Income Tax Severed Letters - 2006-01-13

Ruling

2005 Ruling 2005-0144551R3 - Withholding Tax Exemption

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

Principal Issues: Supplemental Ruling to 2005-012684. Minor Changes

Position: Acceptable

Reasons: last minute revisions

XXXXXXXXXX 2005-014455

2005 Ruling 2005-0145911R3 - Interest deductibility

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

Principal Issues: Whether 212(1)(b)(vii) applies

Position: Yes.

Reasons: Previous decisions.

2005 Ruling 2005-0114861R3 - Butterfly - XXXXXXXXXX

Unedited CRA Tags
55(3)(b) 55(4)

Principal Issues: Standard Butterfly

Position: Favourable rulings given.

Reasons: Comply with applicable provisions.

2005 Ruling 2005-0148381R3 F - Don d'actions d'une SPCC

Unedited CRA Tags
118.1(18) 118.1(1) 118.1(13) 88(2)

Principales Questions:
1. Le gain en capital calculé selon le paragraphe 40(1.01) entre-t-il dans l'élément B de la définition "total des dons" lorsque le titre non admissible est disposé par le donataire dans la même année que le don est fait?
2. Le paragraphe 129(1.2) est-il applicable aux dividendes de liquidation?
3. Les actions sont-elles disposées au moment où l'on applique le paragraphe 88(2)?

Position Adoptée:
1. Oui le gain entre dans l'élément B de la définition "total des dons".
2. Le paragraphe 129(1.2) n'est pas applicable dans la situation présente
3. Oui les actions sont disposées au moment où l'on applique le paragraphe 88(2).

Raisons:
1. Analyse législative.
2. Les principaux objets de la série d'opérations ne visent pas à profiter de l'exemption d'impôt de la fondation privée.
3. Application du paragraphe 9 du bulletin d'interprétation IT-126R2.

2005 Ruling 2005-0126841R3 - Withholding Tax Exemption

Unedited CRA Tags
212(1)(b)(vii) 149(1)(o.2) 245(2)

Principal Issues: 1. Are the interest payments made by Finco (who will on-loan to an LP structure) to a non-resident lender exempt from 212(1)(b)(vii)? 2. Should a partner dispose of his interest in the LP or a new partner be admitted in the LP cause the 212(1)(b)(vii) exemption to cease or result in a new obligation

Position: 1. Yes 2. No

Reasons: Finco has a long-term obligation with acceptable events of default with the non-resident lenders who deal at arm's length with Finco and the LP and the continuing partners in LP structure do not affect that loan. See also 2004-0093591 and 2004-0039243.

XXXXXXXXXX 2005-012684

XXXXXXXXXX , 2005

2005 Ruling 2005-0152251R3 - Interest Expense - Substituted Property

Unedited CRA Tags
20(1)(c)

Principal Issues: Does interest remain deductible when property that was acquired in the course of borrowing money is substituted for other income earning property?

Position: YES

Reasons: Substituted Property - paragraph 27 of IT 533

2005 Ruling 2005-0127871R3 - Split-up Butterfly - Family Farm Corporation

Unedited CRA Tags
55(3)(b) 70(9.2) 43.1

Principal Issues: Split-up butterfly of a family farm corporation owned by an estate that was created on the death of the principal shareholder. Creation of a life interest and residual interest in certain real property owned by the distributing corporation. The life interest will be transferred to one transferee corporation while the residual interest will be transferred to another transferee corporation.

Position: Favourable rulings given.

Reasons: In compliance with the law.

XXXXXXXXXX 2005-012787

2005 Ruling 2005-0158951R3 - Credit Union Shares

Unedited CRA Tags
137(4.1) 12(3) 12(4)

Principal Issues: Whether shares of a credit union are shares or debt obligations for purposes of the Act including the interest accrual rules.

Position: They are shares for all purposes of the Act.

