Income Tax Severed Letters - 2009-05-15

Ruling

2009 Ruling 2008-0269731R3 - Partner's pro corp providing services to ptnshp

Unedited CRA Tags
125(7); 56(2); 96(1)

Principal Issues: Whether the active business income earned by a partner's professional corporation from providing professional services to a partnership of which the partner is a member would be restricted under the rules for specified partnership income or personal services business.

Position: No, as long as the facts and proposed transactions set out in the ruling request are accurate.

Reasons: The facts and proposed transactions, as described, conform to our requirements as set out in other similar rulings.

2009 Ruling 2008-0282411R3 - Professional Services Corporation

Unedited CRA Tags
125(7); 56(2); 96(1)

Principal Issues: Whether the active business income earned by a corporation from performing professional on behalf of a partnership of which the corporation's controlling shareholder is a member would be specified partnership income or income from a personal services business.

Position: No.

Reasons: Conforms to our requirements for these types of rulings as set out in other similar rulings.

2009 Ruling 2009-0306061R3 F - Mining Exploration Program

Unedited CRA Tags
66.1(6) CEE (f), (g), 66.2(5) CDE (d)

Principal Issues: (1) Whether expenses relating to an underground mining exploration program to be carried out will be related to a mine that has come into production in reasonable commercial quantities, or to a potential or actual extension thereof. (2) Whether expenses relating to an underground exploration program to be carried out will qualify for inclusion under paragraph (f) of the definition of CEE

Position: (1) No. (2) Yes

Reasons: Based on the facts of the situation, written opinions received from Natural Resources Canada in relation to this case, as well as provided that any economic mineralization found pursuant to the underground exploration program is not exploited using the existing surface and underground infrastructures. Favourable rulings issued in XXXXXXXXXX 2004, XXXXXXXXXX 2005, XXXXXXXXXX 2006 and XXXXXXXXXX 2008 with respect to this particular issue. Issuance of the same favourable rulings, in respect of the same issues and the same Project that would cover an additional XXXXXXXXXX -month period.

XXXXXXXXXX 2009-030606

2009 Ruling 2007-0221331R3 - Split-up Butterfly

Unedited CRA Tags
55(3); 87(4); 15(1)

Principal Issues: Is a benefit conferred for the purposes of 87(4) where a subsidiary controlled corporation holds shares in its parent-predecessor corporation and, on an amalgamation of the parent-predecessor corporation with a related corporation that owns the remaining outstanding shares of the subsidiary controlled corporation, the subsidiary controlled corporation becomes a subsidiary wholly-owned corporation of Amalco that receives nominal value preferred shares of Amalco on the amalgamation?

Position: Not in the circumstances.

Reasons: In the particular circumstances, it was not reasonable to regard the apparent forfeiture of value by the subsidiary controlled corporation on the amalgamation as giving rise to a benefit that was conferred on the remaining Amalco shareholders.

XXXXXXXXXX 2007-022133

2009 Ruling 2007-0251621R3 - Split-Up Butterfly

Unedited CRA Tags
55(3)(b)

Principal Issues: Standard Split-Up Butterfly

2008 Ruling 2008-0273431R3 - Cash Sweeping

Unedited CRA Tags
20(1)(c); 15(2); 15(1)

Principal Issues: 1. Will the interest paid to NR Holdco by BBCo be deductible by BBCo under paragraph 20(1)(c) of the Act? 2. Will subsection 15(2) of the Act apply to the cash sweeping transactions? 3. Will the fact that BBCo may make a loan to a Participant in financial difficulty, in and of itself, result in a subsection 15(1) benefit being conferred on NR Holdco?

Position: 1. Yes. 2. No. 3. No

Reasons: 1. The interest will meet the requirements of paragraph 20(1)(c). 2. Where BBCo and each of the Participants are corporations resident in Canada, and provided there will be no repatriation or loans by BBCo or the Participants back to NR Holdco, subsection 15(2) of the Act will not apply to the cash sweeping transaction. 3. Where a bona fide intercompany loan is made in the ordinary course of carrying on the businesses of the corporations and the corporation receiving the loan is, at the time of the loan, in a position to repay the loan or provide reasonable security for repayment, the CRA has a long standing position that subsection 15(1) will not be applied.

XXXXXXXXXX 2008-027343

2008 Ruling 2008-0279781R3 - Subsections 85(1) and 55(3)

Unedited CRA Tags
85(1) 55(3)

Principal Issues: Whether transaction is exempt from application of subsection 55(2) by virtue of subsection 55(3)(a).

Position: Yes

Reasons: Wording of the provision

Technical Interpretation - External

13 May 2009 External T.I. 2009-0314851E5 F - Frais d'administration, régimes de pensions

Unedited CRA Tags
18(1)a); 20(1)q)
payment by employer to pension plan of ITCs generated by it on pension plan administration expenses could be deductible if pursuant to legal obligation

Principales Questions: Est-ce que le versement d'un montant équivalent aux CTI et RTI reçus pour les dépenses d'administration d'un régime de pension, par l'employeur à la fiducie de ce régime de pension, est un montant déductible en vertu de l'alinéa 18(1)a) ?

Position Adoptée: Question de fait

Raisons: Les tribunaux ont interprété l'alinéa 18(1)a) comme exigeant notamment que les dépenses soient faites en raison d'une obligation légale de payer le montant.

11 May 2009 External T.I. 2009-0310321E5 - Work-Space-in-Home

Unedited CRA Tags
18(12) 20(1)(c) 45(1)

Principal Issues: Deductibility of interest on a line of credit that is secured on a principal residence.

Position: General comments only.

Reasons: Mixed question of fact and law. We have no information on how the borrowed funds were actually used or what the current use would be.

