Income Tax Severed Letters - 2001-04-13

Miscellaneous

2001 2000-0049451 - XXXXXXXXXX

Unedited CRA Tags
XXXXXXXXXX XXXXXXXXXX

Principal Issues:
1) Can we rule on the proposed addition of the RESP feature to the plan since the plan has been implemented?
2) Will a XXXXXXXXXX contributed to an RESP by the XXXXXXXXXX be a contribution by a Subscriber to an RESP as contemplated in 146.1 of the Act?

Position:
1) Yes.
2) Yes.

Reasons:
1) The RESP feature is not yet available under the plan.
2) The XXXXXXXXXX are the property of the XXXXXXXXXX , who can choose to contribute them to an RRSP, an RESP or a non-registered account.

2001 2001-0072211 - SUPPLEMENTARY RULING

Unedited CRA Tags
53(1)(e)(iv)

Principal Issues: minor changes

Position: minor changes

Reasons: no impact on rulings

2000 2000-0034581 - Supplemental Ruling Request

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

Principal Issues:
Request for amendments to the facts & proposed transactions described in the Ruling as well as consequential revisions to advance rulings.

2000 2000-0061401 - Supplementary Ruling

Principal Issues: minor changes

Position: none

Reasons: minor changes

Ruling

2 March 2001 Ruling 2001-0070233 - Collective Agreement, PBSA

Unedited CRA Tags
8500(1)

Principal Issues:
Can we rule on the application of the Pension Benefits Standards Act, 1985 or on whether certain payments are in accordance with a pension plan as registered?

Position: No.

Reasons:
Neither are included in the responsibilities of the Income Tax Rulings Directorate.

2001 Ruling 2000-0049203 - Offshore Reinsurance

Unedited CRA Tags
138(1) 18(9) 20(7)(c)

Principal Issues: Under a proposed arrangement, a non-resident insurance corporation with a branch office in Canada will provide XXXXXXXXXX insurance through a subsidiary in provinces where the insurance does not need to be underwritten by a regulated entity, and directly in provinces where the insurance does. The subsidiary will reinsure XXXXXXXXXX % of its risk with the branch office; the branch office will reinsure XXXXXXXXXX % of its direct risk, and retrocede XXXXXXXXXX % of the subsidiary's risk with a related captive situated in a tax haven. As a result, the only income that will be subject to Canadian taxation is the portion of the premiums retained by the subsidiary and the reinsurance commissions received by the branch office. We are asked to confirm that the subsidiary will be an insurance company within the meaning of section 138 of the Act, that the branch will be entitled to claim a reserve in respect of its reinsurance commissions, and for comments on the application of subsection 18(9) to the outlays and expenses of the branch office and the subsidiary.

Position: The subsidiary will be carrying on an insurance business. The branch office will be entitled to claim a reasonable reserve in respect of unearned reinsurance commissions. The outlays and expenses of the two entities will be subject to subsection 18(9); clause 18(9)(a)(iii)(A) will apply in respect of the reinsurance premiums paid by the subsidiary to the branch and by the branch to the captive.

Reasons: Each ruling was dependent upon a finding of fact that the subject matter of the contracts would be insurance and that each of the subsidiary and the branch office would in fact be directly underwriting the risks they are purporting to insure. The rulings are dependent upon the captive being sufficiently capitalized to underwrite the risks it is undertaking to reinsure - see XXXXXXXXXX

2001 Ruling 2000-0062913 - Public Co - Return of Capital

Unedited CRA Tags
84(4.1) 84(2)

Principal Issues: Reduction of Capital - Public Corporation.

Position: Subsection 84(2) precludes application of subsection 84(4.1).

Reasons: Proposed transactions constitute a reorganization of a business.

2001 Ruling 2001-0065383 F - Actions privilégiées de renflouement

Unedited CRA Tags
248(1) 112(1) 20(1)e) 15(1)

Principales Questions:
Est-ce que les actions sont des actions priviligiées de renflouement?

Position Adoptée: Oui.

2001 Ruling 2000-0052953 - Resident of a Contracting State

Unedited CRA Tags
Reg 5907(11.2) Art 4

Principal Issues: Whether election by a UK corporation to have its shipping activities taxed under the new UK "tonnage tax" regime would cause it not to be a resident of the UK under the Canada-UK Income Tax Convention.

Position: No

Reasons: See detailed issue sheet

2001 Ruling 2001-0068273 F - INDIAN BANK PUBLIC BODY

Unedited CRA Tags
149(1)(c)

Position Adoptée:
Oui

2001 Ruling 2000-0036913 - GAAR; CONTROL; LOSSES

Unedited CRA Tags
245(2) 111

Principal Issues:
1 whether change of control
2 whether OpCo and Partnership are non-arms length
3 whether 53(1)(e)(iv) applies re capital contribution from SubCo to Partnership
4 whether foreign currency gain is on capital account

Position:
1 yes - favourable ruling
2 yes - favourable ruling
3 yes - favourable ruling
4 yes - to the extent funds were borrowed for long term financing of construction - favourable ruling

Reasons:
1 249(4) ITA
2 facts of situation
3 no benefit to related party
4 IT-95

2001 Ruling 2000-0054593 - Non-resident-owned Investment Corporation

Unedited CRA Tags
133 20(1)(c) 18(4) 245(2)

Principal Issues: Unwinding NRO Structure

Position: See Issue Sheet

Reasons: See Issue Sheet

2001 Ruling 2000-0061803 - Phantom Stock Plan - Directors

Unedited CRA Tags
6801(d)

Principal Issues:
Are the completed Directors' elections subject to a condition precedent such that we can rule?

Position: Yes.

Reasons:
The elections do not become effective until the date a favourable ruling is issued.

2000 Ruling 2000-0004783 - Election not to be a public corporation

Unedited CRA Tags
20(1)(c) 89(1) REG 4800

Principal Issues:
1. Whether an election not to be a public corporation can be made when previously listed shares no longer exist.
2. Is interest deductible on funds borrowed to return capital?

Position:
1. Yes
2. Yes

Reasons:
1. Since as a matter of tax policy, a corporation in this situation should not be precluded from electing not to be a public corporation, the condition in Regulation 4800(2)(a) can be read as applying where previously listed shares no longer exist.
2. IT- 80

2000 Ruling 2000-0038793 - XXXXXXXXXX

Unedited CRA Tags
20(1)(c)

Principal Issues: Supplemental Ruling to 1999-001439 - minor change in facts.

Position: N/A

Reasons: N//A

2000 Ruling 2000-0032363 - REINSURANCE

Unedited CRA Tags
9

Principal Issues: Whether or not a single reinsurance premium paid under an indemnity reinsurance arrangement where the reinsurance is 100% co-insurance, would be considered a premium paid/received in the ordinary course of carrying on an insurance business and therefore deductible from and includable in income for the purpose of sections 9

Position: To the extent the amount of the premium is reasonable, it will be considered to have been paid/received in the course of carrying on an insurance business and is therefore deductible in computing the income of the payor pursuant to section 9 and must be included in the income of the recipient pursuant to section 9.

Reasons: Under an indemnity reinsurance arrangement, the original insurer retains the ultimate liability to the policyholders under the policies and the reinsurance of risks is considered to be an ordinary part of the carrying on of an insurance business.

