Income Tax Severed Letters - 2006-08-11

Ruling

2006 Ruling 2006-0169591R3 - XXXXXXXXXX - PUC Reduction

Unedited CRA Tags
84(4.1) 84(2)

Principal Issues: Whether the distribution of property by a public corporation by way of a PUC reduction is subject to the provisions of subsection 84(2)?

Position: Yes.

Reasons: Meets the requirements of the provision based on the facts.

2006 Ruling 2006-0165501R3 - Advance Tax Ruling

Unedited CRA Tags
5 110.2(1) 100(3)

Principal Issues: 1) Determine whether the amounts paid meet the definition of "qualifying amount" in subsection 110.2(1) of the Act.
2) Determine whether the amounts paid for pain and suffering are taxable.
3) Determine the date in which the right to the amounts is established.
4) Determine whether Regulation 100(3) applies.

Position: 1) Yes, the amounts paid as "lost wages" will meet the definition of "qualifying amount" in subsection 110.2(1) of the Act.
2) No, the amounts paid for pain and suffering are not taxable to the recipients.
3) The date the settlement agreement is ratified.
4) Yes, provided the employee certifies with the employer that the amount or a portion of the amount is being contributed to an RRSP.

Reasons:
1) The amounts paid as "lost wages" are amounts received pursuant to a contract by which the payor and the individual terminate a legal proceeding.
2) These amounts represent general damages for pain and suffering which are not required to be included in income pursuant to our IT-365R2.
3) The determination date is the ratification date. This is the day that the legal proceeding is terminated and the right to the amounts are established.
4) Wording in the Regulations.

2006 Ruling 2006-0168841R3 - First Nation as a public body government

Unedited CRA Tags
149(1)(c)

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 provides and administers many public works, social services and infrastructure programs. Further, the First Nation is engaged in negotiating a specific claim with Indian and Northern Affairs Canada

XXXXXXXXXX 2006-016884

Ministerial Correspondence

21 July 2006 Ministerial Correspondence 2006-0192301M4 - Min Mail - Obligation To Provide Written Answers

Principal Issues: Whether the Canada Revenue Agency (CRA) should be obligated to provide businesses with advance income tax rulings and interpretations in writing.

Position: It is CRA policy to consider all such requests and to issue the resulting ruling or technical interpretation in writing, where possible.

Reasons: IC 70-6R5

14 July 2006 Ministerial Correspondence 2006-0188061M4 - Private Health Services Plans

Unedited CRA Tags
6(1)(a) 20.01 248(1) defn "PHSP"

Principal Issues: The application of section 20.01 to sole proprietors. Is a particular arrangement a private health services plan (PHSP)?

Position: General comments re: relevant considerations when a "cost-plus" health services arrangement is implemented by a sole proprietor.

Reasons: N/A

14 July 2006 Ministerial Correspondence 2006-0180991M4 - Christian Science; Medical Expense Tax Credit

Unedited CRA Tags
118.2(2) 118.4

Principal Issues: Request for information concerning CRA practice with respect to payments for Christian Science practitioners.

Position: Payments to a Christian Science practitioner do not qualify for the METC unless the practitioner is otherwise a medical doctor, a nurse or a "medical practitioner" in accordance with the definition in s.118.4 of the Act acting within the scope of his or her profession. Other information was also provided as requested where possible.

Reasons: Christian Scientists are not "medical practitioners" authorized to practice as such under any provincial legislation currently in force.

13 July 2006 Ministerial Correspondence 2006-0188091M4 - Employee Cost of Tools

Unedited CRA Tags
8

Principal Issues: Does the Income Tax Act allow an employed tradesperson to deduct the cost of tools and related expenses?

Position: The 2006 Federal Budget proposes to recognize a deduction for the cost of eligible new tools acquired by an employed tradesperson after May 2, 2006

Reasons: The deduction will be limited to the lesser of $500 and the amount by which the total cost of the new tools acquired in the year exceeds $1,000.

11 July 2006 Ministerial Correspondence 2006-0190161M4 - Cost of Achieving and Maintaining ISO 9000

Unedited CRA Tags
18(1)(a)

Principal Issues: Are expenses to achieve and maintain ISO9000 registration deductible in computing business income.