11 May 2009 External T.I. 2009-0312641E5 - Overseas Employment Tax Credit

Unedited CRA Tags
122.3

Principal Issues: Whether employment periods with separate employers can be considered part of the same qualifying period if there is a break between employments

Position: No

8 May 2009 External T.I. 2008-0270061E5 - Legal Fees Incurred to Divide Property on Divorce

Unedited CRA Tags
60(o.1)

Principal Issues: Are legal fees incurred to divide a farm property on divorce deductible?

Position: 1. No, the legal fees are not deductible.

Reasons: Legal fees attributable to the division of property on the dissolution of a marriage are generally not incurred for the purpose of gaining or producing income pursuant to paragraph 18(1)(a) and are non deductible capital outlays pursuant to paragraph 18(1)(b). The legal fees do not fall within the statutory exception provided in subsection 60(o.1).

XXXXXXXXXX 2008-027006
Robert Dubis
May 8, 2009

8 May 2009 External T.I. 2009-0318751E5 - Reporting UCCB

Unedited CRA Tags
56(6) 60(y) 63 81(1)(a)

Principal Issues: Where an individual's entire income is exempt under paragraph 81(1)(a) of the Act which spouse or common law partner should report the UCCB?

Position: The person with the lower net income as otherwise determined excluding such exempt income.

Reasons: Income that is exempt under paragraph 81(1)(a) is not included in net income under the Act.

7 May 2009 External T.I. 2008-0276181E5 - Stock Option Benefits

Unedited CRA Tags
7; 115(1)(a); 153(1)(a); 110(1)(d)

Principal Issues: 1) Whether stock option benefit of a non-resident individual employed in Canada (as a director of a company) is subject to Canadian tax; 2) Whether employer withholding is required

Position: 1) Stock option benefit is taxable in Canada; 2) Employer is required to withhold at the same rates as those applicable to Canadian resident individuals

Reasons: 1) Stock option benefit is taxable under section 115; 2) Withholding is required under section 153

2008-027618
XXXXXXXXXX Gwen Mah
613-957-2113
May 7, 2009

6 May 2009 External T.I. 2009-0311951E5 F - Résidence au Canada pour fins fiscales

Unedited CRA Tags
128.1 2(1); 2(3) 114 115
application of s. 114 where return to Canada during the year

Principales Questions: Quelles sont les conséquences fiscales pour un non-résident du Canada qui reviendra s'installer au pays au cours de l'année 2009?

Position Adoptée: Discussion générale seulement.

Raisons: Loi de l'impôt sur le revenu.

XXXXXXXXXX 2009-031195
F. Bordeleau, LL.B.
Le 6 mai 2009

27 April 2009 External T.I. 2008-0304761E5 F - Retraits et transferts provenant d'un RPDB

Unedited CRA Tags
147(19); 147(10); 56(1)i); 147(2)k)
s. 147(2)(k) available even while member still an employee
s. 147(19) available even while member still an employee

Principales Questions: Est-ce que les termes d'un RPDB peuvent permettre à ses participants de retirer la totalité ou une partie des sommes qui leur ont été dévolues en vertu du régime et ce, tout en demeurant à l'emploi de l'employeur?

Position Adoptée: Oui

Raisons: Possibilité de retirer des sommes selon l'alinéa 147(2)k) ou encore de transférer des sommes à un REER, un RPA ou un autre RPDB si les conditions du paragraphe 147(19) sont satisfaites.

21 April 2009 External T.I. 2008-0304451E5 F - Accord de séparation et transfert de biens

Unedited CRA Tags
146(16)b)

Principales Questions: Est-ce que le paragraphe 146(16) s'applique au transfert d'une somme globale du REER d'un rentier à celui de son ex-conjoint lorsque ce transfert a pour but de partager des REÉR accumulés durant le mariage et de permettre à l'ex-conjoint de pourvoir aux besoins des enfants?

Position Adoptée: La portion visant le partage des REÉR peut être assujettie au transfert du paragraphe 146(16) mais pas la portion de la somme visant le paiement d'une pension alimentaire pour subvenir aux besoins des enfants.

Raisons: L'alinéa 146(16)b) requiert que le paiement doit être fait en "règlement des droits découlant du mariage ou de l'union de fait ou de son échec "

Conference

10 October 2008 Roundtable, 2008-0284421C6 F - Rachat hâtif d'un placement

Unedited CRA Tags
20(21)

Principales Questions: Est-ce que le paragraphe 20(21) peut s'appliquer lorsqu'un contribuable dispose d'un contrat de placement avant l'échéance pour permettre la déduction de toute pénalité au titre du redressement des intérêts occasionné par cette disposition?

Position Adoptée: Oui.

Raisons: Loi. La position exposée dans notre lettre d'interprétation portant le numéro 2007-0228831E5 est basée sur un cas d'espèce et ne modifie pas l'extrait du guide T4015 cité dans la question.

Technical Interpretation - Internal

5 May 2009 Internal T.I. 2009-0316531I7 - Employee Benefits - Discount on Home Upgrades

Unedited CRA Tags
6(1)(a)

Principal Issues: Whether a taxable benefit should arise where an employer in the construction industry sells a house from its inventory to an employee and the employee receives a discount on the installed upgrades relating to that house. The purchase of installed upgrades is provided under a separate agreement to the agreement for purchase of the house and is contracted with an entity related to the employer but not necessarily by the employer directly.

Position: Yes.

Reasons: Once installed, the upgrades are permanent fixtures and become integral to the house such that the administrative position outlined in IT-470R for "Discounts on Merchandise" should not apply. This administrative position was never intended to extend to major capital assets such as residential properties, or by extension, the purchase of installed upgrades forming an integral part thereof. In addition, case law supports the view that a benefit received by virtue of employment is taxable regardless of the source of the benefit.