2000 Ruling 2000-0051053 - PHANTOM STOCK PLAN - DIRECTORS

Unedited CRA Tags
REG 6801(d)

Principal Issues:
Will the payment of director's fees in the form of deferred stock units result in an SDA?

Position: No.

Reasons: 6801(d) is satisfied.

2000 Ruling 2000-0014603 - Internal Reorganization

Unedited CRA Tags
20(1)(c) 55(3)(a) 86(1)

Principal Issues: Interest deductibility; application of section 86; application of paragraph 55(3)(a)

Position: Interest deductible; section 86 applies to share reorganization; dividends not subject to subsection 55(2) by virtue of paragraph 55(3)(a)

Reasons: Interest expense incurred for the purpose of earning income - amount of interest reasonable; requirements of section 86 and paragraph 55(3)(a) satisfied

2000 Ruling 2000-0041673 - PHANTOM STOCK PLAN, DIRECTORS

Unedited CRA Tags
REG 6801(d)

Principal Issues: Will the payment of Director fees in the form of deferred share units result in an SDA?

Position: No.

Reasons: 6801(d) is satisfied.

2000 Ruling 2000-0036753 - PHANTOM STOCK PLAN

Unedited CRA Tags
REG 6801(d)

Principal Issues: Will the payment of Director fees in the form of deferred share units result in an SDA?

Position: No.

Reasons: 6801(d) is satisfied.

2000 Ruling 2000-0021013 - SDA PARAGRAPH K EXCLUSION

Unedited CRA Tags
7 248(1)(S)

Principal Issues:

1. An arrangement provides for the determination of a bonus in respect of an employee's services rendered in a fiscal year that ends in a particular calendar year. The arrangement then provides for the conversion of the bonus into deferred units which will be redeemed within a period that ends three years after January 1 of the calendar year immediately following the particular calendar year. Will the arrangement satisfy the conditions of paragraph (k) of the definition of an SDA?

2. The proposal provides for the payment of cash to the employees on redemption of the units. However the Employer can, at its discretion, choose to issue shares from treasury to satisfy the claim. Will the Plan be subject to section 7 if shares are issued?

3. The proposal provides for the creation of additional units in the event dividends are paid by the employer or the share capital of the employer is altered. What period will such rights be considered to be in respect of.

Position:

1. Yes.

2. Yes.

3. We will accept they are in respect of the calendar year in which they are awarded.

Reasons:

2000 Ruling 2000-0041683 - Redeemable on Demand - Ruling

Unedited CRA Tags
108(2)

Principal Issues: 1. Whether "redeemable on demand" requirement in ss. 108(2) would be met.

Position: The conditions necessary for a trust to be considered a unit trust are met.

Reasons: Particular facts and circumstances would suggest conditions are met at a point in time.

2000 Ruling 2000-0023653 F - REGIME DE PARTICIPATION AUX BENEFICES EET

Unedited CRA Tags
248(1) 6(1)a) 9(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.

PRINCIPALE QUESTION

Le régime de participation aux bénéfices constitue-t-il une "entente d'échelonnement du traitement" au sens que lui donne le paragraphe 248(1) de la Loi.

Position Adoptée

2000 Ruling 2000-0043473 - DIRECTORS PHANTOM STOCK PLAN

Unedited CRA Tags
REG 6801(d)

Principal Issues: Amendment to proposed transactions describing the date of the payout of phantom stock units credited to a participant's notional account.

Position: Amendment to proposed transactions provided.

Reasons: Amendment does not affect rulings.

2000 Ruling 2000-0036973 - PHANTOM STOCK PLAN EMPLOYEE BONUSES

Unedited CRA Tags
REG 6801(d)

Principal Issues: Will the payment of employee bonuses in the form of Deferred Stock Units result in an SDA?

Position: No.

Reasons: 6801(d) is satisfied.

2000 Ruling 2000-0054773 - Production Services Film

Unedited CRA Tags
125.5 96(2.2) 143.2

Principal Issues:

This ruling involves a proposed public production services film deal similar to one previously issued for the same group (file #1999-001455 [also sometimes referred to as file #993252]). The main difference in the facts is that instead of Studio hiring one company to do the Canadian labour and a 3rd party to do the non-Canadian labour production services (and then having that 3rd party hire the production partnership to do the non-Canadian labour production services), in the present instance Studio hires the production partnership to do all of the production services. The production partnership, then, in effect, sub-contracts the Canadian labour expenses out to Studio, which in turn hires a 3rd party to incur those costs.
No new issues.

Position:

Reasons:

2000 Ruling 2000-0025183 - LIMITED PARTNERSHIP FILM FINANCING

Unedited CRA Tags
18.1 143.2 96(2.2)

Principal Issues: Multi-level partnership structure to provide financing through a limited partnership for film and television industry production in Canada for those costs not eligible for tax credits.

(1) Are the operating partnership's costs deductible. (2) Does section 18.1 apply to the operating partnership. (3) Are losses deductible. (4) What impacts upon the at-risk amount of investors. (5) Is interest on amount borrowed to invest deductible.

Position:
(1) Yes, subject to eligibility under the Act and caveats described in the ruling. (2) No. (3) Yes, to extent of at-risk amount and subject to 143.2. (4) At-risk amount will generally be full outlay by the investors and upper partnership, but subject to caveats. (5) Yes, subject to caveats.

Reasons:
(1) Incurred in the course of earning income from business or profit (subject to REOP). (2) The exception in paragraph 18.1(15)(b) is met. (3) to the extent realized in the course of earning income from business or property. (4) Application of 96(2.2). (5) Application of 20(1)(c).

2000 Ruling 2000-0044813 - PHANTOM STOCK PLAN DIRECTORS

Unedited CRA Tags
REG 6801(d)

Principal Issues:
Will the payment of director's fees in the form of deferred share units result in an SDA?

Position:
No.

Reasons:
6801(d) is satisfied.

2000 Ruling 1999-0014393 - INTEREST DEDUCTIBILITY XXXXXXXXXX

Unedited CRA Tags
20(1)(c)

Principal Issues: The company is proposing to settle a trust, the units of which will be issued to the public and listed on a prescribed Canadian stock exchange. If XXXXXXXXXX , it is necessary that the company control the trust. For this reason only, the company will hold all the voting units in the trust. But for the voting feature, all the units of the trust are identical in all respects. The company is then proposing to issue debt which will be held by the trust. The company has the option to redeem the debentures after 10 years from their issuance by paying the outstanding principal amount and any unpaid income entitlement. The trust has the option to redeem its units after 10 years from their issuance by paying the XXXXXXXXXX amount of the units XXXXXXXXXX . If there is a XXXXXXXXXX or XXXXXXXXXX event at any time, the trust may redeem its units, and the company may redeem its debentures by paying cash equal to the XXXXXXXXXX . If there is a XXXXXXXXXX event, the trust preference shares of the company having a stated capital equal to the outstanding principal and the trust unit holders are deemed to have exchanged their trust units for shares having stated capital equal to the XXXXXXXXXX of their trust units. We are asked to confirm that the interest paid by the company on the debentures will be deductible under paragraph 20(1)(c) and that subsection 104(7.1) will not apply in respect of distributions made by the trust to its unitholders.

Position: The interest is deductible. Subsection 104(7.1) will not apply in respect of distributions made by the trust.

