Income Tax Severed Letters - 2008-01-11

Ruling

2007 Ruling 2007-0241561R3 - Credit Union Shares

Unedited CRA Tags
137(4.1) 137(4.2) 248(1)

Principal Issues: (1) What is the amount of the stock dividend declared and paid to members of a credit union and (2) whether Part VI.1 tax is exigible?

Position: (1) The amount of the stock dividend is the amount by which the paid-up capital of the XXXXXXXXXX Shares is increased by reason of the payment of the stock dividend which is calculated in reference to the par value of each Share. (2) Part VI.1 tax does not apply.

Reasons: (1) Pursuant to paragraph (c) of the definition "amount" in subsection 248(1) and provisions of governing federal legislation. (2) By virtue of the operation of subsections 137(4.1) and (4.2) the amount of the stock dividend is deemed to be interest and deemed not to be dividend, notwithstanding any other provision of the Act.

2007 Ruling 2007-0245191R3 F - Amalgamation of public co and private co

Unedited CRA Tags
55(2) 87(1)

Principal Issues: In the particular situation, whether subsection 55(2) should apply to a dividend.

Position: Subsection 55(2) will not apply to the part of the dividend that does not exceed the safe income on hand attributable to the shares on which the dividend is paid.

Reasons: Subsection 55(2) and CRA's administrative position on the computation of safe income on hand.

2007 Ruling 2007-0245201R3 - Withholding Tax Exemption

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

Principal Issues: Does the maintenance of a collateral account preclude the application of 212(1)(b)(vii)?

Position: NO

Reasons: Given before in similar circumstances

2007 Ruling 2006-0182881R3 - Gift of equitable interest in a trust

Unedited CRA Tags
118.1(5) 118.1(18)

Principal Issues: Whether the gift of an equitable interest in a testamentary spousal trust qualifies as a gift by will for the purposes of subsection 118.1(5).

Position: Yes.

Reasons: Based on the terms of the will, the conditions set out in IT-226R are met.

XXXXXXXXXX 2006-018288

2007 Ruling 2006-0191631R3 - XXXXXXXXXX

Unedited CRA Tags
98(6) 132.2

Principal Issues: Rulings confirm tax consequences of a REIT reorganization in order to simplify the structure of the MFT ...ie. conversion of a general partnership to a limited partnership & elimination of currently existing layers of corporations through amalgamation and transfers of assets using various rollover to achieve simplification.

XXXXXXXXXX 2006-019163

2007 Ruling 2006-0198221R3 - Definition of Private Health Services Plan

Unedited CRA Tags
248(1) Private Health Services Plan 6(1)(a)(i) 118.2(2)(q)

Principal Issues: Given a statement of fact that a particular health care plan qualifies as a private health services plan, will the addition of a new group of employees to the plan taint that qualification?

Position: We are not ruling on whether the existing plan is a private health services plan. However, based on the statement of fact that it so qualifies, the addition of the new group of employees will not, in and of itself, cause the plan to cease to qualify.

Reasons: Our reading of the legislation and consistent with our positions in IT-339R2.

Technical Interpretation - External

4 January 2008 External T.I. 2007-0262311E5 - Prescribed International Organization

Unedited CRA Tags
110(1)(f)(iii)

Principal Issues: Whether the World Bank is a prescribed international organization for purposes of subparagraph 110(1)(f)(iii) of the Act.

Position: Yes.

Reasons: The World Bank is one of the specialized agencies prescribed in paragraph 8900(1)(b) of the Regulations.

4 January 2008 External T.I. 2007-0262351E5 - Overseas Employment Tax Credit

Unedited CRA Tags
122.3

Principal Issues: Whether a particular employee satisfies the "qualifying period" test in section 122.3 of the Act.

Position: Question of fact.

Reasons: The TSO will need to review where the actual employment duties were performed to determine whether this requirement is satisfied.

4 January 2008 External T.I. 2007-0254491E5 - Allocation of Pension Income

Unedited CRA Tags
56(1)(a)

Principal Issues: Reporting of pension income by designated beneficiary.

Position: Designated beneficiary is required to include in income.

Reasons: Paragraph 56(1)(a) of the ITA.

2 January 2008 External T.I. 2007-0228241E5 F - Programme canadien d'options familles agricoles

Unedited CRA Tags
9(1) 28(1) 12(1)(x) 56(1)r)(iv); 146(1); règl. 200(2)(c); 234(1)(2);
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(r) - Subparagraph 56(1)(r)(iv)
payments under the Canadian Farm Families Options Program to those without a farming source of income would be included under s. 56(1)(r)(iv)
Summary Under
Tax Topics - Income Tax Act - Section 9 - Computation of Profit
payments under the Canadian Farm Families Options Program were business income to those with a farming source of income
Summary Under
Tax Topics - Income Tax Act - Section 146 - Subsection 146(1) - Earned Income
payments under the Canadian Farm Families Options Program to those without a farming source of income would be excluded from earned income

Principales Questions:
(1) Quel sera le traitement fiscal à accorder aux montants reçus par un bénéficiaire du programme options qui n'a pas de revenu d'entreprise agricole par ailleurs?
(2) Quel sera le traitement fiscal pour les bénéficiaires qui ont un revenu d'entreprise agricole par ailleurs?
(3) Est-ce que les montants reçus sont des revenus assujettis aux cotisations au RPC et au RRQ?
(4) Est-ce que les montants entreront dans le calcul du revenu gagné au sens du paragraphe 146(1)?

