Income Tax Severed Letters - 2008-11-21

Technical Interpretation - External

14 November 2008 External T.I. 2008-0294511E5 - Child Support

Unedited CRA Tags
60.1(2); 60(b); 56.1(4)

Principal Issues: Whether lump sum payments paid in respect of child support and related legal fees are deductible.

Position: No

Reasons: The agreement has a "commencement date" as a consequence of the filing of a T1157 election. All payments made after the date specified in the election are not deductible to the payer and not taxable to the recipient. Also, retroactive support for the period preceding the court order would not be qualifying support amount (IT-530R, paragraph 22). Legal fees incurred by the payer are not deductible as they are considered to be personal or living expenses.

13 November 2008 External T.I. 2008-0294041E5 - Taxation and Insolvency

Unedited CRA Tags
s. 5(1) s. 153(1)(a) Regulation 100

Principal Issues: Whether a payment, made to employees of a corporation to settle claims for wages as part of a compromise under the Companies Creditors' Arrangement Act, is subject to income tax withholdings.

Position: Yes.

Reasons: S. 153(1)(a) and Regulation 100.

12 November 2008 External T.I. 2007-0259241E5 - Income Tax Consequences of a Loan Securitization

Unedited CRA Tags
9(1); 12(1)(b)

Principal Issues: Whether the amount of the deferred purchase price is to be taken into account in determining vendor's income at the time of the sale of receivables?

Position: Deferred amount represents a separate property and the fair market value should be included in income at the time the receivables are transferred to the collateralized security entity.

Reasons: Section 9 of the Act.

12 November 2008 External T.I. 2008-0295731E5 F - Supplément remboursable pour frais médicaux

Unedited CRA Tags
122.51
Summary Under
Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(f)
statutory reference to sources of income from businesses did not require netting business loss from 1st partnership against business income from 2nd partnership
Summary Under
Tax Topics - Income Tax Act - Section 122.51 - Subsection 122.51(1) - Eligible Individual - Paragraph (c) - Subparagraph (c))ii)
reference to sources of income from business did not require netting partnership business loss against business income from 2nd partnership

Principales Questions: Si un particulier exploite activement deux entreprises et que les revenus combinés de ces deux entreprises résultent en une perte, est-ce que le particulier, s'il ne tire pas de revenus provenant de charges ou d'emploi, pourra réclamer le supplément remboursable pour frais médicaux?

Position Adoptée: Oui.

Raisons: Dans le cadre de cette analyse, le revenu - en excluant les pertes - de chaque entreprise exploitée par le particulier pour une année d'imposition doit être d'au moins 2 984$.

XXXXXXXXXX 2008-029573

Le 12 novembre 2008

10 November 2008 External T.I. 2008-0274141E5 - Principal Residence Exemption

Unedited CRA Tags
40(2)(b); 54; 45(1)(c)

Principal Issues: Whether there was a change in use of a portion of a principal residence where that portion was used for rental purposes.

Position: No.

Reasons: Based on the facts that the income-producing use is ancillary to the main use of the property as a residence, there is no structural change to the property, and no capital cost allowance is claimed on the property and based on our position in paragraph 32 of IT-120R6.

10 November 2008 External T.I. 2008-0276121E5 - SR&ED - exploit results

Unedited CRA Tags
37(1)(a); 127(9)

Principal Issues: Whether the Sub is entitled to claim a deduction under subsection 37(1) of the Act and the ITC in respect of the SR&ED expenditures for the development of the project software even though it is being reimbursed by a foreign parent and the parent retains ownership of the world-wide rights to exploit the project software.

Position: Yes.

Reasons: The phrase "entitled to exploit the results" appears in subparagraphs 37(1)(a)(i.1) and 37(1)(a)(ii) of the Act but not in subparagraph 37(1)(a)(i). If the Sub otherwise meets the requirements of subparagraph 37(1)(a)(i) of the Act, the fact that the Sub does not have the right to exploit the results of SR&ED that it carries out would not, in and by itself, affect its ability to deduct the SR&ED expenditures incurred by it and claim the related ITC.

10 November 2008 External T.I. 2007-0237551E5 F - Vente à tempérament

Unedited CRA Tags
248(1); 20(1)(a); 13(21)
Summary Under
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A
acquisition and disposition under instalment sale when purchaser obtains possession, the right of use and to collect the fruits

Principales Questions: Est-ce qu'un acheteur, qui obtient la possession d'un bien en vertu d'une vente à tempérament, peut réclamer la déduction pour amortissement relativement au bien dès sa prise de possession?

Position Adoptée: Oui.

Raisons: Dans la mesure où, au moment de la prise de possession du bien, l'acheteur obtient également le droit d'usage, le droit de percevoir les fruits et les risques de pertes associés au bien.

5 November 2008 External T.I. 2008-0293241E5 - Tax Liability - General

Unedited CRA Tags
2(1); 3, 6, 9, 56

Principal Issues: Whether an amount received by an individual from a foreign government would, in the circumstances described, be subject to tax in Canada.

Position: No

Reasons: The amount received would not be subject to tax.

16 October 2008 External T.I. 2008-0274371E5 - RRSP division of matrimonial property

Unedited CRA Tags
146(16)

Principal Issues: Can an amendment be made to an existing separation agreement to allow a transfer of RRSP property?

Position: Yes but the agreement must provide that the transfer is in respect of a division of property as a consequence of a marriage breakdown. It is not sufficient to merely provide for a transfer for some other reason.

Reasons: The provisions of 146(16) may only be used as described therein.

Technical Interpretation - Internal

10 November 2008 Internal T.I. 2008-0294051I7 - Transfer of farm property to child- 73(3)

Unedited CRA Tags
73(3); 69(11)

Principal Issues: 1) Does subsection 73(3) require the taxpayer's spouse who has done the farming still be living when the transfer is made? 2) Does subsection 69(11) apply?

Position: 1) No. The fact that a taxpayer's former spouse is deceased does not mean that the deceased's use of the farmland should not be considered in applying subsection 73(3). 2) Yes.

Reasons: 1) The requirement to be met is that during the time that the farmland has been owned, the taxpayer's spouse used the farmland principally in the business of farming on a regular and continuous basis. 2) Subsection 69(11) could be applied because one of the main purposes of the series of transaction is to obtain the benefit of multiple capital gains deductions for qualified farm property.

10 November 2008 Internal T.I. 2008-0296531I7 - CCA class- mobile homes

Unedited CRA Tags
18(1)(b); Schedule II

Principal Issues: What is the CCA class for a mobile home?

Position: A mobile home having the construction of a trailer, that has not been attached to a permanent foundation, should be included in Class 10(e). A mobile home that has been attached to a permanent foundation, with the intention of remaining in place permanently, would be a class 1 property.

Reasons: Interpretation of Schedule II and the decision in Landsdowne

6 November 2008 Internal T.I. 2008-0292561I7 F - DAPE multiple

Unedited CRA Tags
125(7); 256(2.1)
Summary Under
Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Personal Services Business
PSBs where 4 brothers and an executive provided all the management services to a jointly owned construction company through their respective managementcos
Summary Under
Tax Topics - Income Tax Act - Section 256 - Subsection 256(2.1)
application of s. 256(2.1) to SBD multiplication where 4 brothers provided their management services to Opco through their respective managementcos

Principales Questions: Cinq particuliers ont chacun créé leur société de gestion. Une société opérante leur verse annuellement des frais de gestion. Est-ce que chacune des sociétés de gestion peut réclamer la déduction accordée aux petites entreprises?

Position Adoptée: Probablement pas.

Raisons: Question de faits.