Reasons: Deductibility under this provision is dependent upon there being a borrower and lender relationship between the parties to the debentures. There is a good argument that a loan exists until such time as a XXXXXXXXXX event occurs. The existence of the voting rights attached to the company's shares is not intended to give the company a percentage interest in the trust's property in excess of the company's income interest in the trust.

2000 Ruling 2000-0037133 - EMPLOYEE SAVINGS PLAN AND FUND

Unedited CRA Tags
7(1) 38

Principal Issues:
The arrangement is an employees' share purchase plan where shares will be acquired with employee contributions and funds obtained through bank financing. Tax issues concerning the various components of the arrangement are:
1. Does the arrangement constitute a trust?
2 Does section 7 apply?
3. Will the shares be capital property for the purposes of the Act and as a consequence, will the financing be treated on capital account?
4. The arrangement requires a payment of an amount equal to the dividends paid on the shares to the financial institution Will the Dividends be taxable to the employees? Will other income be taxable to the employees?
5. The employer will pay all costs for the operation of the plan. Will this result in a taxable benefit to the employees?
6. Can the financing arrangement be characterized as a loan?

Position:
1. No. Individual employees hold the property under the arrangement.
2. Section 7 of the Act applies to the transactions but a benefit will only arise if the cost to the employee of the shares is less than the value of the shares at the time of their acquisition.
3. The nature of the gains or losses on the shares is a question of fact. There will be a linkage between the shares and the financing.
4. The dividends and other income will be income to the employee/shareholders.
5. Payment of the expenses of the arrangement by the employer are taxable benefits.
6. No.

Reasons:
1. There is no intention to hold property in trust and under French law it is not a trust.
2. The arrangement encompasses an agreement by the employer or related company to sell shares to employees.
3. Normally an employee acquires shares of an employer as capital property but there could be circumstances where an employee acquires the shares on income account. It is generally considered that the treatment of the financing costs will be on the same basis.
4. The right to the dividends rests with the shareholders. The near cash investments of the arrangement are also owned by the employees.
5. The arrangement is designed to facilitate the employees acquisition and holding of shares. Employer payment of these amounts will be taxable benefits. This is consistent with our position on group RRSPs and similar plans.
6. The necessary elements for a swap/hedge exist.

2000 Ruling 2000-0058793 - PHANTOM STOCK PLAN, DIRECTORS

Unedited CRA Tags
REG 6801(d)

Principal Issues: Will the payment of Director fees in the form of deferred share units result in an SDA?

Position: No.

Reasons: 6801(d) is satisfied.

2000 Ruling 2000-0028103 - EMPLOYER-PROVIDED COMPUTERS FOR TRAINING

Unedited CRA Tags
6(1)(a)

Principal Issues: 1. In the particular situation, whether an employer-provided computer and internet service results in a taxable benefit to employees?

Position: Not in this situation.

Reasons: The employer is providing this computer and internet service to employees. This was not part of a negotiated wage settlement. The employer's industry is moving XXXXXXXXXX to a consumer-oriented industry. As a consumer-oriented industry, reliance will be placed on the internet and e-commerce at all levels of the company. To accomplish this transformation, employees must become computer literate in the near term. Technical News No. 13, reflects the Agency's position on employer provided education. In this situation, the provision of the internet and computer falls clearly within the Agency's comments on General-Employment Related Training. Provision of the internet and computer will also link employees closer to customers and will open a new communication channel to employees.

2000 Ruling 2000-0048653 - DEMUTUALIZATION

Unedited CRA Tags
139.1

Principal Issues:

1. Will paragraph 139.1(16) apply in respect of the distribution of Demutualization Proceeds by a paragraph 149(1)(l) organization to its members?
2. Will an organization exempt from taxation pursuant to paragraph 149(1)(l) lose its exempt status as a consequence of distributing Demutualization Proceeds received by the organization under group policies for the benefit of its members, to those members?

Position:

1. Yes, based on the facts provided.
2. Provided the amount distributed to the members does not exceed the Demutualization Proceeds (the taxable conversion benefit) received by the organization and provided the conditions in paragraph 139.1(16) are satisfied, the organization's status under paragraph 149(1)(l) should not be affected by the distribution.

Reasons:

2000 Ruling 2000-0037543 - INTEREST DEDUCTIBILITY

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

Principal Issues:
Request for amendments to the proposed transactions described in the Ruling & Supplemental thereto.

2000 Ruling 2000-0032113 - FREEZE OF CCPC SHARES IN RRSP ACB ROLLOVER

Unedited CRA Tags
86 REG 4900(12) REG 4900(12) REG 4900(1)

Principal Issues:

1) Will the amendment of the attributes of the XXXXXXXXXX shares constitute a disposition and acquisition of those shares?
2) Will section 86 or 51 apply?
3) Will the conditions in Regulation 4900(12) have to be met after the amendment?
4) Will the acquisition of the amended shares under the freeze indicate that the annuitants are dealing non-arm's-length with the Company?
5) Will the cost base rollover in 86(1)(b) apply for purposes of the $25,000 limit in the definition of "connected shareholder" in Regulation 4901(1)?
6) Will the cost base rollover in 86(1)(b) apply for purposes of subsection 206(2)?

Position:

1) Yes
2) Section 86.
3) Yes
4) No
5) Yes
6) Yes

Reasons:

1) Amendment is a fundamental change in the economic interest in the Company.
2) Section 86 applies automatically, and section 51 will not apply where section 86 applies.
3) The amended shares are "acquired", and the test in Regulation 4900(12) is upon acquisition.
4) The test is immediately after the acquisition. We have said that a situation where two 50/50 shareholders use their own RRSPs to acquire shares of their corporation is not, by itself, an indication that the annuitants do not deal at arm's length with the corporation.
5) Definitions in the Act provide a link from "cost" in 86(1)(b) to "cost amount" in the definition of "connected shareholder" in Regulation 4901(1).
6) Definitions in the Act provide a link from "cost" in 86(1)(b) to "cost amount" in subsection 206(2).

Ministerial Correspondence

28 March 2001 Ministerial Correspondence 2001-0073404 - SUPPORT PAYMENTS

Unedited CRA Tags
56.1(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.

March 28, 2001

XXXXXXXXXX

Dear XXXXXXXXXX:

Mr. Rob Wright, Commissioner of the Canada Customs and Revenue Agency (CCRA), has asked me to respond to your correspondence of January 16, 2001, concerning life insurance premiums paid pursuant to a separation agreement.

5 March 2001 Ministerial Correspondence 2001-0065294 - Disposal of Demutualization Shares

Unedited CRA Tags
139.1 38

Principal Issues: Taxation of capital gains realized on disposition of shares received on demutualization of insurance corporation.

Position: See Letter

Reasons: See Letter

14 February 2001 Ministerial Correspondence 2001-0066774 - Lien on an RPP

Unedited CRA Tags
147.1

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.

February 14, 2001

XXXXXXXXXX

Dear XXXXXXXXXX:

Mr. Rob Wright, Commissioner of the Canada Customs and Revenue Agency, formerly Deputy Minister, has asked me to respond to your letter of December 6, 2000, concerning the theft of estate funds by a former trustee.

Technical Interpretation - External

12 April 2001 External T.I. 2000-0061495 - RAP ASSOCIE D'UNE SOCIETE DE PERSONNES

Unedited CRA Tags
146.01(1) 146.01(2)(a.1)

Principales Questions: Un particulier peut-il participer à un RAP alors qu'il est membre d'une société de personnes qui détient un immeuble et que ce particulier habite un logement dans cet immeuble à titre de propriétaire-occupant?

