE PAYMENT TO WIDOWS-ON

Unedited CRA Tags
56(1)(v) 12(1)(c)

Principal Issues: Interest on workers compensation payment.

Position: Exempt from income

Reasons: Consistent with previous position on similar issue.

3 March 2000 External T.I. 2000-0007885 - DIS. T.C.&MED EXP. FOR INSTITU. FEES

Unedited CRA Tags
118.3(2) 118.2(2)(e)

Principal Issues: Whether a claim for a medical expense tax credit under paragraph 118.2(2)(e) of the Income Tax Act for a dependent child precludes the parent from also claiming the disability tax credit in respect of that child pursuant to subsection 118.3(2) of the Act.

Position: No.

Reasons: It is our view that an amount paid to a school, institution or other place for care or care and training would not be considered "remuneration" and thus would not be "remuneration for an attendant," even though the fees paid may be used by that school, institution or other place to pay the remuneration of its staff. Accordingly, the restriction in paragraph 118.3(2)(b), which denies a disability tax credit in respect of a dependent where an amount in respect of remuneration for an attendant or care in a nursing home is included in calculating a medical expense tax credit, would not apply.

2 March 2000 External T.I. 2000-0003375 - CONTRIBUTIONS TO UK PENSION PLAN

Unedited CRA Tags
147.2(4)

Principal Issues: A Canadian resident originally from the U.K. is allowed to make additional contributions to the U.K. Pension Department in order to increase the pension he will receive from the U.K. pension when he reaches 65 years of age, can he deduct these additional contributions in computing his Canadian income taxes?

Position: No.

Reasons: There is no provision in the Act that provides for a deduction.

2 March 2000 External T.I. 2000-0000155 - RCA PAYMENTS TO NON-RESIDENT

Unedited CRA Tags
56(1) 212(1)(J)

Principal Issues: Are rights to benefits under an EPSP, an EBP or a FRA held by an individual who emigrates from Canada included in income under proposed paragraph 128.1(4)(b) of the Act?

Position: No for EPSP or EBP. Yes for FRA.

Reasons: EPSP and EBP rights are specifically excluded under the proposed subparagraph 128.1(4)(b)(iv).

2 March 2000 External T.I. 1999-0015705 - Affiliated persons and stop loss rules

Unedited CRA Tags
40(3.6) 251.1

Principal Issues: Is the trust an affiliated person with a corporation personally controlled by the trustee where the trustee is the sole trustee of the trust for the purposes of subsection 40(3.6)?

Position: Yes

Reasons: The law

2 March 2000 External T.I. 2000-0003215 - RCA PART XIII

Unedited CRA Tags
212(1)(j)

Principal Issues: Will payments from a Canadian RCA relating to foreign service provided by an employee while he was a non-resident be exempt from withholding taxes under 212(1)(h) of the Act?

Position: No.

Reasons: Paragraph 212(1)(j) applies to RCA payments made to a non-resident and there is no exclusion for benefits relating to services provided while the person was not resident in Canada.

1 March 2000 External T.I. 2000-0008135 - LEGAL FEES TO SETTLE AN ESTATE

Unedited CRA Tags
9(1)

Principal Issues: Whether legal fees incurred by a taxpayer in connection with a dispute with a sibling over farmland is tax deductible.

Position: No.

Reasons: Except where there is a specific provision in the Act dealing with legal fees, such as paragraph 8(1)(b) or 60(o.1), legal fees are deductible only to the extent that they (a) are incurred for the purpose of gaining or producing income from a business or property, and (b) are not outlays of a capital nature. Further, legal fees incurred in settling an estate would not be considered to have been incurred on the acquisition of capital property and thus would not be included as part of the cost of property.

1 March 2000 External T.I. 1999-0011375 - Family Farm Corporation

Unedited CRA Tags
70(10)

Principal Issues: Is partner considered to be carrying on business of partnership?

Position: Yes.

Reasons: Previous position. Only asset of corporate partner is partnership interest. Then partner carrying on business if partnership carrying on business of farming which is a question of fact.

1 March 2000 External T.I. 1999-0014935 - FOREIGN PROPERTY

Unedited CRA Tags
206(1) REG 3201(o)(viii)

Principal Issues: Whether shares listed on NASDAQ are foreign property.

Position: Question of fact.

Reasons: Need more information to ascertain and then could respond only in the form of an advance ruling request.