Position: Yes if incurred for the purpose of gaining or producing income from a business.

Reasons: 18(1)(a)

11 July 2006 Ministerial Correspondence 2006-0179141M4 - Motor Vehicle Allowances

Unedited CRA Tags
6(1)(b)(vii.1)

Principal Issues: Would an allowance paid to an employee for the use of his or her vehicle be considered a taxable benefit when a replacement employee uses the vehicle?

Position: No, provided the employee is incurring all the costs of operating the vehicle and does not receive any compensation from his or her replacement toward the operating costs.

5 July 2006 Ministerial Correspondence 2006-0188071M4 - Draft Subsection 3.1

Unedited CRA Tags
3.1

Principal Issues: Concern expressed over the impact of draft section 3.1 of the Income Tax Act.

Position: Finance intends to address the concerns raised prior to the legislation being enacted.

Reasons: There has been extensive public consultation with Finance since release.

28 June 2006 Ministerial Correspondence 2006-0181611M4 - Employee Housing Loss

Unedited CRA Tags
6(19)

Principal Issues: Application of subsections 6(19) to 6(22) of the Income Tax Act sections to payments received during the period of February 23, 1998 to December 31, 2000.

Position: An employer-paid housing loss is fully taxable unless it is paid for an eligible relocation, generally in which case, the first $15,000 is not taxable and one-half of the excess amount is taxable. A payment made before February 23, 1998, is not taxable under the new rules, as well as any payment made on or before December 31, 2000, for an eligible relocation if employment at the new work location began before October 1998.

Reasons: Provisions are applicable to the 2001 and subsequent taxation years in respect of an eligible relocation of an individual in connection with which the individual begins employment at a new work location before October 1998; and in any other case, after February 23, 1998.

Technical Interpretation - External

11 August 2006 External T.I. 2006-0176951E5 - Legal expenses of an employee

Unedited CRA Tags
8(1)(b) 6(1)(f)

Principal Issues: Beginning in which year can legal expenses incurred by the taxpayer to collect or establish a right to an amount that, if received, would be included in computing the taxpayer's employment income?

Position: A proposed amendment to the Act would make it available starting in the 2001 and subsequent taxation years.

8 August 2006 External T.I. 2006-0179431E5 - qualified farm property

Unedited CRA Tags
110.6(1)

Principal Issues: Whether a particular farm property qualifies as "qualified farm property" as defined in subsection 110.6(1) of the Income Tax Act

Position: General comments given.

Reasons: The law. Also position taken in paragraph 27 if IT-268R4.

3 August 2006 External T.I. 2006-0184481E5 - Executor's fees

Unedited CRA Tags
6(1)(c) 248(1)

Principal Issues: Are executor's fees employment income?

Position: Question of fact.

Reasons: See IT 377R

2 August 2006 External T.I. 2006-0198081E5 - Medical Expenses

Unedited CRA Tags
118.2(2)

Principal Issues: Whether particular expenses related to renovations and alterations to a pool are medical expenses for purposes of the medical expense tax credit.

Position: Under proposed amendments applying to expenses incurred after February 22, 2005, expenses likely don't qualify.

Reasons: In general, renovations or alterations to a pool would not be considered "renovations or alterations to a dwelling" within the meaning of paragraph 118.2(2)(l.2). On facts, however, pool is enclosed and attached to the dwelling. However, renovations to render a pool usable would reasonably be incurred by a person who has normal physical development or who does not have a serious and prolonged mobility impairment. It is also reasonable to assume that the renovations are of a nature that would increase the value of the dwelling.

31 July 2006 External T.I. 2005-0156171E5 - Leasehold interest as replacement property

Unedited CRA Tags
13 44 1100(1)(b) 1102(4) & (5) of the Regulations.
leasehold interest included

Principal Issues: (1) Can leasehold improvements acquired to replace a former business property: namely a building, be considered replacement property? (2) If so, if a leasehold improvement is still under construction at the end of the first taxation year following the initial year can it be considered replacement property? (3) Where corporations are running the business through a joint venture, that is not a partnership at law, which taxation year is relevant in applying the replacement property rules?