Position Adoptée: Non

10 April 2001 External T.I. 2001-0068845 - Residency Determination

Unedited CRA Tags
2

Principal Issues:
Whether taxpayer is resident in Canada in 2001.

Position: Question of fact, taxpayer should contact ITSO.

Reasons: N/A

10 April 2001 External T.I. 2001-0071235 - PAYMENTS TO CHURCH STAFF FOR FUNERAL

Unedited CRA Tags
5(1)

Principal Issues: Whether payments made by a funeral home to employees of a church, and turned over to the church, constitutes employment income to the employees

Position: Question of fact. It is probably employment income unless it can be established that the employees received the amounts as agents of the church, for services performed by the church.

Reasons: Subsection 5(1) includes in employment income salaries, wages and gratuities received by employee in the year. Factual determination is required as to whether the employee receives the amounts, or whether he collects amounts as agent for the Church.

10 April 2001 External T.I. 2001-0065935 - CHARITABLE DONATION

Unedited CRA Tags
110.1 118.1

Principal Issues: Whether or not a particular contribution is a charitable donation.

Position: It is likely that a benefit is provided to a dependant of the payor.

Reasons: The meaning of a gift.

10 April 2001 External T.I. 2000-0058935 - shareholder benefits & subs 56(2)

Unedited CRA Tags
15(1) 246(1) 56(2) 55(2)

Principal Issues: Whether subsection 56(2) of the Act will be applied as a consequence of Newco only having to pay $1 for the preferred share issued by Opco 1 that will have a fair market value well in excess of that amount?

Position: Question of fact - but it appears that subsection 15(1) will apply in this particular situation. Also subsection 55(2) may apply to the deemed dividends.

Reasons: The law.

10 April 2001 External T.I. 2001-0070365 - CCA CLASS FOR BLD. ON LEASE

Unedited CRA Tags
Reg. 1102(5)

Principal Issues: Question 1: Whether a new building on leased land is to be written off over 20 years as a class 13 leasehold improvement or as a class 1 building?
Question 2: During the term of a 20-year lease, the franchisee pays a contractor to build an addition to the building, which has to be approved by the franchisor. Is the addition a class 13 leasehold improvement to be written off over the remainder of the 20-year lease or is it a class 1 building?
Question 3: During the term of the 20-year lease, the franchisee sells its location to a third party. Does the third party acquire the building and the addition thereto on the same terms as the seller reported it, i.e., as either a class 13 or class 1 property?

Position: (1) No comment. (2) Class 13. (3) The addition is class 13.

Reasons: (1) Not enough information to determine if subsection 1102(5) of the Regulations applies. (2) Subparagraph 1102(5)(a)(ii) of the Regulations applies. (3) Paragraph 1102(5)(b) of the Regulations applies.

10 April 2001 External T.I. 2000-0059165 - PROPERTY TAX ADDED TO ACB OF LAND

Unedited CRA Tags
53(1)(h)

Principal Issues: Whether the cost of property taxes and gravel can be added to the adjusted cost base (ACB) of land that was inherited from a spouse.

Position: Depends on whether land is inventory or a capital property.

Reasons: No provision to allow such costs to be included in ACB of capital property.

9 April 2001 External T.I. 2001-0073985 - COMBINE SPOUSAL AND NON-SPOUSAL RRSP

Unedited CRA Tags
146(16) 146(8.3)

Principal Issues: Can a taxpayer combine his or her regular RRSP with his or her spousal RRSP?

Position: Yes.

Reasons: The Act provides for the transfer of property between plans with the same annuitant but the combined plan becomes a spousal plan.

6 April 2001 External T.I. 2001-0075605 - EMPLOYEES LOW PURCHASE PRICE

Unedited CRA Tags
6(1)(a) 6(2)

Principal Issues: The income tax treatment of vehicle purchases by employees at amounts below fair market value (FMV), where the particular vehicles were previously leased by your company (the "Corporation"),

Position: An employee benefit, equal to the excess of the automobile's fair market value over the purchase price paid by the employee for the automobile, will be considered to have been received by the employee. In this situation, it is also our view that the employer has effectively received a "terminal credit" in respect of a leased automobile equal to the benefit paid to the employee in the form of a low purchase price for a leased automobile.

Reasons: The reference to "other benefits of any kind whatever" in paragraph 6(1)(a) is sufficiently broad to catch these situations.

6 April 2001 External T.I. 2001-0075835 - DISABILITY BENEFIT SETTLEMENTS

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

Principal Issues: Whether payment received by a taxpayer from XXXXXXXXXX as an out of court settlement on a claim for long term disability payments from a disability insurance plan in which the taxpayer's former employer had made a contribution.

Position: Payment is taxable.

Reasons: Our position that such an amount is taxable pursuant to paragraph 6(1)(a) or (f) of the Income Tax Act is well known and was recently affirmed by the Tax Court of Canada in the case of Catherine Dumas v. Her Majesty the Queen, 2000 DTC 2603.

6 April 2001 External T.I. 2001-0074185 - DEDUCT. OF FINES AND PENALTIES

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

Principal Issues: The Federal Government's response to the Supreme Court's decision in 65302 British Columbia Ltd. v. The Queen (99 DTC 5799), which established that Parliament, not the courts, should decide on public policy issues and that generally, as long as a fine is incurred to earn income, it is deductible.

Position: In accordance with the principles established by the Supreme Court in 65302 British Columbia Ltd., taxpayers will be allowed to deduct fines and penalties incurred to earn income. The tests of "avoidability" and "public policy" discussed in IT-104R2 are no longer relevant, and as a result, the bulletin will be withdrawn entirely.

Reasons: Based on our comments at the 2000 CTF Roundtable.

5 April 2001 External T.I. 2000-0043615 - Taxation of Shareholder of US S-Corp

Unedited CRA Tags
20(11) 20(12) 126(1)

Principal Issues:
General tax treatment of a Canadian resident who is a shareholder of a United States S-Corp where there is no distribution in Canada but US tax has been paid by the resident on income of the S-Corp.

Position:
Where there is no distribution, subsection 20(11) does not apply. Subsection 20(12) does apply. To the extent that the US tax paid is not deducted under subsection 20(12), it is eligible for purposes of claiming a foreign tax credit under subsection 126(1).

Reasons: Where there is no distribution, there is no "amount that has been included in computing the taxpayer's income for the year from the property" (i.e., the shares of the S-Corp). Subsection 20(12) is applicable because the US tax qualifies as "non-business-income-tax" under subsection 126(7). Subsection 126(1) would also be applicable for the same reason.

5 April 2001 External T.I. 2001-0069175 - Reimbursement of Taxes Paid on Salary

Unedited CRA Tags
6(3) 5(1)

Principal Issues: Whether reimbursement by former employer of taxes paid on salary is taxable?

Position: yes

Reasons: Wording of subsection 6(3) of the Act, e9828408

5 April 2001 External T.I. 2001-0069885 - Residence Treaties Remittance Basis

Unedited CRA Tags
Art IV

Principal Issues:
Whether the result in the McFadyen (TCC) decision means that we have reversed our position that individuals who are subject to tax in a country on a remittance basis may still qualify as resident in that country for purposes of a tax treaty with that country.

Position: We have not changed our position.