1 March 2000 External T.I. 1999-0014975 - ATTRIB. RULES - INTEREST DEDUCTION

Unedited CRA Tags
74.1(1) 73(1) 74.5(11) 20(1)(c)

Principal Issues:
Where an individual transfers shares to his or her spouse that have an acb of $1 and fmv of $100,000 and an amount is borrowed by the spouse from a bank to pay and the individual in turn pays off a personal residence mortgage, do the attribution rules apply and is the interest deductible?

1 March 2000 External T.I. 1999-0015475 - CAPITAL GAIN ON JOINTLY-HELD PROPERTY

Unedited CRA Tags
74.2(1) 74.1(1)

Principal Issues: Reporting of capital gain on farmland owned jointly by a husband and wife where the capital contribution to acquire the farmland was provided disproportionately between the two of them.

Position: Each spouse would report a share of the capital gain on the basis of his or her respective contribution of capital to acquire the property.

Reasons: When spouses own a property jointly but have provided the financing for its acquisition disproportionately, it is our view that the attribution rules in subsection 74.2(1) of the Income Tax Act will apply to determine the reporting of a capital gain earned on the disposition of the property.

29 February 2000 External T.I. 2000-0006115 - DEATH SUBSEQUENT RRSP INCOME AND LOSS

Unedited CRA Tags
146(8.8) 146(4) 146(1)

Principal Issues:
1) When there is an increase in value in an RRSP after the date of death , how is the income taxed to the estate?
2) Where an RRSP incurs a loss subsequent to the death of its annuitant, can the beneficiaries of the RRSP claim that loss?

Position:
1) When amounts are paid out of the RRSP to the estate in excess of the amount taxed to the deceased under subsection 146(8.8) they are taxed pursuant to 146(8) of the Act.
2) No

Reasons:
1) Amount is a benefit out of an RRSP
2) There is no provision in the Act that allows for the loss to flow through to the RRSP beneficiaries.

29 February 2000 External T.I. 2000-0008905 - OFFICE IN THE HOME

Unedited CRA Tags
18(12)

Principal Issues: How do you determine the reasonable portion of the expenses relating to a work space in a home used in a business?

Position: General comments.

Reasons: It is a question of fact as to what is reasonable in a particular circumstance.

29 February 2000 External T.I. 1999-0001435 - TRANS. OF CAPITAL PROPERTY TO A SPOUSE

Unedited CRA Tags
73(1) 70(6) 53(1) 53(2)

Principal Issues: If the transferor receives a promissory note as consideration for property transferred (shares) to his spouse or spouse trust, is the adjusted cost base of the note equal to the value equal to the face amount of the note?

Position: Question of fact

Reasons: Generally, the ACB of capital property of property is the amount paid. However, it is also arguable that a note received from a spouse or a spouse trust may not be regarded as capital property but simply a promise to pay.

28 February 2000 External T.I. 1999-0009305 - Winding-up, dividend

Unedited CRA Tags
88(1)(d)(i.1) 88(1.7)

Principal Issues: Based on situation, there were no contentious issues.

Position:

Reasons:

28 February 2000 External T.I. 1999-0014365 - Foreign merger

Unedited CRA Tags
87(8) 87(8.1)

Principal Issues: Meaning of "foreign merger"

Position: Proposed merger qualifies as a foreign merger

Reasons: Satisfies requirements of subsection 87(8.1)

28 February 2000 External T.I. 1999-0013435 - Immigrant Trust-Spousal Attribution

Unedited CRA Tags
74.1(1) 74.2(1) 75(2) 94(1)

Principal Issues: 1) Can the attribution rules in subsection 74.1(1) and 74.2(1) apply to a transfer of funds between spouses if both individuals are not residents of Canada?

2) Do the attribution rules apply if the tranferred funds are used by the transferee spouse to fund a non-resident trust?

Position: 1) No/Yest 2)No/Yes

Reasons: 1) Given the particular fact pattern in this hypothetical scenario subsections 74.1(1) and 74.2(1) will not apply at the time of the transfer as the transferor was not resident in Canada. However, when the transferor becomes a resident of Canada both subsections may have application.

25 February 2000 External T.I. 1999-0015945 - TRAVEL BETWEEN HOME OFFICE & BOARD OFFICE

Unedited CRA Tags
6(1)(a) 6(1)(e) 6(1)(k)

Principal Issues: Whether travel between a school board trustee's home office and the board office should be considered personal travel.

