Income Tax Severed Letters - 2003-07-08

Ruling

11 July 2003 Ruling 2003-0023253 - FILM TAX CREDIT-OWNERSHIP VS ASSISTANCE

Unedited CRA Tags
125.4 12(1)(X)

Principal Issues:
1. For the purposes of computing the Canadian film or video production tax credit in section 125.4 of the Act, will the purchase proceeds paid to a producer by a broadcaster, solely in order to acquire legal and beneficial ownership of a portion of the production, be assistance received by the producer?

Position:
1. No. However, there will still be a pro rata allocation of production expenses between the production owners, which would reduce the producer's available film tax credit.

Reasons:
1. Paragraph 12(1)(x)(viii) would apply to exclude the amount that might otherwise be assistance. The owners would be required to share production expenses.

2003 Ruling 2003-0022523 F - ACCORD DE SEPARATION - TRANSFERT D'UN REER

Unedited CRA Tags
146(16)B)

Position Adoptée: Oui

2003 Ruling 2003-0020553 - XXXXXXXXXX

Unedited CRA Tags
20(1)(c) XXXXXXXXXX 112(1)

Principal Issues: Deductibility of Interest in an affiliated group.

Position: Deductible.

Reasons: The law.

Ministerial Correspondence

23 July 2003 Ministerial Correspondence 2003-0030624 F - Investment Income-Status Indian

Unedited CRA Tags
146(1) 81(1)(a) 204.1

Principal Issues: To provide the author of the request with general views regarding RRSPs and exempt income earned by status Indians.

Position: A taxpayer's RRSP deduction limit is based on the taxpayer's "earned income." Income that is exempt from taxation pursuant to paragraph 81(1)(a) of the Act and section 87 of the Indian Act does not generate "earned income." Consequently, where a contribution to an RRSP relates solely to a status Indian's tax-exempt income (i.e., the Indian has no "earned income"), the contribution cannot be deducted. Where a status Indian had made contributions to an RRSP out of exempt income, the contributions will not be subject to income tax when withdrawn from the RRSP since no deduction was available when the contribution was made. However, the investment income generated by such contributions is generally considered to be earned off reserve and, as such, is taxable to a status Indian upon receipt. Consequently, the withdrawal of any investment earnings related to RRSP contributions out of exempt income by a status Indian will generally be subject to income tax in the annuitant's hands. Finally, there is a 1% penalty tax which is payable on "excess amounts" held in a RRSP at the end of each month. For a status Indian, excess amounts will be calculated on cumulative contributions to an RRSP out of exempt income which have not been withdrawn from the RRSP before the end of a particular month. The law provides that the Minister of Revenue may waive the penalty tax if the over-contribution arose as a result of reasonable error and steps are taken to remove any excess amounts from the RRSP).

Reasons: Wording of the Act. No "earned income" to create RRSP room.

Technical Interpretation - External

22 July 2003 External T.I. 2003-0014485 - NURSING HOME AND ATTENDANT CARE

Unedited CRA Tags
118.2(2)(b) 118.2(2)(b.1) 118.3(1)

Principal Issues: Whether Extended Care and Intermediate Care facilities in British Columbia are nursing homes and various other questions pertaining to nursing homes, attendant care and the disability tax credit.

Position: General comments provided.

Reasons: Question of fact.

10 July 2003 External T.I. 2003-0012645 - ELIGIBLE RELOCATION - ORDINARILY RESIDED

Unedited CRA Tags
62(1)

Principal Issues: Whether moving expenses may be deducted where relocation is not an eligible relocation pursuant to ss. 248(1).

Position: No.

Reasons: Where a relocation is not an eligible relocation no deduction under s.62 can be claimed.

7 July 2003 External T.I. 2001-0091415 F - Income & Losses from Bus. or Prop. Sec. 9 ITA

Unedited CRA Tags
9(1) 12(1)(a) 20(1)(m)
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(a)
prepaid crypt fees of funeral home were includible under s. 12(1)(a)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(m)
prepaid crypt fees of funeral home were ineligible for s. 20(1)(m) reserve

Principal Issues: 1) Whether amounts received by a taxpayer in a particular situation should be included in its income by virtue of paragraph 12(1)(a) of the Act and whether such taxpayer may claim a reserve for a reasonable amount pursuant to paragraph 20(1)(m) of the Act.
2) Whether such amounts would be considered active business income for purposes of the Act.

Position: 1) No. 2) Yes.