Reasons: The shares are equity shares under the relevant provincial legislation. Notwithstanding that subsections 137(4.1) and (4.2) deem dividends paid or payable on the shares to be interest and not to be dividends, there is nothing in the Act which changes their underlying nature as shares.

XXXXXXXXXX 2005-015895

2005 Ruling 2005-0136981R3 - First Nation as public body

Unedited CRA Tags
149(1)(c)

Principal Issues: Does a particular First Nation qualify as a public body performing a function of government within the meaning of paragraph 149(1)(c) of the Act, such that it would not pay Part I tax on income derived from its interest in a limited partnership or dividend income from ownership of shares?

Position: Yes

Reasons: The First Nation has entered into an agreement with the Federal government with respect to health care. In addition, the First Nation has passed by-laws pursuant to section 81 of the Indian Act. The First Nation provides schooling and numerous public works, social services and infrastructure programs

2005 Ruling 2005-0142001R3 - Indian Band as Public Body

Unedited CRA Tags
81(1)(a)

Principal Issues: Does a particular First Nation qualify as a public body performing a function of government for purposes of paragraph 149(1)(c)?

Position: Yes

Reasons: The First Nation has entered into a Health Services Transfer Agreement with the federal government. The First Nation provides primary schooling to its Members. The First Nation provides and administers a fairly extensive list of public works, social services and infrastructure programs.

XXXXXXXXXX 2005-014200

Technical Interpretation - External

11 January 2006 External T.I. 2005-0163311E5 - EI Part II benefits to status Indian

Unedited CRA Tags
81(1)(a) 56(1)(r) 110(1)(g)

Principal Issues: Are benefits received under Part II of the Employment Insurance Act taxable to a status Indian when part of the training takes place on a reserve, and part of the training takes place off the reserve?
How are the benefits reported?

Position: The benefits will be exempt under paragraph 81(1)(a) only if connected to a reserve. It would be reasonable to allocate the value of the benefit related to the on-reserve training, and such amount would be exempt.
Non-exempt amounts are included in income under paragraph 56(1)(r) but to the extent that the amount relates to tuition, there is an offsetting deduction provided by paragraph 110(1)(g).
The Part II EI benefit is reported on a T4E

2005-016331
XXXXXXXXXX Renée Shields
(613) 948-5273
January 11, 2006

10 January 2006 External T.I. 2005-0144591E5 - Subsection 88(1.1)

Unedited CRA Tags
88(1.1) 111(5)

Principal Issues: Application of subsection 88(1.1) to non-capital losses incurred by a subsidiary where that corporation was wound-up.

Position: See response.

Reasons: The law.

6 January 2006 External T.I. 2005-0159421E5 F - Dons visant un programme particulier

Unedited CRA Tags
248(30)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(30)
acceptable to direct that donation to school where donor’s grandson is student can direct that the funds be used to purchase texts

Principales Questions: Y a-t-il un avantage lorsqu'un don d'argent est fait à une commission scolaire qui servira à acheter des livres qui seront utilisés par les élèves de l'école fréquentée par le petit-fils du donateur?

Position Adoptée: Non.

Raisons: Généralement, on ne considère pas qu'il y a un avantage lorsqu'il y a des directives générales quant à l'utilisation d'un don en autant que le donateur n'en tire aucun avantage, que le don ne profite pas à une personne à laquelle le donateur est lié et que les décisions concernant l'usage du don reviennent à l'organisme.

23 December 2005 External T.I. 2005-0163751E5 - test wind turbines - CRCE

Unedited CRA Tags
Reg. 1219(1) and (3)

Principal Issues: 1) Whether certain changes to the wind project described in our file 2005-014075 would alter our opinion as to whether the XXXXXXXXXX proposed wind turbines will continue to qualify as "test wind turbines" under Reg. 1219(3). 2) Whether XXXXXXXXXX new wind turbines to be added to the expanded project will qualify as "test wind turbines".

Position: All XXXXXXXXXX of the proposed wind turbines will meet the definition of "test wind turbine".