Reasons: Our position in the McFadyen case was based on the fact that there was no evidence that the taxpayer paid or was even liable for any tax in Japan.

5 April 2001 External T.I. 2001-0074215 - REFINANCING-STUDENT LOANS

Unedited CRA Tags
118.62

Principal Issues:
Whether interest paid on student loans that are renegotiated with financial institutions, other than through the process of Consolidation, would qualify for the tax credit in respect of interest on student loans contained in section 118.62.

5 April 2001 External T.I. 2000-0058445 F - Entreprise de gestion et REATB

Unedited CRA Tags
91(1) 95(1) 95(2)

Principales Questions: L'exploitation d'une entreprise de gestion par une société étrangère affiliée contrôlée constitue-t-elle une entreprise exploitée activement pour les fins de l'article 91 de la Loi?

Position Adoptée: oui

5 April 2001 External T.I. 2001-0071295 - SOCIAL ASSISTANCE

Unedited CRA Tags
81(1)(h)

Principal Issues:
Tax treatment under paragraph 81(1)(h) of the Act of payments under a specific program.

Position TAKEN:
Question of fact. Exempt if all conditions in paragraph 81(1)(h) are met.

Reasons:
Consistent with CCRA policy for years after 1997.

4 April 2001 External T.I. 2000-0056625 - Gift From Alter Ego Trust

Unedited CRA Tags
118.1(3) 104(6)

Principal Issues:
Where a donation is made by an alter ego trust to a registered charity subsequent to the creator's death, should the donation be treated as a gift which would entitle the trust to claim a tax credit pursuant to subsection 118.1(3) or should it be treated as an allocation of income which may result in a deduction pursuant to subsection 104(6)?

Position:
Question of fact.

Reasons:
Provided that the terms of the trust agreement empower the trustees to make gifts and that the trustees exercise that power, subsection 118.1(3) would apply. Otherwise, if the charity is an income beneficiary and income is allocated to the charity, subsection 104(6) would apply and the deduction thereunder would be restricted as set out therein to exclude among other things deemed gains pursuant to subsection 104(4).

4 April 2001 External T.I. 2001-0074345 - RRIF CS BOND ONTARIO BONDS

Unedited CRA Tags
146.3(1)

Principal Issues: Can a RRIF trust acquire Canada Savings Bonds or Ontario Provincial Savings Bonds?

Position: Yes.

Reasons: These are qualified investments?

4 April 2001 External T.I. 2001-0074445 - OPTION BENEFIT SUBSEQUENT REDUCTION

Unedited CRA Tags
7(1)(a)

Principal Issues: 1) Is the 7(1)(a) benefit computed based on the date the option is exercised? 2) Can the stock option benefit be reduced because of the subsequent reduction in fmv of the shares?

Position: 1) No. 2) No.

Reasons: 1) The benefit is computed based on the date the share is acquired by the employee. 2) There is no provision providing for the reduction.

3 April 2001 External T.I. 2001-0064985 - SPECIFIED INTERNATIONAL FINANCE TRUST

Unedited CRA Tags
REG 5000(7)

Principal Issues: Where all of the other conditions are satisfied, can a trust qualify as a specified international finance trust where it acquires debts of organizations described in clauses (c)(i)(A) to (H) of the definition of "specified international finance trust" in subsection 5000(7) of the Regulations in the secondary market?

Position: No.

Reasons: Debts acquired in the secondary market would not satisfy the condition that they be acquired from the organizations described in clauses (c)(i)(A) to (H). XXXXXXXXXX .

3 April 2001 External T.I. 2000-0062815 - Foreign Tax Credit Kyrgyz

Unedited CRA Tags
126(4)

Principal Issues: whether 126(4) is applicable

Position: yes

Reasons: wording of provision

3 April 2001 External T.I. 2001-0064035 - DISPOSITION OF LAND QFP

Unedited CRA Tags
110.6(1)

Principal Issues: Whether farm land meets definition of Qualified Farm Property if individual is not actively involved on a regular and continuous basis in farming business at time of sale.

Position: Question of Fact. It is not necessary that this test be met at time of sale, but rather for any 24 month period while the individual owned the property.

Reasons: Wording in clause (a)(vi)(A) of definition of QFP in 110.6(1). Consistent with other opinions.

2 April 2001 External T.I. 2001-0072305 - WLRP-WHETHER AN EMPLOYEE-PAY-ALL

Unedited CRA Tags
6(1)(f)

Principal Issues: The income tax treatment in the situation where the employer pays for the cost of the plan premiums on behalf of the employee.

Position: Question of fact.

Reasons: To determine whether an employee-pay-all plan exists, one must look at the actual wording of a particular plan to determine whether the plan, as a term of either the policy with the plan carrier, the employment contract or some other document, places upon the employees the legal obligation to pay 100% of the premiums (although the employer may still be responsible for remitting the employees' premiums as collected from gross salary withholdings). If such an obligation exists, the plan will be considered an employee-pay-all plan provided such an arrangement was in place at the time contributions to the plan were made.

2 April 2001 External T.I. 2001-0068935 - SURROGOCY ARRANGEMENTS

Unedited CRA Tags
3 9(1) 18(1)(h)

Principal Issues: Tax treatment of payments received under a "gestational surrogacy contract" for services rendered by a "surrogate mother" and treatment of related expenses.

Position: Payments under a commercial arrangement would be taxable as business income and expenses incurred to earn the income would generally be deductible, provided the taxpayer has a reasonable expectation of profit and subject to other limitations provided in the Act.

Reasons: The payments are in consideration for services rendered according to our understanding of the contractual relationship between the "Intended Parents" (the payors) and the "Gestational Carrier" (the beneficiary).

29 March 2001 External T.I. 2000-0050265 - Mutual fund corporation - "switch" shares

Unedited CRA Tags
51 131

Principal Issues: 1. Application of section 51. 2. Amount paid on the redemption.

Position: 1. Yes. 2. No amount paid where 51(1) applies.

Reasons: 1. Wording of provision. 2. Amount paid on redemption where shares are issued is generally equal to the paid-up capital of those shares. Previous position is that an open-end mutual fund corporation does not have paid-up capital. Thus, no amount paid.

29 March 2001 External T.I. 2001-0064585 F - Application de 13(21.2)e)(iii)(C)

Unedited CRA Tags
13(21.2)

Principales Questions: Déterminer si la division 13(21.2)e)(iii)(C) s'applique lorsque c'est le cessionnaire du bien transféré qui devient non-résident.

Position Adoptée: La division 13(21.2)e)(iii)(C) ne s'applique que lorsque le cédant du bien transféré, et non le cessionnaire, devient non-résident.

29 March 2001 External T.I. 2001-0074145 - Affiliated persons & stop loss rules

Unedited CRA Tags
40(3.6) 251.1

Principal Issues:
Is a corporation, all the shares of which are owned equally by four trusts and with each trust having the same corporate trustee, an affiliated person vis a vis each trust for the purposes of subsection 40(3.6) after the redemption of some or all of the shares held by only one trust?

Position: Yes.

Reasons:
Affiliated by virtue of subparagraph 251.1(1)(b)(i) and paragraph 251.1(4)(a). See for example, specific rules in subsections 256(4) and 256(5) of the Act that were required to prevent two or more corporations from being associated where they are otherwise controlled by the same trustee/executor. There is no similar relief in the affiliated person rules.

