Income Tax Severed Letters - 2006-02-03

Ruling

2006 Ruling 2005-0114031R3 - Classification of Austrian Investment Fund

Unedited CRA Tags
212 215

Principal Issues: What is the classification of an Austrian Investment Fund for Canadian tax purposes?

Position: It is a co-ownership of the underlying assets of the investment fund.

Reasons: It is a co-ownership under Austrian law.

2005 Ruling 2005-0143281R3 F - Rente assurée

Unedited CRA Tags
12.2 20(1)c)(iv) 20(1)e.2) 245(2)

Principales Questions: Dans une situation particulière où un particulier emprunte auprès d'une banque dans le but de faire l'acquisition d'une rente viagère et qu'il remet à la banque, à titre de garantie, le contrat de rente et une police d'assurance vie, est-ce que: 1) l'alinéa 20(1)e.2) s'appliquera de manière à permettre la déduction en partie des primes payables aux termes de la police d'assurance vie; et 2) le paragraphe 245(2) s'appliquera par suite et en raison des opérations projetées.

Position Adoptée: 1) Oui. 2) Non.

Raisons: La Loi et positions antérieures.

XXXXXXXXXX 2005-014328

Le XXXXXXXXXX 2005

2005 Ruling 2005-0148251R3 - Disposition of Taxable Canadian Property

Unedited CRA Tags
116(3) 116(5) Article 13 Canada-Finland Treaty

Principal Issues: Will the taxpayer's disposition of taxable Canadian property be subject to Canadian income tax? Are the shares being disposed of excluded property?

Position: The disposition is not subject to Canadian tax. The shares are excluded property.

Reasons: Paragraph 5 of Article 13 of the Canada-Finland Treaty provides that the disposition of shares will not be taxable in Canada.
The shares are excluded property by virtue of the definition thereof in subsection 116(6) of the Act.

2005 Ruling 2005-0149491R3 - Shareholder Loan and Deemed Interest Income

Unedited CRA Tags
17(1) 17(2)

Principal Issues: 1. Does subsection 15(2) of the Act apply to the loan from Canadian Sub to FFC? 2. Does subsection 17(1) of the Act apply to the loan (s) payable to FFC by the European subsidiay(ies) of Foreign Parent?

Position: 1. No. 2. To a portion of the loan.

Reasons: 1. Canadian Sub and FFC are not connected by virtue of paragraph 15(2.1)(a) of the Act. 2. Subsection 17(1) of the Act applies to deem the European subsidiary(ies) to owe Canadian Sub an amount equal to that portion of the loan(s) payable by the European subsidiary(ies) to FFC that became owing to FFC because of Canadian Sub's transfer of property to FFC on the acquisition of the shares of FFC.

Technical Interpretation - External

31 January 2006 External T.I. 2006-0167501E5 F - Retenues à la source

Unedited CRA Tags
100(3)c) 153(1)q) 146(5)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 100 - Subsection 100(3) - Paragraph 100(3)(c)
reasonable belief can be based on confirmation from annuitant

Principales Questions: 1.Est-ce qu'il y a une exigence d'effectuer des retenues à la source lors du transfert direct d'un montant d'une CR à un REER?
2. Qu'est-ce que l'Agence considère comme " motif raisonnable " pour les fins de l'alinéa 100(3)c) du Règlement?

Position Adoptée: 1. Non, si le rentier du REER démontre que le montant transféré ne dépassera pas le montant maximal qu'il peut déduire comme cotisation à des REER en vertu du paragraphe 146(5).
2. Nous considérons comme motif raisonnable une confirmation, par le rentier du REER, attestant que la cotisation peut être déduite pour l'année, ou une copie de la partie de son avis de cotisation qui indique le maximum déductible au titre de ses REER.

Raisons: 1. Le libellé du paragraphe 100(3) du Règlement.
2. Le Guide de l'employeur (T4001(F) Rev. 05).

31 January 2006 External T.I. 2005-0151041E5 F - Régimes de sécurité sociale étrangers

Unedited CRA Tags
9 6(1)a)
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 29
plan recognized as a pension plan under Art. 29(5) of the Cda-France Convention cannot be an EBP

Principales Questions: 1. Est-ce que des contributions faites par un employeur à certains régimes de sécurité sociale français constituent un avantage imposable pour les employés?
2. Est-ce que certains régimes de sécurité sociale français constituent des régimes de prestations aux employés?