Reasons: 1) The requirements of Reg. 1219(3) will continue to be met and a favourable opinion confirming this was provided by Natural Resources Canada on December 20, 2005. 2) The requirements of Reg. 1219(3) will be met and a favourable opinion confirming this was provided by Natural Resources Canada on December 20, 2005.

19 July 2005 External T.I. 2005-0140751E5 - test wind turbine - CRCE

Unedited CRA Tags
Reg. 1219(1) and (3)

Principal Issues: whether XXXXXXXXXX planned exploratory wind turbines will qualify as test wind turbines under proposed Reg. 1219(3).

Position: yes, provided the amendments to the Regulations are promulgated as described

Reasons: planned project complies with proposed amendments and favourable written opinion has been provided by Natural Resources Canada dated July 5, 2005.

Conference

7 October 2005 Roundtable, 2005-0135321C6 F - REEE - Établissement d'enseignement à l'étranger

Unedited CRA Tags
146.1

Principales Questions: Est-ce qu'un " établissement d'enseignement postsecondaire " situé aux États-Unis doit figurer dans l'édition courante du document intitulé Accredited Council on Education pour être un établissement admissible aux fins de la définition de ce terme au paragraphe 146.1(1) ?

Position Adoptée: Non.

Raisons: Il n'y a aucune exigence dans la L.I.R. pour qu'un établissement y figure.

26 May 2005 Roundtable, 2005-0164721C6 - CLHIA 2005- Q 10- Index Linked Deferred Annuities

Unedited CRA Tags
12.2 307(1)(b)(ii) 1401(1)(a),(c) 1408

Principal Issues: Can "contingent interest" for a deferred annuity with guaranteed values and an index-linked bonus payable only on maturity be excluded from the determination of the tax reserve and from the amount of income required to be reported prior to maturity?

Position: Unable to conclude without a thorough review of the circumstances.

Reasons: See response.

26 May 2005 Roundtable, 2005-0164671C6 - Retroactive changes in assessing practice

Unedited CRA Tags
152(4)

Principal Issues: What is the CRA's position with respect to changes in assessing practice and retroactive application?

Position: See document

Reasons: See document

26 May 2005 Roundtable, 2005-0164681C6 - Sections 165 and 152

Unedited CRA Tags
165 152

Principal Issues: CRA's responsibility to provide explanations for adjustments made to the original filing or the last reassessment.

Position: See document

Reasons: See document

26 May 2005 Roundtable, 2005-0164701C6 - CLHIA 2005 - Question 7 - Meaning of "value"

Unedited CRA Tags
2400

Principal Issues: How would the CRA compute the "value" of investment property where the asset is funded with non-interest bearing debt, such that both the numerator and denominator of the second quotient in the formula are zero.

Position: See response

Reasons: See response

26 May 2005 Roundtable, 2005-0164711C6 - Conversion rights and paragraph 148(10)(d)

Unedited CRA Tags
148(10)(d)

Principal Issues: Whether the conversion of a life insurance policy issued by one company into a policy issued by another company would constitute a disposition of the policy in circumstances whether there has been a consolidation of the two companies.

Position: See document

Reasons: See document

Internal Memorandum

13 December 2005 Internal Memo 2005-0161221A11 - interest charged on carry back of loss

Unedited CRA Tags
161(1) 161(7)

Principal Issues: Whether the comments expressed in our internal memorandum dated May 26, 1998 (our file #9733167) are applicable to the particular fact situation described?

Position: No.

Reasons: The position in the memo indicating that there will be no interest charged where there is a substitution of losses and tax credits on an amended return does not apply to the particular fact situation because, in that situation, there is a change to the corporation's taxable income reported for 1995. The fact situation is identical to that considered in the Connaught case in which the Court held that interest was payable under subsections 161(1) and (7) on a previously unreported capital gain where the taxpayer choose to carry back a net capital loss from a subsequent year, even though there were discretionary deductions available in the reassessed year that could have been used to bring the taxable income to nil.