Position: Likely yes.

Reasons: If an employee, whose regular place of work is the home office, is required to regularly and habitually attend staff or other meetings at the main office, it may be that the main office remains one of two locations from which the employee regularly performs the duties of employment. As a result, travel between such locations may be viewed as personal in nature. In determining whether a particular location is a regular place of work, the regularity of the reporting and the nature of the duties carried on at this location is more important than the fact that an employee may only report to the work location once or twice each month.

25 February 2000 External T.I. 1999-0009685 - Foreign affiliates - group relief

Unedited CRA Tags
95(2)(a)(ii)(D)

Principal Issues: Whether the portion of any interest payments which contribute to a loss of the payer foreign affiliate resident in the United Kingdom which cannot be surrendered to any other foreign affiliate resident in the United Kingdom, can nevertheless be considered as "relevant in computing the liability for income taxes in that country of the members of a group of corporations..." for the purpose of subclause 95(2)(a)(ii)(D)(V).

Position: Generally not.

Reasons: Such portion of the interest payments may only be relevant in computing the liability for income taxes of the payer foreign affiliate.

24 February 2000 External T.I. 1999-0014195 - Qualified Farm Property

Unedited CRA Tags
110.6(1)

Principal Issues:
(1) Does a particular farm qualify as a "qualified farm property'?
(2) To qualify as a "qualified farm property", the property must be used by certain entities "in the course of carrying on the business of farming in Canada". If a taxpayer is relying on the use of a property in the business of farming by a partnership of which he is a member, must his interest in the partnership be "an interest in a family farm partnership"?

Position:
(1) General comments.
(2) Yes.

Reasons:
(1) Depends on the facts of a particular situation.
(2) It is the Agency's position that a member of a partnership carries on the business of the partnership (see for example IT-183). It does not follow that each property used by the partnership is also used by each member of the partnership. To accept such a proposition would render subparagraph (a)(v) of the definition "qualified farm property" in subsection 110.6(1) nugatory.

24 February 2000 External T.I. 1999-0004805 - housing loans

Unedited CRA Tags
80.4

Principal Issues:
1. In a situation involving an employer-requested move, is the mere fact that the employee's move qualifies as an eligible relocation [defined in ITA 248(1)] sufficient to conclude, in accordance with ITA 80.4(1.1), that a third party loan to finance a house price differential would not have been received but for the employee's employment?
2. If there is clear evidence that a loan would not have been received by the employee but for the employment such that ITA 80.4(1.1) applies, would a benefit be computed under ITA 80.4, notwithstanding the introduction of ITA 6(23)?
3. With the introduction of ITA 6(23) and ITA 80.4(1.1), does the arrangement whereby the interest subsidy to the employee for the house price differential is provided via an interest-free loan from the employer result in the same taxable benefit as the arrangement whereby the employer pays the interest on a loan received by the employee from the third party lender?

Position: 1. No
2. Yes
3. Not necessarily

Reasons:
1. ITA 80.4(1.1) refers to a relationship between the loan/debt and the individual's office/ employment, as opposed to the individual's relocation. The relocation by itself, whether or not it qualifies as an eligible relocation, would be insufficient evidence to reasonably conclude that any loan/debt would not have been received/incurred by the individual but for the office or employment, within the meaning of ITA 80.4(1.1). Whether a loan is received because of employment is a question of fact based on the degree of involvement of the employer; e.g., the employer provides documentation to the lender to support the loan application, guarantees the principal and/or interest and pays the interest subsidy to the lender.
2. If an amount is included in income by virtue of ITA 80.4, a deduction may be available under ITA 110(1)(j) in respect of a home relocation loan [defined in ITA 248(1)]. If , based on the facts, ITA 80.4 and ITA 6(9) do not apply, then a benefit may be assessed under ITA 6(1)(a) and ITA 6(23).
3. The benefit on an interest-free loan is determined under ITA 80.4(1) and ITA 6(9). However, depending on the specific details of the arrangement, a benefit in respect of third party loans can arise either under ITA 80.4(1) and ITA 6(9) or under 6(23) and 6(1)(a).

24 February 2000 External T.I. 1999-0009925 F - T1135 - Déclarations générales

Unedited CRA Tags
233.3

Principales Questions:

Faut-il cocher la case ®Autres( du formulaire T1135 lorsqu'il s'agit de déterminer le lieu où est situé l'un ou l'autre des biens étrangers déterminés suivants:

1. un billet émis par une société étrangère qui est physiquement détenu au Canada;
2. des actions d'une société étrangère qui sont physiquement détenues au Canada;
3. des actions d'une société étrangère qui sont en dépôt chez un courtier situé au Canada.