29 March 2001 External T.I. 2001-0071825 F - Application de 132(6) et 132(6.1)

Unedited CRA Tags
132(6) 132(6.1)

Principales Questions: Interprétation des paragraphes 132(6) et 132(6.1) de la Loi de l'impôt sur le revenu.

Position Adoptée: Une fiducie qui ne rencontre pas les conditions énumérées au paragraphe 132(6) avant le 91e jour suivant la fin de sa première année d'imposition ne peut bénéficier du choix prévu au paragraphe 132(6.1) et ne sera donc considérée comme une fiducie de fonds commun de placement qu'à compter du jour où elle rencontre les conditions prescrites par le paragraphe 132(6).

29 March 2001 External T.I. 2000-0063095 - DONATION RECEIPTS FOR VOLUNTEER EXPENSES

Unedited CRA Tags
118.1

Principal Issues: Whether donation receipts may be issued to volunteers for expenses incurred on behalf of a charity.

Position: Where charity has reimbursed a volunteer for expenses and the volunteer later chooses to give the charity some or all of the reimbursement funds, there may be a gift for which a donation receipt may be issued. However, where a charity has a standard policy of reimbursing volunteers by way of issuing a donation receipt for the amount of the expense claims, it is our view that there has been no gift to the charity for which a donation receipt may be issued

Reasons: For there to be a gift for which a donation receipt may be issued, there must be a voluntary transfer of property from the donor to the charity, without any expectation of return or benefit to the donor or a person designated by the donor. Where the charity has a policy that it will reimburse volunteers by issuing donation receipts for the amount of the expenses, it would seem that there has been no voluntary transfer of property to the charity.

29 March 2001 External T.I. 2001-0071395 - NORTHERN RESIDENTS DEDUCTION

Unedited CRA Tags
110.7(1) 6(1)(a)

Principal Issues: (1) If an employee uses Aeroplan points to purchase airline tickets, can the equivalent cost of economy airfare be claimed as a deduction northern residents deduction? (2) If an employee does not provide receipts for advances from employers for professional development (PD) travel expenses, should the advances should be reported on these particular employees' T4 slips.
(3) If the Employer reimburses an employee for the cost of travel in connection with PD travel, but treats the reimbursement as a non-taxable benefit, can the employee claim the deduction on their personal income tax return?

Position: (1) No. (2) Yes. (3) No.

Reasons: (1) It is our general view that travel expenses have not been incurred to the extent that Aeroplan points or airmiles have been used to reduce a taxpayer's travel costs.
(2) the exclusion from income of training benefits applies only to the extent of the actual amount of training costs incurred that fit within the guidelines provided in IT-470R (Consolidated).
(3) If the employer pays for the PD travel, the employee has not incurred any expense.

28 March 2001 External T.I. 2001-0070415 F - Interaction entre les articles 51 et 116

Unedited CRA Tags
51 116

Principales Questions: Est-ce que le paragraphe 116(5) s'applique lors d'un échange d'actions effectué en vertu de l'article 51?

Position Adoptée: Oui. L'alinéa 51(1)a) énonce que l'échange est réputé ne pas constituer une disposition. Toutefois, le paragraphe 51(1) ne stipule pas que l'échange est réputé ne pas constituer une acquisition. Il y a donc acquisition par la corporation de ses propres actions, donnant ainsi ouverture à l'application du paragraphe 116(5).

28 March 2001 External T.I. 2001-0071655 - HWT-CONTRIB. FOR FUTURE YEAR BENEFITS

Unedited CRA Tags
18(9)

Principal Issues: Whether the fact that the Taxpayer's annual contribution to a health and welfare trust would exceed what is required to fund current year benefits, i.e., contributions may be in respect of future benefits also, would disqualify the trust as a health and welfare trust and thus jeopardize the tax exempt status of the benefits paid to employees.

Position: It is our position that employer contributions to a health and welfare trust which exceed the amount necessary to provide current year coverage will be denied pursuant to subsection 18(9) of the Income Tax Act. However, it is our view that the fact that excessive contributions have been made will generally not, in and of itself, result in the disqualification of a trust as a health and welfare trust, if the contributions are based on an actuarial determination of the amounts necessary to fund future health and welfare benefits.

Reasons: Administrative position.

28 March 2001 External T.I. 2001-0069895 - MOVING EXPENSES

Unedited CRA Tags
62(1)

Principal Issues: Whether the cost of selling a residence (real estate fees and legal fees), incurred one year after an eligible relocation occurred, can be deducted in the year incurred as moving expenses under section 62 of the Act.

Position: Question of fact.

Reasons: There is no timeframe during which moving expenses must be incurred. If the expenses fall within the ambit of section 62 of the Act, they may be deducted under subsection 62(1) of the Act. It is a question of fact whether costs of selling a property are incurred on account of moving expenses in respect of an eligible relocation.

28 March 2001 External T.I. 2001-0068855 - FILING RETURN OF INCOME

Unedited CRA Tags
150(1)(d)

Principal Issues:
Whether an individual earning rental income would qualify to file a return of income for the June 15th filing deadline?

Position: The June 15th filing deadline is for individuals who carried on a business in the year.

Reasons: Where rental income is characterized as business income, the June 15th deadline would apply.

27 March 2001 External T.I. 2001-0067625 - CHARITABLE DONATION

Unedited CRA Tags
118.1(3)

Principal Issues: Can a charitable donation receipt be issued by a charity where rent is charged to a charity on the understanding that it be contributed back to the charity by the recipient?

Position: No.

Reasons: This is not a voluntary transfer of property and therefore not a gift.

27 March 2001 External T.I. 2001-0067745 - IN-TRUST ACCOUNTS FOR MINORS

Unedited CRA Tags
74.1 74.3 75(2) 120.4

Principal Issues: How are in-trust accounts for minors taxed

Position: Depends on the facts

Reasons: If the three certainties are present, tax as trust. Attribution under subsection 74.1(2), subject to subsection 74.3(1), may apply with respect to income. Under 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).

27 March 2001 External T.I. 2001-0070435 - Foreign spin-off

Unedited CRA Tags
86.1

Principal Issues: Whether shares of one US corporation distributed by another US corporation to a Canadian shareholder may be done on a tax deferred basis

Position: Yes

Reasons: Provided all the requirements in proposed section 86.1 are complied with.

27 March 2001 External T.I. 2001-0072425 - SPECIFIC IDENTIFICATION 30 DAY TEST

Unedited CRA Tags
7(1.31)

Principal Issues: Proposed subsection 7(1.31) allows a taxpayer to specifically identify the shares that were acquired under a stock option as being the shares sold by the taxpayer when they are disposed of within 30 days of their acquisition and the taxpayer has elected to utilize the specific identification method. Will we administratively allow a taxpayer to elect to use the specific identification provision in extenuating circumstances where the 30 day condition can't be satisfied?

Position: No.

Reasons: The proposed 30 day condition is clear.

26 March 2001 External T.I. 2001-0070585 F - Interaction entre Convention Canada-US et LIR

Unedited CRA Tags
128.1(4)(b) 128.1(4)(c) Art XIII

Principales Questions: Un résident américain peut-il être assujetti à l'impôt canadien sur un gain réalisé suite à une disposition de biens canadiens imposables constitués d'actions reçues lors d'une fusion, visée par le paragraphe 87(1) de la Loi de l'impôt sur le revenu (la " Loi "), en échange d'actions qui ont fait l'objet d'une disposition réputée en vertu de l'alinéa 128.1(4)b) de la Loi lorsque ce contribuable a cessé de résider au Canada?

