Income Tax Severed Letters - 2006-12-15

Principal Issues: Whether there is a deemed disposition where a principal residence is constructed on vacant land.

Position: No.

Reasons: There is no change in use. The tax consequences accompanying the construction of a principal residence on vacant land are discussed in paragraph 11 of IT-120R6.

Principal Issues: What are the tax consequences of amounts received by a union member upon the wind-up of the member's union?

Position: Generally, the disposition of the right to be a member will constitute the disposition of a capital property that has a cost base of nil and the proceeds of disposition will be included in the member's income as a capital gain.

Reasons: See above.

Principal Issues: Where students enrolled in a correspondence course have the option to purchase or not to purchase textbooks, will the cost of same be eligible for the tuition tax credit?

Position: Likely not eligible for the tuition tax credit but effective 2006, the student may be eligible for the textbook credit.

Reasons: Although normally not eligible for the tuition tax credit, where the cost of textbooks, CDs or similar materials is included in the tuition cost for a correspondence course offered by a designated educational institution, such amount will qualify for the tuition tax credit provided all other requirements are also met.
Effective 2006 the new "textbook tax credit" will provide a credit for students enrolled in programs qualifying them for the education tax credit, with a textbook credit calculated as a flat amount per month of full-time or part-time enrolment.

2006-021512
XXXXXXXXXX Renée Shields
(613) 948-5273
November 28, 2006

Principal Issues:
Whether the cost of certain vitamins and minerals is eligible medical expense pursuant to paragraph 118.2(2)(n) for purposes of the medical expense tax credit

Position:
No, amounts are eligible only if the relevant vitamins and minerals are included in Schedule I of the Drug Schedule Regulations to the relevant provincial legislation and purchased for use by the patient as prescribed by a medical practitioner or dentist and as recorded by a pharmacist.

Reasons:
In interpreting the phrase "as prescribed by a medical practitioner or dentist and as recorded by a pharmacist", the CRA relies on the legislative authorities governing the sale, dispensing or disposal of drugs and devices. This approach is consistent with the decision of the Federal Court of Appeal in Ray [2004] DTC 6028.