Income Tax Severed Letters - 2007-06-29

Ruling

2007 Ruling 2006-0205771R3 - 88(1)(d) Bump and Substituted Property

Unedited CRA Tags
88(1)(c)(vi)(B) 88(1)(c.3) 143.3(3)

Principal Issues: (1) The cost of property acquired in exchange for shares issued by the purchaser? (2) Whether shares of the acquirer corporation that are issued to the shareholders of the target corporation will be substituted property described in 88(1)(c.3)(ii)?

Position: (1) Subject to 143.3(3), where there is no agreement regarding the price the cost will be the amount added to the stated capital of the shares. (2) Not in the circumstances.

Reasons: (1) The position is consistent with previous rulings and jurisprudence. (2) The position is consistent with a previous ruling and Explanatory Notes of the Dept. of Finance.

2007 Ruling 2007-0226581R3 - Intrnl reorg. - XXXXXXXXXX

Unedited CRA Tags
55(3)(a)

Principal Issues: Distribution of assets of a corporation prior to a divorce by the two shareholders.

Position: Favourable rulings issued.

Reasons: The law.

Technical Interpretation - External

21 June 2007 External T.I. 2005-0157861E5 F - Cotisation professionnelle

Unedited CRA Tags
8(1)i)(i)
Summary Under
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(i) - Subparagraph 8(1)(i)(i)
membership in a municipal employees’ association was not necessary for the maintenance of a professional status

Principales Questions: Est-ce que la cotisation annuelle versée à la COMAQ est déductible en vertu du sous-alinéa 8(1)i)(i)?

Position Adoptée: Non.

Raisons: L'adhésion à la COMAQ n'est pas une condition nécessaire à la conservation du statut professionnel de l'employé ou du cadre, même si le fait d'en être membre est avantageux pour l'employé ou le cadre dans l'exercice de ses fonctions.

19 June 2007 External T.I. 2007-0238461E5 - Retiring Allowance

Unedited CRA Tags
248(1)

Principal Issues: Will the payment of an amount to an employee of the Public Service under the Executive Employment Transition Policy (approved by Treasury Board), be considered a retiring allowance for purposes of subsection 248(1) of the Income Tax Act?

Position: Provided the payment meets the policy as described, yes

Reasons: wording of the legislation and a long-standing CRA position

18 June 2007 External T.I. 2007-0226411E5 - Reduction in qualified expenditures under 127(18)

Unedited CRA Tags
127(18)

Principal Issues: Whether a Crown Corporation would be required to reduce its otherwise eligible SR&ED expenses by virtue of Subsection 127(18) for the government funding.

Position: Question of fact.

Reasons: It would be a question of fact to be determined with reference to the circumstances, agreements, etc., relevant to a particular situation. The funding process information provided would probably not be the only factor considered in making a determination.

13 June 2007 External T.I. 2007-0226261E5 F - Convention Émirats Arabes Unis

Unedited CRA Tags
5907; 95(1); 90(1); 12(1)(k); 113)
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 4
meaning of “substantially all” in UAE Convention informed by its meaning under ITA
Words and Phrases
substantially all
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 3
undefined term in Convention informed by its domestic interpretation by CRA
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(11.2) - Paragraph 5907(11.2)(a)
FA required to have its central management and control in the Treaty country in addition to satisfying the Treaty residence test

Principal Issues:
1) Est-ce que la convention fiscale Canada-Émirats Arabes Unis s'applique?
2) Est-ce que les profits de Dubai Co se qualifieront de surplus exonérés au sens du paragraphe 95(1) de la Loi de l'impôt sur le revenu?
3) Quel sera le traitement fiscal des dividendes versés par Dubai Co à Canco en vertu de la Loi et de la Convention Canada-Émirats Arabes Unis?

Position: Commentaires généraux

Reasons: Selon les quelques faits fournis, il ne peut être déterminé que Dubai Co sera résidente des Émirats Arabes Unis aux fins de la Convention puisqu'il ne peut être établi qu'elle tirera la totalité ou la presque totalité de la valeur de son revenu d'une entreprise exploitée activement par elle dans les Émirats Arabes Unis et que la totalité ou la presque totalité de la valeur de ses biens sera attribuable à des biens utilisés dans cette entreprise.

11 June 2007 External T.I. 2007-0233931E5 - Indians - Guideline 4

Unedited CRA Tags
81(1)

Principal Issues: Is income of an individual exempt from tax under Guideline 4

Position: General comments only, but probably no.

Reasons: Nature of employer does not appear to satisfy requirements of Guideline

Conference

21 June 2007 Roundtable, 2007-0229761C6 - Life insurance death benefits

Unedited CRA Tags
148(1) 12(1)(c)

Principal Issues: Whether interest added to an indemnity for damages taxable

Position: No position

Reasons: question of fact

Technical Interpretation - Internal

21 June 2007 Internal T.I. 2007-0239681I7 F - perte sur prêts irrécouvrables

Unedited CRA Tags
40(2)g)(ii)
Summary Under
Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(g) - Subparagraph 40(2)(g)(ii)
acquisition of shares through an RRSP can establish an income-producing purpose re a non-interest loan made directly to the corp

Principales Questions: Le sous-alinéa 40(2)g)(ii) a-t-il pour effet de réputer nulle une perte sur un prêt ne portant pas intérêt?

Position Adoptée: Non

Raisons: Application de la décision Byram.

Le 21 juin 2007

20 June 2007 Internal T.I. 2007-0233551I7 - Deductibility of Transaction Costs

Unedited CRA Tags
18(1)(b) 9(1) 20(1)(e) 20(1)(cc)
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Legal and other Professional Fees
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(cc)
auditor fees not deductible where no report

Principal Issues: Whether fees incurred with respect to a proposed conversion to an income trust are deductible under subsection 9(1).

Position: No

Reasons: Expenses are on account of capital and precluded under paragraph 18(1)(b)

18 June 2007 Internal T.I. 2007-0231861I7 F - Principale place d'affaires

Unedited CRA Tags
8(13) 8(13)a)
Summary Under
Tax Topics - Income Tax Act - Section 8 - Subsection 8(13) - Paragraph 8(13)(a) - Subparagraph 8(13)(a)(i)
“principally performed” test references the proportion of time spent at the home office
Words and Phrases
principally performs

Principales Questions: Le bureau qu'un agent immobilier au Québec tient à domicile peut-il être considéré comme étant le lieu où il accomplit principalement les fonctions de sa charge ou de son emploi?

Position Adoptée: Question de fait.

Raisons: Il est nécessaire de se référer au temps que l'agent passe physiquement dans les locaux de son domicile aménagés aux fins de son travail. Si plus de 50% du temps consacré à l'ensemble des fonctions de l'agent liées à son emploi est attribuable au temps passé dans ces locaux, un montant pourra être déduit en vertu du sous-alinéa 8(13)a)(i) de la Loi de l'impôt sur le revenu.

Le 18 juin 2007