Position Adoptée: Oui

26 March 2001 External T.I. 2001-0070165 F - Conventions fiscales et lois provinciales

Principales Questions: Application des conventions fiscales auxquelles le Canada est parti à l'égard des lois fiscales provinciales.

Position Adoptée: Aucune.

26 March 2001 External T.I. 2001-0063925 - SPEC. INVESTMENT BUSINESS

Unedited CRA Tags
125(7)

Principal Issues:
ACo and BCo are related and associated CCPCs. BCo purchases ACo's trade accounts receivable at a discount rate and under similar conditions that would be charged between arm's length parties for trade receivables with similar attributes. BCo will employ a full-time staff of fewer than six employees and no company associated with BCo will provide any services to BCo.

26 March 2001 External T.I. 2001-0073495 - MANUFACTURING & PROCESSING

Unedited CRA Tags
125.1(1) 125.1(3) Reg. 5202

Principal Issues: Does a recycling business involving 3 different procedures a qualified activity for the manufacturing and processing deduction?

Position: General comments but it appears that at least 2 of the three procedures qualify

Reasons: Meaning of "Processing"

26 March 2001 External T.I. 2001-0069095 - INTERNET PAID BY EMPLOYER

Unedited CRA Tags
6(1)(a)

Principal Issues:
Employer, a college, pays fees to Internet Service Provider (ISP) for internet in employee's home under two scenarios. Is this a taxable benefit?

20 March 2001 External T.I. 2001-0069075 - Transfer of shares of a farm corporation

Unedited CRA Tags
70(9.2) 110.6(2) 104(19) 104(20)

Principal Issues: Issues relating to the transfer of the shares of a farm corporation upon the death the shareholder: a) eligibility of the shares for subsection 70(9.2) rollover; b) entitlement to the capital gains deduction provided in subsection 110.6(2); and c) designation of taxable and non-taxable dividends under subsections 104(19) and (20).

Position: General comments regarding the application of subsections 70(9.2), 110.6(2), 104(19) and 104(20) of the Income Tax Act.

Reasons: Subsections 70(9.2), 70(10), 104(19), 104(20), 110.6(1), 110.6(2), 110.6(6) to (8) and 248(8).

20 March 2001 External T.I. 2001-0071445 - ESOP EXCHANGE OF SHARES

Unedited CRA Tags
7(1.5)

Principal Issues:
1. Can subsection 7(1.5) apply to an exchange of shares where the proceeds includes a right (usually a "Put") that has a nominal value?
2. Can the value of the right be ignored when determining if the conditions of subsection 7(1.5) have been met?

Position:
1 Only if the right is an integral term of the share such that it does not constitute a receipt of anything other than a share.
2. No.

Reasons:
Subsection 7(1.5) requirements as currently written are specific and must be met. The October 2000 budget requested input on possible changes to the rules for share for share exchanges but did not otherwise propose any changes.

19 March 2001 External T.I. 2001-0069965 - GIFT BY WILL

Unedited CRA Tags
118.1(5)

Principal Issues: Whether subsection 118.1(5) would apply to a bequest that is subject to various conditions.

Position: Factual determination.

Reasons: In previous files, we concluded that the fact that there are conditions attached to a gift does not, in itself, negate the gift. Our general view is that the donation would qualify as a gift if the donor is freely parting with the funds or property, receives no benefit, other than recognition, in return and the funds or property can never revert to the donor or any related person.

19 March 2001 External T.I. 2001-0066705 - transfer foreign pension to rrsp

Unedited CRA Tags
56(1) 60(j) 248(1)

Principal Issues:
Can an amount paid out of a particular retirement or pension arrangement be transferred to an RRSP?

Position:
No firm answer can be provided.

Reasons:
The request indicates that the employer did not make any contributions under the arrangement. If this is correct it would not be a pension plan. The plan is also not a Foreign Retirement Arrangement. Accordingly, there is no provision under the Act that will allow a deduction and thereby permit a tax deferred transfer of an amount from the arrangement to an RRSP.

8 March 2001 External T.I. 2001-0066685 - Overtime pay transferred to an RRSP

Unedited CRA Tags
Reg. 100(3)

Principal Issues:
Can banked overtime pay be transferred to an RRSP without withholdings?

Position: Yes

Reasons: This is provided for in subsection 100(3) of the Regulations.

6 March 2001 External T.I. 2001-0072015 - PRESCRIBED PRIZE

Unedited CRA Tags
56(1)(n)

Principal Issues: whether Millenium Prize awarded by National Gallery of Canada Foundation is a prescribed prize

Position: yes -

Reasons: prize will be recognized by the general public; is awarded for meritorious achievements in the arts; no indication the prize is provided as compensation for the services of the artists

28 February 2001 External T.I. 2000-0061815 - free tuition

Unedited CRA Tags
118.5 118.6 56(1)(n)

Principal Issues:
Is the value of benefits in the form of free tuition, room, board, employment, etc. received by Canadian residents to attend university outside Canada and to play university sports taxable?

23 February 2001 External T.I. 2001-0064325 - Retiring allowance paid by employer

Unedited CRA Tags
60(j.1)

Principal Issues:
1. Do payments under an early retirement program qualify as payments of a retiring allowance?
2. If the answer to 1. is yes, can the years of employment with previous employers be counted in determining the amount that may be transferred to an RRSP?

Position:
1. Yes.
2. Yes, if the allowance is paid by the current employer and the service with the former employer is recognized in the calculation of pension benefits.

Reasons:
1. They are being paid because of the employees termination or retirement.
2. Service with a former employer is recognized if any of that service is recognized in the calculation of pension benefits. Only payments by an employer may be transferred.

13 February 2001 External T.I. 2000-0051255 - Pledge incentives - XXXXXXXXXX

Unedited CRA Tags
118.1 110.1

Principal Issues:
A charity undertakes fund raising through workplace campaigns. Whether the charity should provide official tax receipts when employees who return their pledge forms by a set deadline are eligible to be entered into a draw for a prize.

Position:
If an employee's eligibility to be entered into the draw is based solely on the return of the pledge form by a set deadline and not on whether a donation is actually made, the entry into the draw, in and of itself, should not disqualify the employee's donation as a gift for income tax purposes.

Reasons:
The employee's entry into the draw is not conditional on the employee also making a donation. Accordingly, it should not, in our view, constitute consideration for a donation made by the employee.

Technical Interpretation - Internal

4 April 2001 Internal T.I. 2001-0071867 - TAX OF INCOME EARNED BY STATUS INDIAN-PILOT

Unedited CRA Tags
81(1)(a)

Principal Issues: Taxation of employment income of status Indian who is a pilot.

Position: Possibly partially exempt as per guideline 1. Guideline 3 may exempt his income if the employer is resident on a reserve and the percentage of work performed on a reserve by the employee is greater than 50%. We would note, however, that, as a pilot, we expect that most of the employment duties would be performed off reserve.

Reasons: As per the Guidelines

2 April 2001 Internal T.I. 2001-0068987 - QUALIFIED FARM PROPERTY

Unedited CRA Tags
110.6

Principal Issues: A taxpayer and his spouse, who operate a tree farm, would like to know whether they satisfy the tests in respect of clause (a)(vi)(B) of the definition of qualified farm property in subsection 110.6(1) of the Income Tax Act.