Whether, on the form T1135, the box "Other" should be checked to indicate the location of the following specified foreign properties:

1. indebtedness owed by a foreign corporation which is held by the filer in Canada;
2. Shares of a foreign corporation which are held by the filer in Canada;
3. Shares of a foreign corporation which are held, for the filer, by a Canadian broker.

Position Adoptée:

24 February 2000 External T.I. 1999-0015885 - Long Term Care

Unedited CRA Tags
118.2(2) Reg. 5700

Principal Issues: Whether Long Term Care insurance policy qualifies as a PHSP?

Position: General comments only.

Reasons: Department's comments regarding a PHSP are set out in IT-339R2 and Medical Expenses in IT-519R2.

23 February 2000 External T.I. 2000-0000205 - INTEREST DEDUCTIBILITY

Unedited CRA Tags
20(1)(c) 20(3)

Principal Issues: Whether the interest expense on the assumption of a mortgage in satisfaction of an inter-company debt would be deductible..

Position: General Comments.

Reasons: Question of fact and not enough information provided.

23 February 2000 External T.I. 2000-0007335 - CERTIFIGIFTS DONATIONS

Unedited CRA Tags
118.1(1) 110.1

Principal Issues: Whether a person can make a gift and transfer the related credit/deduction to a retailer in exchange for a discount.

Position: No

Reasons: Retailer would not be transferring property to the charity - therefore no gift. Individual has not made a gift due to consideration received. In short charitable credits are not transferable under the Act.

22 February 2000 External T.I. 1999-0010255 - Saudi Arabian LLC

Unedited CRA Tags
113(1)(c)

Principal Issues: (i) Whether an entity formed under the Saudi Arabian legislation with respect to Limited Liability Companies is treated as a corporation for Canadian tax purposes; and

(ii) Whether a deduction is allowed under section 113 of the Act with respect to Saudi Arabian income tax paid by the Canadian corporate investor of such entity.

Position: (i) The information provided is not sufficient to make a determination

(ii) Provided that the entity is a corporation for Canadian tax purposes, paragraph 113(1)(c) would probably apply.

Reasons: (i) Not sufficient information

2000 External T.I. 9931905 - INVESTMENT TRUST - PURCHASE PLAN

Unedited CRA Tags
105(1) 52(1)

Principal Issues:
1. Effect of extending period for measuring price?
2. Whether additional Purchase Plan is subject to same provisions that the Reinvestment Plan is subject to?

Position:
1. no change
2. yes

Reasons:
1. The benefit pertains to the fact that there is a discount, not to the period for which the price is determined.
2. The Purchase Plan provides for a discount similar to that of the Reinvestment Plan.

15 December 1999 External T.I. 1999-0009415 - Locally engaged staff deemed resident

Unedited CRA Tags
250(1)(g) 115(2)(c) art 19

Principal Issues: Non-resident persons are hired as locally engaged employees (LES) at Canadian embassies in countries which do not impose an income tax on the wages paid to them and such persons are former residents of Canada. The issue is whether the wages paid to such LES are taxable under paragraph 115(2)(c) of the Act.

Position: no. paragraph 115(2)(c)(iii) does not apply to such LES

Reasons: As a result of the 1999 amendments to paragraph 115(2)(c) of the Act, and in particular the enactment of subparagraph 115(2)(c)(iii), paragraph 115(2)(c) of the Act no longer applies to such LES and the result is that the wages paid to such LES is no longer taxable under part I of the Act.

9 November 1999 External T.I. 9906255 F - CALCUL DE L'IMPOT P. IV - 55

Unedited CRA Tags
55(2) 186(1)b)

Principales Questions:

Le montant du dividende reçu par une société aux fins de 186(1)b)(i) correspond-il au montant du dividende reçu net de la partie de ce dividende qui est réputée ne pas être un dividende au sens de 55(2)a)?

Position Adoptée:

Conference

6 March 2000 TEI Roundtable, 1999-0006720 - EMPLOYEE RELOCATIONS-TEI QUESTIONS

Unedited CRA Tags
6(23)

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.