Position Adoptée: 1. Non si le paragraphe 5 de l'article 29 de la Convention fiscale entre le Canada et la France peut s'appliquer.
2. Lorsque le paragraphe 5 de l'article 29 de la Convention fiscale s'applique, il ne s'agit pas d'un RPE.

Raisons: 1. et 2. La Convention fiscale a préséance sur l'application de la Loi.

31 January 2006 External T.I. 2005-0162341E5 - Class 43.1 - small hydro installation

Unedited CRA Tags
Class 43.1

Principal Issues: whether depreciable property of a proposed small hydro installation is eligible for inclusion in Class 43.1

Position: general comments provided

Reasons: practice in paragraph 22 of IC 70-6R5

30 January 2006 External T.I. 2005-0154041E5 - Long term disability lump sum payments

Unedited CRA Tags
6(1)(f) 39(1)(a)(iii)

Principal Issues: Whether a lump sum payment of long term disability benefits is taxable.

Position: Question of fact. Taxable amounts under paragraph 6(1)(f) of the Act include lump sum settlements that are attributable to disability payments in arrears and accruing to the date of the settlement. However, where an individual receives a lump sum payment in lieu of future benefits that would have been otherwise paid under an employer long-term disability plan, in circumstances such that the payment can reasonably be considered to be proceeds of disposition of an interest in an insurance policy, it is our view that the proceeds are not taxable; not under paragraph 6(1)(f) of the Act or as a capital gain.

Reasons: Jurisprudence; Subparagraph 39(1)(a)(iii).

30 January 2006 External T.I. 2005-0159331E5 - Long term disability lump sum payments

Unedited CRA Tags
6(1)(f) 39(1)(a)(iii)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(f)
lump sum in lieu of future benefits under employee disability plan is non-taxable

Principal Issues: 1) Taxability of lump sum settlement payment of future disability benefits;
2) CRA's view on whether lump sum settlement payment of future disability benefits is a considered a capital gain
3) CRA's opinion of whether relevant legislation will be amended, and whether any amendment will be retroactive.

Position: 1) Where an individual receives a lump sum payment in lieu of future benefits that would have been otherwise paid under an employer long-term disability plan, in circumstances such that the payment can reasonably be considered to be proceeds of disposition of an interest in an insurance policy in accordance with subparagraph 39(1)(a)(iii) of the Act, it is our view that the proceeds are not taxable under paragraph 6(1)(f) of the Act.
2) In accordance with subparagraph 39(1)(a)(iii) of the Act, it is our view that the proceeds are not taxable.
3) The role of the CRA is to administer and enforce the Act and Regulations as enacted by Parliament. It is the role of the Department of Finance to consider changes to existing tax legislation.

Reasons: Jurisprudence; Subparagraph 39(1)(a)(iii).

27 January 2006 External T.I. 2005-0164611E5 F - Société immobilière de pension - sens de location

Unedited CRA Tags
149(1)o.2)
Summary Under
Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(o.2) - Subparagraph 149(1)(o.2)(ii) - Clause 149(1)(o.2)(ii)(A)
providing meals, medical services and housekeeping in a seniors apartment would put the corp. offside

Principales Questions: Est-ce qu'une société immobilière de pension qui détient un immeuble locatif et qui loue des appartements à des personnes âgées autonomes peut être considérée comme avoir limité ses activités à la location ou la gestion d'immobilisations au sens de la division 149(1)o.2)(A) si elle fournit des services (comme par exemple, des repas, des services médicaux ainsi que l'entretien ménager) qui font l'objet d'une facturation distincte?

Position Adoptée: Non.

Raisons: Sens ordinaire de l'expression "location ou gestion". Les services en question ne sont pas des activités décrites à la division 149(1)o.2)(ii)(A).

27 January 2006 External T.I. 2006-0167441E5 - Eligible tuition fees

Unedited CRA Tags
118.5 118.6

Principal Issues: Are fees paid by students to attend post-secondary courses at a qualifying educational institution on an audit basis eligible tuition fees for purposes of the tuition and education tax credits under the Act?

Position: Question of fact, but likely yes

Reasons: wording of the legislation

2006-016744
XXXXXXXXXX Kimberly Duval
(613) 599-6054
January 27, 2006