Position: General comments were provided.

Reasons: The available information was very limited.
April 2, 2001

30 March 2001 Internal T.I. 2001-0074087 F - DEPENSES POUR SITE WEB

Unedited CRA Tags
18(1)a) 18(1)b) 14

Principales Questions:
Quel est le traitement fiscal des dépenses reliées à l'achat d'un site Internet ou au développement d'un tel site ?

Position Adoptée:
Commentaires généraux. Certains coûts sont déductibles tandis que d'autres sont capitalisables et amortissables.

22 March 2001 Internal T.I. 2001-0074757 - PATERNITY AGREEMENT-COURT ORDER

Unedited CRA Tags
60(b) 56.1(4)

Principal Issues: Whether an agreement filed with a competent tribunal under the provisions of provincial legislation dealing with family maintenance may constitute an order for the purposes of paragraph 60(b) of the Act.

Position: No.

Reasons: The requirement in paragraph 60(b) of the Act and the definition of "support amount" in subsection 56.1(4) of the Act refers, in paragraph (b), to an order of a competent tribunal in accordance with the laws of a province. As mentioned in paragraph 13 of IT-530, nothing less than a concrete pronouncement, decree or direction of a tribunal empowered to make an order will constitute an order as required by the definition of support amount in subsection 56.1(4) of the Act.

20 March 2001 Internal T.I. 2001-0073197 - LARGE CORPORATION TAX

Unedited CRA Tags
181

Principal Issues:
Whether or not the reference to generally accepted accounting principles ("GAAP") in subsection 181(3) is to Canadian GAAP.

Position: Yes

Reasons:
As stated in paragraph 5 of IT-532 GAAP refers to those accounting principles specific to the accounting requirements of the Canadian Institute of Chartered Accountants, the accepted authority for the application of GAAP in Canada.

12 March 2001 Internal T.I. 2000-0037637 F - Partie 1.3 Aide gouvernementale/Surplus

Unedited CRA Tags
181.2(3)(a) 181(3)(b)

Principales Questions:
Une subvention gouvernementale est-elle un " tout autre surplus " au sens de l'alinéa 181.2(3)a) de la Loi.

Position Adoptée: Oui

7 March 2001 Internal T.I. 2001-0072157 - DISP. OF DEPRECIABLE PROPERTY

Unedited CRA Tags
13(21) 39(1)(b)(i)

Principal Issues:
Whether a taxpayer is entitled to claim a capital loss in respect of depreciable property that is no longer available for use in a business in those situations where no compensation has been received in respect of such a loss of use.

Position: No.

Reasons: Specifically excluded pursuant to subparagraph 39(1)(b)(i) of the Act.

6 March 2001 Internal T.I. 2000-0005187 - Gift by Will

Unedited CRA Tags
118.1(5)

Principal Issues:
Where an individual, by his will, provides for a donation to be made to a private foundation to be established by the individual's estate, would the donation qualify as a gift by will for the purposes of subsection 118.1(5)?

Position:
Yes, if the donation otherwise qualifies as a gift by will and the private foundation is a qualified donee at the time the gift is made.

Reasons:
We have reconsidered our position as stated at the 1999 APFF Conference (E9M19190) and we are now of the view that the fact that the private foundation did not exist at the time of the individual's death will not, in and of itself, preclude the donation from otherwise qualifying as a gift by will as long as the private foundation is a qualified donee at the time the gift is actually made.
March 6, 2001

2 March 2001 Internal T.I. 2001-0070687 F - REGIME D'ASSUR. MEDICAMENTS DU QUE.

Unedited CRA Tags
118.2(2)

Principales Questions:
Est-ce que la Loi de l'impôt sur le revenu sera modifiée pour permettre d'inclure les cotisations au Régime d'assurance médicaments du Québec dans le calcul du crédit d'impôt pour les frais médicaux de l'année malgré le fait que ces cotisations soient versées l'année suivante?

Position Adoptée:
Non.

23 February 2001 Internal T.I. 2000-0030217 - Brazil Inflationary Monetary Adjustments

Unedited CRA Tags
Art 22 5907(1)

Principal Issues: Brazil Inflationary Monetary Adjustments.

Position:
To close file. Second consideration of our opinion 982557 (December 23, 1999,
J. Stalker). Opinion unchanged.

Reasons:

14 February 2001 Internal T.I. 2000-0061897 - MEANING OF "FULL-TIME EMPLOYEE"

Unedited CRA Tags
125(7)

Principal Issues: Whether janitorial staff who work 4 hours a week, 5 days a week, may be considered "full-time employees" for the purpose of the definition of "specified investment business" in subsection 125(7)

Position: No.

Reasons: Plain meaning of the term.
February 14, 2001

13 February 2001 Internal T.I. 2001-0066407 - DPSP, lump-sum, Part XIII

Unedited CRA Tags
212(1)(m)

Principal Issues:
Will a single withdrawal of $XXXXXXXXXX from a DPSP where the non-resident individual leaves balance of approximately $XXXXXXXXXX in the DPSP qualify under paragraph 1 of Article XVII of the Canada-U.K. Income Tax Convention (1978)?

Position: No.

Reasons:
We have previously taken the position that such an amount would constitute a payment in settlement of all future entitlements in respect of the $XXXXXXXXXX and, as such, would not meet the definition of pension in paragraph 3 of Article XVII of the Convention.

9 February 2001 Internal T.I. 2000-0055757 F - ALLOCATION PERIODIQUE

Unedited CRA Tags
118(1)b) 118(5) 561(4)

Principales Questions:

Selon une ordonnance, le contribuable verse à son ex-conjointe XXXXXXXXXX $ chaque fois que les deux enfants visitent leur mère pour une durée d'une semaine. Le nombre de visites varie d'une année à l'autre et sont restreintes à certaines périodes de l'année. Est-ce que les paiements de XXXXXXXXXX $ représentent un paiement de pension alimentaire, ce qui ferait en sorte que le contribuable n'aurait pas droit au crédit équivalent pour personne entièrement à charge ?

Position Adoptée:

8 February 2001 Internal T.I. 2000-0048887 - Annuities - Beneficiary Designations

Unedited CRA Tags
118.1(5.1) 118.1(5.2)

Principal Issues:
Where an individual designates a charity as the beneficiary of the individual's annuity, would the payout by the issuer on the death of the individual constitute a gift for income tax purposes?

Position:
No, under the current income tax legislation. Possibly, under draft subsections 118.1(5.1) and (5.2).

Reasons:
Since the amount is paid to fulfill a legal obligation of the issuer, the payment is not a gift by either the deceased or the estate for income tax purposes. However, if the conditions set out in draft subsection 118.1(5.1) are met, draft subsection 118.1(5.2) will apply to deem the payment to be a gift made by the deceased immediately before death.

15 September 2000 Internal T.I. 2000-0038337 F - RETENUES A LA SOURCE-REMUNERATION

Unedited CRA Tags
153(1)

Principales Questions: Est-ce que l'impôt doit être retenu à la source lorsqu'un paiement est effectué suite à un recours collectif contre les administrateurs d'une société en faillite à l'égard de salaire et d'autre rémunération impayé pour services rendus à la société.

Position Adoptée: Oui.