Income Tax Severed Letters - 2008-05-30

Principales Questions: Aux fins de la définition de contribuant résidant et de contribuant rattaché et de l'alinéa 75(3)c.2), tels que proposés dans le projet de loi C-10 du 9 novembre 2006, est-ce qu'une période de résidence au Canada qui survient avant une période de non-résidence suivie du retour au Canada fait partie des périodes comptées pour déterminer si le nombre de mois excède 60?

Position Adoptée: Oui

Raisons: Libellé du texte des modifications proposées.

Principal Issues: 1. Whether on the amalgamation of a debtor and creditor, a foreign currency denominated loan that is deemed settled pursuant to 80.01(3) will result in a capital gain or capital loss to the creditor pursuant to subsection 39(2) of the Income Tax Act? 2.Whether on the amalgamation of a debtor and creditor, a foreign currency denominated loan that is deemed settled pursuant to 80.01(3) will result in a forgiven amount (as defined in subsection 80(1)) to the debtor or result in a capital gain pursuant to subsection 39(2) of the Income Tax Act?

Position: 1. By virtue of 80.01(3), there is no capital gain or capital loss to the creditor. "2. There is also no forgiven amount under subsection 80(1) and, under the facts of this particular case, no capital gain or loss to the debtor".

Reasons: Interaction of 80.01(3) and 80(2)(k)

Principal Issues: A taxpayer and his family suffer from eczema and have a prescription from their doctor for a water softener for purposes of alleviating the conditions of this ailment. The taxpayer wants to claim the water softener under the medical expense tax credit provisions, and, in particular, under paragraph 118.2(2)(m) of the Act and paragraph 5700(c.1) which refers to a "...water filter or purifier for use by an individual who is suffering from ... a severe chronic immune system disregulation to cope with or overcome that ailment."

Position: It is a question of fact whether all of the conditions in the relevant METC provisions are met. However, it is our view that a water softener may be considered a water filter or purifier for these purposes.

Reasons: A water filter or purifier is not defined in the Act and thus, under their ordinary meanings, encompass a water softener.

Principal Issues: Whether a notification method that does not provide the amount of the dividend at the time it is paid to each shareholder meets the designation requirement stated in subsection 89(14) of the ITA

Position: No - the designation requirements stated in subsection 89(14) would not be met by the proposed notification methods

Reasons: A textual, contextual and purposive review of subsection 89(14) reveals that the taxpayer's entitlement to a written and contemporaneous notification each time a dividend is paid underlies Parliament's intent to provide dividend recipients with certainty regarding the tax consequences of corporate distributions.

Principal Issues: 1. Est-ce qu'un contribuable réalisera un gain ou une perte sur change lors de l'utilisation de fonds en monnaie étrangère pour acquérir des actions de société américaine qui sont des immobilisations du contribuable?
2. Comment calculer le gain ou la perte en capital à l'égard de placements autres que des fonds en dépôt payés et vendus en monnaie étrangère?

Position: 1. Oui.
2. Le gain ou la perte réalisée à la vente des placements sera calculé en convertissant en monnaie canadienne le prix de base rajusté et le produit de disposition des placements selon le taux de change en vigueur à l'époque pertinente. De manière plus précise, le prix de base rajusté doit être converti en monnaie canadienne en utilisant le taux de change prévalant au moment de l'acquisition des placements visés et le produit de disposition des placements doit être converti en utilisant le taux de change prévalant au moment de la disposition des placements.

Reasons: 1. Paragraphe 13 IT-95R.
2. Arrêt Gaynor c. La Reine (CAF) 91 DTC 5288
PUBLICATIONS DE L'ARC: F2007-024244, F2007-0237791I7, IT-95R
ARTICLE DE LA LOI: 39
HAA: 7007-4