Position: (1) Yes. (2) Only that portion of it that is being used for the same or similar use as the former business property. (3) Each corporation's taxation year is relevant for their portion of the replacement property.

Reasons: (1) Leasehold improvements are considered to be depreciable property pursuant to subsection 1100(1)(b) of the Regulations. (2) Subsections 13(4), 13(4.1), 44(1) and 44(5) require, among other things, that the capital property was acquired and used in the business before the end of the first taxation year following the initial year to qualify as replacement property. (3) The replacement property rules apply to the taxpayer and the joint venture is not a taxpayer.

25 July 2006 External T.I. 2006-0190171E5 - Employment Income of a Status Indian Guideline 4

Principal Issues: Is the employment income earned off reserve by status Indian employees of an Indian band exempt from taxation by virtue of Guideline 4?

Position: No

Reasons: All the requirements of Guideline 4 have not been met in the circumstances

2006-019017
XXXXXXXXXX Kimberly Duval, CA
(613) 599-6054
July 25, 2006

25 July 2006 External T.I. 2006-0175931E5 - Reimbursement of Health Premiums by Employer

Unedited CRA Tags
6(1)(a)(i) 248(1)

Principal Issues: Is the reimbursement of an employee's health and dental premiums of a non-group plan by an employer a taxable benefit to the employee pursuant to paragraph 6(1)(a) of the Act?

Position: No, provided the plan itself qualifies as a PHSP

Reasons: wording of the legislation - specifically the law does not require that a PHSP be a group plan

18 July 2006 External T.I. 2005-0162181E5 F - Subsection 74.4(2)

Unedited CRA Tags
74.4(2)
a 9% spousal shareholder is a specified shareholder if she also controls a related corporation
9% shareholder of corporation otherwise held by her spouse becomes a specified shareholder if she wholly-owns a second corporation

Principales Questions: Whether a taxpayer would be a specified shareholder in the two scenarios described in the letter?

Position Adoptée: Scenario 1 - yes, scenario 2 - no.

Raisons: Wording of subsection 74.4(2) and of definition "specified shareholder" in subsection 248(1).

18 July 2006 External T.I. 2005-0159781E5 F - Paragraph 55(3)(a)

Unedited CRA Tags
55(2) 55(3)(a)
ss. 55(3)(a)(i) to 55(3)(a)(v) not engaged where Holdco spins off Subco to Sisterco and then redeems the minority shareholding in Holdco of 3rd party

Principales Questions: Whether subsection 55(2) would apply to the dividends received by GESCO and SOEURCO in the two scenarios described in the letter?

Position Adoptée: No

Raisons: No disposition or significant increase of interest described in subsection 55(3)(a).

17 July 2006 External T.I. 2006-0175271E5 - Home Providers and Respite Providers

Unedited CRA Tags
81(1)(h) 5(1) 9(1)
  • Principal Issues: (1) Tax treatment of per diem payments plus the monthly room and board received by a "Home Provider" to provide support in their home to a person with a developmental disability. (2) Tax treatment of amounts for the purchase or provision of respite services received directly or indirectly by the person with a disability, the "Home Provider" and the "Respite Provider". (3) Whether the rent and/or board payments, paid on behalf of the person with a developmental disability might be used by him or her to claim the Ontario refundable property tax credits.

Position: General comments provided.

Reasons: Questions of fact.

2006-017527
XXXXXXXXXX Dominic Tiu
(613) 957-8961
July 17, 2006

29 June 2006 External T.I. 2006-0170641E5 F - Distribution of Corporate Property

Unedited CRA Tags
84(2) 84.1 245(2)
12 month maintenance of business of pipeline corporation contributes to favourable s. 84(2) ruling

Principal Issues: Questions with respect to rulings no. F 2002-0154223 and F 2005-0142111R3, which dealt with post mortem planning. The purpose of this type of planning was to bring back progressively at the shareholder level property of a corporation the fair market value of which would correspond to the adjusted cost base to the shareholder, for the purposes of section 84.1, of the shares of the capital-stock of the corporation. In each of the rulings mentioned above, it is indicated that the corporation would remain a separate and distinct entity for a period of at least one year, and that such corporation would continue to carry on its business during such period in the same manner than before. Question as to why the CRA is requiring these conditions. Whether the CRA would accept a shorter period. Whether the period referred to above has been "administratively" determined by the CRA.

