Income Tax Severed Letters - 2004-04-30

Principal Issues: The employee is reimbursed by the employer for the cost of a rental car to travel between the employee's temporary boarding location and the employer's office that is located at a special work site. Whether there is any other provision of the Act or administrative policy of the Canada Revenue Agency which would allow for the rental car reimbursement to be excluded from the employee's income as a taxable benefit.

Position: No

Reasons: The rental car is used to travel daily between the employee's temporary boarding location and a special work site of the employer and, therefore, the reimbursement is not exempt from inclusion in employment income as a taxable benefit by virtue of subparagraph 6(6)(b)(i). The reimbursement is not exempt under any other provision of the Act.

Principal Issues: Whether a terminal charge on a leased automobile should be included in the calculation of a standby charge.

Position: Yes.

Reasons: The amount is part of the employer's cost of leasing the automobile.

Principal Issues: 1. Whether modified partnership method extends to Investment Clubs whose members are not all individuals.

Position: 1. No

Reasons: 1. Administrative position only extended to consortium of individual investors per IC73-13; Intention was not to extend beyond those thought to have needed a concession for ease of reporting. Also legal form - re ownership of undivided interest in investments should not be ignored for all investment clubs.

Principal Issues: In the given situation, where two sister corporations (S1 and S2) are controlled by the parents of the other shareholders (their children) when (1) the children transfer on a rollover basis part of their S1 shares to S2 (2) S1 transfers assets to S2 for shares of S2 (3) the shares S1 owns in S2 and S2 in S1 are cross-redeemed for notes of equal amounts (4) the notes are set-off and (5) some of S1's children shareholders acquire the S1 shares owned by the other S1 children shareholders, whether 55(3)(a) would apply to exempt the deemed dividends from the application of 55(2), assuming that 55(4) does not apply?

Position: Yes.

Reasons: None of the situations described in 55(3)(a)(i) to (v) seem to occur since S1, S2 and each of the children are not "unrelated persons", as described under 55(3.01)(a)

Principal Issues: How is the allocation made to the individual who has transferred property to a trust in which his spouse is beneficially interested. The trust also has other income and other beneficiaries who are not designated persons.

Position: Rules of 74.3 - income retains its character and is attributed to the transferor only up to the extent the designated person receives income from the transferred property.

Reasons: 74.3

Principal Issues: Would scholarships/bursaries paid under the Children of Deceased Veterans Education Assistance Act be taxable?

Position: No.

Reasons: Paragraph 81(1)(d) of the Income Tax Act exempts from tax an allowance that is subject to (inter alia) the Pension Act. A scholarship or bursary paid under the Children of Deceased Veterans Education Assistance Act fits within this exemption.

Principal Issues: Are mortgage payments made by the annuitant to the RRSP on a mortgage held by the RRSP considered to be premiums and therefore deductible under 146(5) of the Act.

Position: NO they are not premiums and therefore not deductible.

Reasons: They would be considered mortgage payments and not premiums. Based on the definition of premium in 146(1) of the Act.

Principal Issues: Whether a status Indian residing full-time on a reserve is entitled to a partial exemption on employment income if, as a community consultant for aboriginal relations, some of her employment duties take place on reserve

Position: Question of fact.

Reasons: When less than 90% of the duties are performed on a reserve and none of the other Guidelines apply, the portion that is performed on a reserve is exempt from tax under the "proration rule".