Position Adoptée:
(1) Les paiements versés dans le cadre du Programme Options aux actionnaires ou aux conjoints sans entreprise agricole sont imposables comme " autres revenus ". Un relevé T4A doit être émis aux bénéficiaires des montants.
(2) Les paiements d'aide reçus selon le Programme Options devront être inclus dans le calcul du revenu d'entreprise agricole. Un relevé AGR-1 doit être émis pour les paiements effectués dans l'année dans le cadre du programme Options.
(3) Le travailleur autonome pourrait contribuer au RPC.
(4) Oui s'ils sont imposables à titre de revenu d'entreprise agricole.

Raisons:
(1) Application du sous-alinéa 56(1)r)(iv) proposé et de l'alinéa 200(2)c) du Règlement.
(2) Les montants sont imposables selon 9(1), 28(1) ou 12(1)x). Les termes utilisés aux paragraphes 234(1) et (2) du Règlement sont suffisamment larges pour inclure les montants reçus en vertu du programme options.
(3) Commentaires généraux fournis par la Division des décisions sur le RPC/AE
(4) Les montants reçus dans le cadre du Programme Options à titre de revenu d'entreprise sont considérés comme étant du revenu gagné au sens des dispositions du paragraphe 146(1)(a)(ii)

XXXXXXXXXX 2007-022824
Julie Racette
Le 2 janvier 2008

6 December 2007 External T.I. 2007-0236891E5 - German pensions

Unedited CRA Tags
56(1)(a) 110(1)(f)(i) Article 18(3)(c) of Germany Treaty

Principal Issues: Taxation of German social security

Position: Treaty exempt to extent it would not be taxable in Germany if received by resident of Germany

Reasons: Article 18(3)(c) of Canada- Germany tax treaty

Technical Interpretation - Internal

5 December 2007 Internal T.I. 2007-0221211I7 F - Capital Dividends

Unedited CRA Tags
83(2) 184(2) 184(3) 184(4)
Summary Under
Tax Topics - Income Tax Act - Section 184 - Subsection 184(3)
Summary Under
Tax Topics - Income Tax Act - Section 165 - Subsection 165(3)
suggesting awaiting by CRA of a court resolution of a related dispute would be contrary to its duty to act with all due dispatch
Summary Under
Tax Topics - Income Tax Act - Section 184 - Subsection 184(3)
CRA will not accommodate appeal of underlying Pt. I and III assessments by agreeing to act on a waiver if appeal successful or by deferred processing of a s. 184(3) election

Principal Issues: (1) Whether the CRA would automatically extend the filing period for the election under ss 184(3), pursuant to ss 220(3.2), if the court rejects the corporation's appeal of the reassessment of its Part I tax (which caused the excessive ss 83(2) election) and of the assessment of its Part III tax? (2) Whether the CRA would defer processing the validly made election under ss 184(3), that was filed at the same time as the corporation filed notices of objections in respect of the reassessment of its Part I tax (which caused the excessive ss 83(2) election) and of the assessment of its Part III tax, until the court rejects the corporation's appeals? (3) In a situation where a corporation files a notice of objection in respect of the reassessment of its Part I tax (which caused an excessive ss 83(2) election) as well as a valid election under ss 184(3) and the CRA reassesses the Part I tax of the corporation's shareholder (to tax a deemed dividend pursuant to 184(3)(d)(ii)), (a) whether the CRA would accept to process the notice of objection filed by the the corporation's shareholder in respect of the reassessment until the courts have finally accepted the corporation's appeal in respect of the reassessment of its Part I tax? (b) whether the CRA would accept a waiver from the corporation's shareholder and automatically reassess the Part I tax of the corporation's shareholder if the court decides in favour of the corporation?

Position: (1) No. (2) No.

Reasons: (1) It is not CRA's practice. (2) Technically, the CRA cannot defer the processing of the validly made election under ss 184(3) in light of the contradictory actions of the corporation. (3)(a) Technically, the CRA cannot defer the processing of the notice of objection filed by the corporation's shareholder in light of the contradictory actions of the corporation's shareholder and the corporation as well as the fact that there is no direct link between the reassessment of the corporation's Part I tax and the reassessment of the corporation's shareholder's Part I tax. (3)(b) The waiver should be considered inadmissible in light of the contradictory actions of the corporation's shareholder who had to approve the filing by the corporation of its election under 184(3).