Position: In the two files mentioned, the Rulings Directorate has issued favourable rulings on the non-application of section 84.1, 84(2) and 245(2). These rulings have been issued based on the facts and circumstances surrounding the situations examined. The fact that the corporation would remain a separate and distinct entity for a period of at least one year and that such corporation would continue to carry on its business during such period in the same manner than before were part of the proposed transactions submitted by the taxpayers involved and as such, cannot be considered as "requirements" from the CRA. However, these elements have contributed to the issuance of favourable rulings with respect to the non-application of subsection 84(2). Finally, CRA's position is to rule on the potential application of section 84.1, subsection 84(2) and subsection 245(2) on a case by case basis, after a review of all the facts and circumstances surrounding a specific situation.

Reasons: Wording of the Act and previous positions.

1 June 1993 External T.I. 93061850 - Prestations d'assurance-salaire

Unedited CRA Tags
6(1)(f)
benefits under wage loss insurance plan were taxable to employees because they had not fully borne the premiums (but s. 6(1)(f)(v) deductions available)
XXXXXXXXXX 							5-930618
C. Dubé
(613) 957-8953
A l'attention de XXXXXXXXXX 

Le 1er juin 1993

Mesdames, Messieurs,

Objet: Régime d'assurance collective XXXXXXXXXX
Imposition des prestations d'assurance-salaire

La présente est en réponse à votre lettre du 18 février 1993 dans laquelle vous demandez notre opinion concernant l'objet mentionné en titre.

1 - Vous nous soumettez que le régime d'assurance collective XXXXXXXXXX est régi par les conventions collectives XXXXXXXXXX (ci-après "convention").

Technical Interpretation - Internal

10 August 2006 Internal T.I. 2006-0194871I7 - NPO status

Unedited CRA Tags
149(1)(l)

Principal Issues: Given a particular bylaw of a specific entity, can it be said that the entity qualifies as an NPO?

Position: No. The entity is not organized in accordance with paragraph 149(1)(l).

Reasons: The bylaw in question authorizes the distribution of surplus earnings to the members. As such, it cannot be said that the entity is organized in accordance with paragraph 149(1)(l).

18 July 2006 Internal T.I. 2006-0184431I7 F - Prêt d'un gouvernement

Unedited CRA Tags
12(1)x) 80
ultimate obligation to repay all the amount advanced rendered a loan an unconditional loan rather than a forgivable loan
Words and Phrases
forgivable loan

Principales Questions: Est-ce qu'une somme reçue dans le cadre d'un prêt accordé par un gouvernement est un prêt à remboursement conditionnel sujet à l'alinéa 12(1)x)?

Position Adoptée: Non.

Raisons: Le prêt est remboursable inconditionnellement.

17 July 2006 Internal T.I. 2006-0181911I7 - Determination of Foreign Source Business Income

Unedited CRA Tags
4(1)(b) 126(2)

Principal Issues: Whether a formulary apportionment method that is used in computing U.S. state corporate business taxes is acceptable for determining qualifying income (i.e. U.S. source income) for Canadian foreign tax credit purposes?

Position: No.

Reasons: A separate accounting approach (traditional transaction method) is more consistent with the scheme of the Income Tax Act and supported by jurisprudence.

11 December 1997 Internal T.I. E9730067 - RCA LOANS TO CONTRIBUTING EMPLOYERS

Unedited CRA Tags
248(1) 20(1)(r)

Principal Issues:

What is the Department's position on the treatment of an arrangement where the arrangement is structured to meet the definition of an RCA, if funds contributed by an employer are used to secure a loan and the proceeds of the loan are returned to the contributor in the form of another loan.

Position:

If a bona fide RCA exists, there are no restrictions on the types of investments the arrangement can make. Accordingly, where an RCA exists, it can invest in loans to a contributing employer. It is a question of fact whether a bona fide RCA is created in any particular situation.

Reasons: