Income Tax Severed Letters - 2005-04-29

Ruling

2005 Ruling 2004-0093021R3 - Split-up Butterfly

Unedited CRA Tags
55(2) 55(3.1)(a)(iv) 112(1) 111(4)

Principal Issues: Split-up of assets of a XXXXXXXXXX controlled holding corporation to avoid application of subsection 55(2).

Position: The split-up is acceptable.

Reasons: Consistent with the law.

2005 Ruling 2005-0115381R3 - XXXXXXXXXX

Unedited CRA Tags
12(1)(x)

Principal Issues: Whether XXXXXXXXXX who receive computers and computer training from the XXXXXXXXXX must include an amount in income under paragraph 12(1)(x).

Position: No.

Reasons: The principal purpose in providing computers is so that the XXXXXXXXXX has the ability to communicate with XXXXXXXXXX . The prime beneficiary is the XXXXXXXXXX will be required to use the computers for the purpose of the program and the technology will be configured to upload from the XXXXXXXXXX website whenever XXXXXXXXXX bulletins or other important notices are posted and the XXXXXXXXXX will monitor XXXXXXXXXX to make sure that they are receiving XXXXXXXXXX (if they do not use the program, they must return the computers). XXXXXXXXXX may use the computers for other purposes. XXXXXXXXXX will receive a computer. This is not part of a remuneration package for XXXXXXXXXX . The XXXXXXXXXX will not own the computer during the XXXXXXXXXX program. Although the XXXXXXXXXX may keep the computers at the end of the program, their value at that time will be minimal.

Technical Interpretation - External

26 April 2005 External T.I. 2005-0117581E5 - Employee Benefits-MV's That Are Not Autos

Unedited CRA Tags
6(1)(a)

Principal Issues: How to calculate employee benefits for the personal use of an employer-provided motor vehicle that is not an "automobile" as defined in subsection 248(1) of the Act. In the situation described the employees are linesmen who work for a power distribution company. The linesmen are required by their employer to be on call 8 to 10 weeks of every year. While on call a linesman must take the employer's "bucket truck" home so that he can quickly respond to emergencies by travelling directly from his home to the point of call. A linesman is not permitted to use the bucket truck for any other personal purpose.

Position: Although the per-kilometre rate in section 7306 of the Regulations is generally accepted, the rate in section 7305.1 is more appropriate in this case.

Reasons: The rate in section 7305.1 of the Regulations reflects the economic benefit enjoyed by the employee for the personal use of the employer's motor vehicle. This rate does not reflect a capital cost component of owning an automobile and generally reflects the value of automobile operating expenses. Therefore, the rate is more in line with the incremental savings to an employee from not having to use his or her own motor vehicle on the days that the employer requires the employee to use its motor vehicle.

26 April 2005 External T.I. 2005-0117081E5 - Construction Industry Multi-Employer HWT

Unedited CRA Tags
6(1)(a)

Principal Issues: What is the taxable status of a construction industry multi-employer health and welfare trust that proposes amending its trust agreement to permit a distribution of excess contributions to employees?

Position: Question of fact, but generally where excess contributions are paid to employees, the trust will not qualify as a health and welfare trust. Payments to employees would be taxable employment income in the year received. Since the trust would not be considered a health and welfare trust, contributions by employers would be considered capital contributions to the trust and therefore, would not be deductible in computing business income of the employers. The trust itself would be taxed the same as any other trust. We would not, however, generally be concerned with a situation in which the excess contributions are paid to the employees in the same taxation in which the employer deducts the contributions.

Reasons: As noted in paragraph 6 of IT-85R2, to qualify for treatment as a health and welfare trust the funds of the trust cannot revert to the employer or be used for any purpose other than providing health and welfare benefits for which the contributions are made. To avoid adverse tax consequences when surpluses occur, otherwise qualifying health and welfare trusts generally have a contribution holiday for employers or increase benefits coverage for employees.

25 April 2005 External T.I. 2005-0119931E5 - RCA for recently incorporated professional

Unedited CRA Tags
20(1)(r)

Principal Issues: Can benefits be provided from an RCA that is to be set up by a newly-incorporated business in respect of a period during which an individual was a partner or proprietor of the business that is subsequently incorporated?

Position: No.

Reasons: A partner or proprietor is not providing employment services.

25 April 2005 External T.I. 2005-0112901E5 - Benefits under an Employee Stock Purchase Plan

Unedited CRA Tags
7(1) 110(1)

Principal Issues: What is the effect on the calculation of the benefit under section 7 of a restriction placed on the sale of shares acquired under an ESPP

Position: Provided information

Reasons: routine explanation of topic.

Technical Interpretation - Internal

14 December 2001 Internal T.I. 2001-0101967 - DUTIES OF A TEMPORARY NATURE

Unedited CRA Tags
6(6)

Principal Issues:
In view of the CCRA's position on subsection 6(6) in IT-91R4, concerning the requirement in the provision that the duties must be of a temporary nature (paragraphs 5 and 6), would housing and travel allowances paid to employees (or employer payment of such expenses) in this factual situation be excluded from income as a taxable benefit, where the employment contract can be for a period of up to XXXXXXXXXX years, but other facts of the case indicate that the duties of employment are indeed of a temporary nature.

Position: Yes.

Reasons:
Subsection 6(6) & IT-91R4 - The position in IT-91R4 that subsection 6(6) will not exclude such allowances (or employer paid expenses) from employment income where the duration of the contract is beyond two years is a general guideline. There are situations where, if facts other than the duration indicate that the duties are of a temporary nature, subsection 6(6) may exclude such amounts from employment income.