Tax Executive Institute
1999
Section 23
file # 1999-000672

Question XXVI: Scope of Proposed Subsection 6(23)

7 December 1999 TEI Roundtable, 1999-0007790 - The application of subsection 17(2)

Unedited CRA Tags
153 reg 105

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.

TEI Conference
December 7, 1999

Question XXVIII.

AMENDED SECTION 17-INTERPRETATIVE ISSUES

7 December 1999 TEI Roundtable, 1999-0007800 - Application of subsection 15(2.3)

Unedited CRA Tags
15(2.3)

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.

TEI Conference
December 7, 1999

Question XXIII.

SUBSECTION 15(2.3)

7 December 1999 TEI Roundtable, 1999-0007820 - Permanent establishment for customs

Unedited CRA Tags
247

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.

TEI Conference
December 7, 1999

Question XXXIV

CRITERIA FOR PERMANENT ESTABLISHMENT - CUSTOMS V. INCOME TAX

7 December 1999 TEI Roundtable Q. 1, 1999-0009100 - Effect of Parthenon decision

Unedited CRA Tags
125(7)(b) 256(6.1)

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.

TEI Conference
December 7, 1999

Question XXX

Effect of the Parthenon Decision on the Definition of Control

Technical Interpretation - Internal

3 March 2000 Internal T.I. 2000-0002337 F - COOPERATIVES

Unedited CRA Tags
125(1) 137(6) 136(1) 127(7)

Principales Questions: Une coopérative constituée en vertu de la Loi sur les coopératives du Québec a-t-elle droit à la DPE si ces seuls revenus sont des revenus d'intérêts.

Position Adoptée: Non

25 February 2000 Internal T.I. 2000-0006157 - Use of Employer Vehicle by Fire-Fighter

Unedited CRA Tags
6(1)(a) 6(1)(e)

Principal Issues: Whether a fire-fighter is in receipt of taxable benefits for use of employer-provided vehicle in 5 different scenarios: The first 4 scenarios are trips to and from the normal worksite. In scenario 5, an employee is scheduled to attend a meeting the following day in a different city. In order to avoid driving 20 kilometres to work that following day, exchanging vehicles, and then doubling back on the drive to the meeting, the employee leaves his or her personal vehicle at the office and uses the employer's vehicle to drive home. The employee then proceeds directly to the meeting the following day.

Position: Scenarios 1 to 4 would be considered personal travel. In scenario 5, there would likely be no benefit included in that employee's income as a result of having taken the employer's vehicle home on the day before the specified business travel and returning it the first morning following the day which concludes the business travel.

Reasons: As stated in paragraph 5 of Interpretation Bulletin IT-63R5, personal use of an automobile includes travel between the employee's home and usual place of work. The
fact that an employee is required or asked by the employer to take the automobile home after work does not change the personal nature of such travel. Also, the fact that an employee travels to his or her residence with a vehicle provided by the employer from the regular place of work, but remains on call as part of the employment contract, does not change the personal nature of the trip. However, where an employee is only infrequently and irregularly provided with the employer's vehicle for the sole purpose of specified business travel, as in scenario 5, benefit would likely be negligible.

25 February 2000 Internal T.I. 2000-0001087 - Co-Researcher

Unedited CRA Tags
56(1)(o)

Principal Issues:
Does the work performed by an individual under a research grant at the University qualify as co-researcher?

24 February 2000 Internal T.I. 1999-0006570 - TEI XI PHSP

Unedited CRA Tags
248(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.

1999 TEI

QUESTION X1

24 February 2000 Internal T.I. 1999-0009047 - Stock option benefit for non-residents

Unedited CRA Tags
115(1)(a)(i) 7

Principal Issues: Where stock options are exercised in 1997 by a non-resident, are the stock option benefits for 1997 attributable to the year the person was granted such stock options.

Position: yes

Reasons: Stock option benefits for 1997 are attributable to the taxpayer's employment with Canco in 1993, the year in which Stock Agreement was entered into, and the amount of such benefit that should be included in the taxpayer's taxable income for 1997 is calculated as follows. Total stock option benefit calculated for 1997 under section 7 of the Act in respect of stock options exercised under the Stock Agreement multiplied by the fraction where the numerator equals the total number of days the taxpayer was in Canada performing duties for Canco in 1993 and the denominator equals the total number of days the taxpayer was performing duties for Canco in 1993.