Reasons: 1) Amounts should be included in income entirely in the year of receipt under subsection 9(1) of the Act, rather than paragraph 12(1)(a). No reserve could be claimed under paragraph 20(1)(m) because of the inapplicability of paragraph 12(1)(a). Pursuant to paragraphs 18(1)(a) and 18(1)(e), no deduction or reserve would be allowed in the year of receipt to take into consideration obligations that the recipient would have to perform or fulfill in the following years.
2) Amounts received pertain or are incident to the active business carried on by the taxpayer.

26 June 2003 External T.I. 2003-0021595 F - Distribution of Corporate Property

Unedited CRA Tags
84(2) 84.1 245(2)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(2.1)
illustration of application, by virtue of s. 107(2.001) election, of s. 107(2.1) to distribution of CCPC shares
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2)
s. 84(2) inapplicable to s. 107(2.1) wind-up of trust holding a Portfolioco followed by an inter vivos pipeline transaction re Portfolioco
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Safe-Income Determination Time
s. 107(2.1) wind-up of trust holding a Portfolioco would trigger a safe-income determination time if with a view to an inter vivos pipeline transaction with a s. 88(2) wind-up of Portfolioco

Principal Issues: Whether, in a particular situation, subsection 84(2) would apply to deem a dividend to have been received by individuals who held shares of a particular corporation. Whether the application of subsection 84.1(1) to the transfers of shares of such corporation would result in a dividend being deemed to be paid to the said individuals. Finally, whether subsection 245(2) would apply in such circumstances.

Position: Subsection 84(2) would not apply to deem a dividend to have been received by individuals who held shares of a particular corporation. The application of subsection 84.1(1) to the transfers of shares of such corporation would not result in a dividend being deemed to be paid to the said individuals. Subsection 55(2) could technically apply to the dividends deemed to have been received by two corporations under subsection 84(2). It is the Income Tax Rulings Directorate's practice to comment on the application of subsection 245(2) only after reviewing all the facts and circumstances of a transaction, in the context of an advance tax ruling. However, subsection 245(2) could apply, depending on the facts and circumstances surrounding a particular situation, to transactions or series of transactions similar to those described in this letter. Certain schemes could involve surplus stripping.

Reasons: Wording of the Act.

Technical Interpretation - Internal

22 July 2003 Internal T.I. 2003-0024377 - ABIL-POST BANKRUPTCY RETURN

Unedited CRA Tags
50(1) 128(2) 111

Principal Issues: Whether an allowable business investment loss is deductible in computing the income reported on an individuals post-bankruptcy return under paragraph 128(2)(f) of the Act.

Position: No.

Reasons: The individual taxpayer would not be entitled to deduct the allowable business investment loss or any resulting non-capital loss on his post-bankruptcy returns. In computing the income for the year to be reported on the post-bankruptcy return subparagraph 128(2)(f)(ii) of the Act denies the deduction of any loss incurred by the trustee through dealings in the estate of the bankrupt or in carrying on the business of the bankrupt. In addition, subparagraph 128(2)(f)(iii) of the Act denies the deduction of any amount under section 111 of the Act.

16 July 2003 Internal T.I. 2003-0024617 F - DEDUCTIBILITE DES COTISATIONS CSST

Unedited CRA Tags
18(1)(a) 18(1)(e)
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(e)
estimated workers’ compensation premium liabilities were currently deductible

Principale Question:

Les montants inscrits au passif qui représentent une estimation de l'ajustement provisoire et de l'ajustement définitif de la cotisation prévue à la Loi sur les accidents du travail et les maladies professionnelles sont-ils déductibles dans le calcul du revenu du contribuable pour une année d'imposition donnée compte tenu que ces montants ne sont fixés qu'après la fin de l'année d'imposition du contribuable?

Position Adoptée: Oui.

14 July 2003 Internal T.I. 2003-0022747 - INTERNET FEES - EMPLOYMENT EXPENSES

Unedited CRA Tags
8(1)(F) 8(1)(I)(III)

Principal Issues: Whether internet fees are deductible under par. 8(1)(f).

Position: Question of fact but generally yes.

Reasons: Where it can be established that internet fees were paid by an employee for the purpose of earning income from commission sales employment, and such fees were not contemplated by either subpar. 8(1)(f)(v) to (vii), the amount paid may be deducted if all the other requirements of par. 8(1)(f) are met.

19 June 2003 Internal T.I. 2003-0024947 - MEDICAL EXPENSES - MARIHUANA

Unedited CRA Tags
118.2(2)

Principal Issues: Does the cost of medical marihuana qualify for the medical expense tax credit?

Position: The cost of medical marihuana qualifies for the medical expense tax credit only if it is prescribed by a medical practitioner or dentist and recorded by a pharmacist.

Reasons: Requirements are set out in paragraph 118.2(2)(n) of the Act.