21 February 2000 Internal T.I. 1999-0015457 - PATRONAGE DIVIDENDS REC. BY INDIAN

Unedited CRA Tags
81(1)(a)

Principal Issues: Whether patronage dividends that are related to exempt business income of Indian are also exempt.

Position: Yes

Reasons: In our view, the patronage dividends form part of the taxpayer's profits from his business and should be treated as tax exempt in accordance with the income tax treatment previously determined for such profits.

25 January 2000 Internal T.I. 1999-0015257 - NORTHERN RESIDENTS DEDUCTION

Unedited CRA Tags
110.7(1)

Principal Issues:
Does the term "travel expenses" as used for the purposes of paragraph 110.7(1)(a) of the Act and section 7304 of the Regulations include the cost of replacing a radiator of a vehicle?

Position
Depends on the circumstances.

Reasons:
See File # 980159 and 983032. "Travel expenses" includes air, train and bus fares, meals, hotel and motel accommodations, camping fees, incidentals such as taxis, road and ferry tolls, and automobile expenses directly related to the trip such as the cost of fuel, general maintenance (ex. oil, grease and servicing charges), repairs, licenses, and insurance as long as the costs are reasonable, are not on account of capital, and can reasonably be attributed to the trip.

14 January 2000 Internal T.I. 9929107 - DEEMED DATE OF POD-EXPROP. PROP.

Unedited CRA Tags
44(2)

Principal Issues: When proceeds of disposition of an expropriated property are deemed to have been received under subsection 44(2) if, not before 2 years after the expropriation, the taxpayer does not institute legal proceedings and is unable to reach a settlement with the expropriating authority.

Position: Two years following the day of expropriation.

Reasons: Clear language of paragraph 44(2)(c).

21 December 1999 Internal T.I. 9915377 - COMMISSION INCOME

Unedited CRA Tags
9(1) 6(1)(e)

Principal Issues: Treatment of vehicles provided to sales agent's.

Position: Taxable as commission income.

Reasons: The vehicle is an incentive based on volume of sales reached by the agent. Agents can receive cash or a vehicle. The incentive fits in to the ordinary meaning of the word commission, as an amount fixed by reference to volume of sales made and therefore must be included in income in the same manner as commissions paid in cash.

26 November 1999 Internal T.I. 9929427 - CAPITAL VS. CURRENT EXP.

Unedited CRA Tags
20(1)(a) 18(1)(a)

Principal Issues: Repair of Leaky Roof Condos in B.C. Whether capital or current expense?

Position: As new roof probably of better quality, to avoid future leaky roof problems, likely to be capital. However any apart that is restored to same quality (e.g., walls) would be current expense.

Reasons: Paragraph 4 of IT-128R.

2 December 1999 Internal T.I. 1999-0010070 - Guarantee fee

Unedited CRA Tags
15(1) 247(2)

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.

Tax Executives Institute Conference

Question XXV Guarantee Fees

19 November 1999 Internal T.I. 1999-0010360 - The Queen v. MacMillan Bloedel Ltd.

Unedited CRA Tags
39(2)
MacMillan restricted to pref redemptions

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.

Tax Executive Institute Conference

Question XXIV MacMillan Bloedel

Ministerial Letter

16 February 2000 Ministerial Letter 2000-0002448 - VOL. DEDUCTION AMEND. REQUEST

Unedited CRA Tags
8(1)(a) 81(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.

February 16, 200

XXXXXXXXXX

Dear XXXXXXXXXX:

11 February 2000 Ministerial Letter 1999-0012478 - RETIREMENT HOME

Unedited CRA Tags
118.2(2)

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.

February 11, 2000

XXXXXXXXXX

Dear XXXXXXXXXX:

11 February 2000 Ministerial Letter 1999-0010268 - SBD V. SERV. RENDERED O/S CANADA

Unedited CRA Tags
125

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.

February 11, 2000

XXXXXXXXXX

Dear Colleague:

Thank: you for your letter of November 15, 1999, concerning the small business deduction. As you know, on November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (CCRA).

10 February 2000 Ministerial Letter 2000-0000108 - RETIRED CLERGY

Unedited CRA Tags
8(1)(c)

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.

February 10, 2000

XXXXXXXXXX

Dear Colleague:

4 February 2000 Ministerial Letter 1999-0004388 - TAXATION OF INDIAN FISHERS

Unedited CRA Tags
81(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.

February 4, 2000

XXXXXXXXXX

Dear XXXXXXXXXX: