Income Tax Severed Letters - 2009-07-31

Ministerial Correspondence

21 July 2009 Ministerial Correspondence 2009-0311701M4 - Eligible expenditures- home renovation tax credit

Unedited CRA Tags
January 27, 2009 federal budget

Principal Issues: Do the costs of renovating kitchen and new eavestrough qualify for the HRTC?

Position: Yes

Reasons: The costs of renovating a kitchen and new eavestrough qualify for the HRTC. Appliances have been specifically excluded in the budget.

21 July 2009 Ministerial Correspondence 2009-0312621M4 F - Crédit d'impôt pour la rénovation domiciliaire

Unedited CRA Tags
2009 Federal Budget - Annex 5

Principales Questions: Est-ce que les foyers intérieurs au bioéthanol sont admissibles au CIRD?

Position Adoptée: Question de fait

Raisons: Les coûts d'achat et d'installation, le cas échéant, d'un foyer intérieur au bioéthanol seront admissibles au CIRD seulement si le foyer intérieur au bioéthanol fait partie intégrante d'une habitation admissible.

20 July 2009 Ministerial Correspondence 2009-0325851M4 - Form T2200 - Home Office Expenses

Unedited CRA Tags
8(13); 8(10); 8(1)(i); 8(1)(j)

Principal Issues: 1. What is the purpose of Question 10 of the Form T2200?
2. Does the addition of this question to the Form T2200 coincide with a change in legislation or policy with respect to the deductibility of home office expenses?

Position: 1. To determine, on a prima facie basis, whether an employee meets the conditions outlined in subsection 8(13) of the Income Tax Act ("the Act").
2. No.

Reasons: 1. Home office expenses deductible under paragraph 8(1)(i) or 8(1)(f) of the Act must also satisfy the additional requirements outlined in subsection 8(13) of the Act. In order for an employee to claim a deduction for home office expenses under either paragraph 8(1)(i) or 8(1)(f) of the Act, a completed form T2200 is required. Subsection 8(10) of the Act indicates that by signing the form, the employer certifies that the employee meets the conditions set out in these provisions. However, for the employee to claim the deduction, he or she must be able to demonstrate that the requirements of the Act have been met.
2. Although the T2200 was amended to include questions to clarify whether an employee met the conditions in subsection 8(13) of the Act, this provision was implemented effective on or after the 1991 taxation year and accordingly does not represent a change in legislation or policy regarding the deductibility of home office expenses.

17 July 2009 Ministerial Correspondence 2009-0322231M4 - Eligible expenditures- home renovation tax credit

Unedited CRA Tags
January 27, 2009 federal budget

Principal Issues: Do the costs for the costs of upgrading, replacing, or newly installing septic tanks would qualify for the HRTC?

Position: Generally, yes

Reasons: Eligible expenditures for the home renovation tax credit include only expenditures that relate to a renovation or an alteration of an eligible dwelling (including land) that is enduring in nature and integral to the dwelling. The costs of upgrading, replacing, or newly installing septic tanks would generally qualify for the HRTC. If the cost is part of routine repairs and maintenance, normally performed on an annual or more frequent basis, it would not qualify for the HRTC.

16 July 2009 Ministerial Correspondence 2009-0325291M4 - HRTC - Eligibility of Expenditures

Unedited CRA Tags
January 27, 2009 Federal Budget - Annex 5

Principal Issues: Whether the costs associated with the purchase and installation of a hot tub would qualify for the home renovation tax credit (HRTC).

Position: Depends on the type of hot tub.

Reasons: To be eligible for the HRTC, expenditures incurred in relation to a renovation or alteration to an eligible dwelling (or the land that forms part of the eligible dwelling) must be of an enduring nature and integral to the dwelling. Hot tubs which are permanently positioned in place and hard wired into the homeowner's electrical panel would qualify for the HRTC. Portable hot tubs would not qualify as they are not enduring in nature or integral to the dwelling.

16 July 2009 Ministerial Correspondence 2009-0325611M4 - HRTC - Eligible Expenditures

Unedited CRA Tags
January 27, 2009 Federal Budget - Annex 5

Principal Issues: (a) Whether the costs associated with the purchase and installation of the heavier type of hot tub (spa) which is hard wired into the homeowner's electrical panel would qualify for the home renovation tax credit (HRTC). (b) Would the purchase and installation of a pool liner qualify for the HRTC.

Position: Yes to both (a) and (b)

Reasons: To be eligible for the HRTC, expenditures incurred in relation to a renovation or alteration to an eligible dwelling (or the land that forms part of the eligible dwelling) must be of an enduring nature and integral to the dwelling. Hot tubs which are permanently positioned in place and hard wired into the homeowner's electrical panel would qualify for the HRTC. Portable hot tubs would not qualify as they are not enduring in nature or integral to the dwelling.

Technical Interpretation - External

20 July 2009 External T.I. 2009-0317041E5 - Spousal attribution re joint line of credit

Unedited CRA Tags
74.1(1), 74.1(3), 74.2(1); 74.5(7), 74.5(2); 56(4.1), 56(2)

Principal Issues: 1. Does the fact that a joint line of credit is secured by a property which the taxpayer contributed most of the capital for, in and of itself, result in attribution to the taxpayer pursuant to 74.1(1)?
2. Does the spouse's use of the funds drawn from the joint line of credit constitute an indirect transfer under subsections 56(4.1) or 56(2)?
3. Does the fact that the line of credit is registered jointly in the taxpayer's and the spouse's name, in and of itself, result in 74.5(7) applying?
4. With respect to the deductibility of interest under subsection 20(1), how would the interest be allocated between the spouses?

Position: 1. No. 2. Generally no. 3. Generally yes. 4. General comments given.

Reasons: 1. Supplying collateral for a loan does not constitute a transfer or a loan. 2. Where the taxpayer has made no loan to the spouse, 56(4.1) would not apply. Where the taxpayer has not directed the issuers to do something and the investment income would not otherwise be the taxpayer's because the spouse is the legal holder of the investments, 56(2) would not apply. 3. Where the taxpayer is obligated, either absolutely or contingently, to ensure the repayment, in whole or in part, of the joint line of credit or of any part of any interest payable on the joint line of credit, 74.5(7) would apply. 4. It is a question of fact.

20 July 2009 External T.I. 2009-0312541E5 F - Allocation pour usage d'un véhicule à moteur

Unedited CRA Tags
6(1)b)(vii.1) 8(1)h.1) 6(1)b)(x) 6(1)b)(xi)
car allowance bifurcated into 2 allowances: reasonable per-kilometre allowance; and unreasonable minimum allowance
T2200 can be prepared where car allowance bifurcated into 2 allowances, one of which is taxable

Principales Questions: En présence d'une allocation mixte, quel montant, s'il y a lieu, les employées doivent-elles inclure dans le calcul de leur revenu? Dans le cas décrit, l'employeur doit-il compléter le formulaire T2200?

Position Adoptée: (1) Nous croyons que les employées reçoivent deux allocations distinctes et que celle calculée sur la base d'un taux de 0,08$/km devra être incluse dans leurs revenus.
(2) Oui.

Raisons: (1) Les deux allocations ne sont pas pour le même usage puisque celle basée sur le taux de 0,08$/km n'est pas basée sur l'utilisation du véhicule à moteur.
(2) Un T2200 devra être complété pour tout employé désirant déduire des frais afférents à des véhicules à moteur engagés dans l'accomplissement des fonctions liées à l'emploi.

20 July 2009 External T.I. 2009-0315911E5 - Section 233.7

Unedited CRA Tags
233.7

Principal Issues:
Whether the expression "first became resident" as used in section 233.7 can include the situation where a former resident of Canada again becomes a resident of Canada in the year?

Position:
An individual who has already been a resident of Canada during a prior year, whether he was a factual resident of Canada or a deemed resident of Canada at that time, could not take advantage of the exception provided in section 233.7 when he again becomes a resident of Canada during a given year.

Reasons:
The intention of the legislator by writing the expression "first became resident" in section 233.7 is to grant an exemption from the requirement to file the information return required under sections 233.2, 233.3, 233.4 and 233.6 only in the case where an individual becomes a resident of Canada for the first time.

16 July 2009 External T.I. 2009-0315181E5 - Clergy Residence deduction

Unedited CRA Tags
8(1)(c)

Principal Issues: Clarification of the extent to which members of the clergy may claim the residence deduction under paragraph 8(1)(c) of the Act when the two members of clergy are spouses and occupy the same residence.

Position: Each can claim the maximum amount calculated in accordance with the provisions of the Act

Reasons: Operation of the Act

7 July 2009 External T.I. 2008-0267941E5 F - Pompiers volontaires

Unedited CRA Tags
81(4)a) 81(4)b) 5 6
“volunteer” in s. 81(4) references its broader meaning under provincial standards legislation, and is initially applied by the employer municipality
someone normally is a “volunteer” rather than employee if any compensation is too small to be motivating
Words and Phrases
volunteer

Principal Issues: Quelle approche l'Agence du revenu du Canada doit prendre afin de déterminer si un pompier est un pompier volontaire au sens du paragraphe 81(4) de la Loi de l'impôt sur le revenu?

Position: L'Agence du revenu du Canada se fiera généralement sur la détermination du statut du pompier par son employeur, étant un gouvernement, une municipalité ou autre administration.

Reasons: Interprétation du paragraphe 81(4) de la Loi de l'impôt sur le revenu. L'expression "pompier volontaire" possède également une signification particulière aux termes des différentes lois provinciales.

7 July 2009 External T.I. 2008-0276851E5 - Volunteer Firefighters

Unedited CRA Tags
81(4)(a) 81(4)(b) 5 6

Principal Issues: How does the Canada Revenue Agency determine whether a firefighter qualifies for the exemption at subsection 81(4) of the Income Tax Act.

Position: Generally, it will accept the determination of the firefighter's status by the municipality or public authority.

Reasons: Interpretation of subsection 81(4) of the Income Tax Act. The expression "volunteer firefighter" has a particular meaning, as evidenced in provincial legislation.

XXXXXXXXXX 2008-027685
Nancy Turgeon, CGA
July 7, 2009

Technical Interpretation - Internal

13 July 2009 Internal T.I. 2009-0309291I7 - Deductibility of GST

Unedited CRA Tags
9; 12(1)(x); 12(2.2); 20(1)(p)

Principal Issues:
1. Is GST paid by the purchaser of goods and services deductible for income tax purposes?
2. Is GST collected from a purchaser by a vendor and remitted to the Receiver General deductible for income tax purposes by the vendor?
3. Is GST payable by a vendor as a result of the vendor's failure to collect and remit GST to the Receiver General deductible for income tax purposes?
4. Is GST payable by an employer on the provision of employee taxable benefits deductible to the employer for income tax purposes?

Position:
1. Yes, provided the GST paid is in respect of an expense that is also deductible for income tax purposes.
2. No.
3. Yes, net of any GST rebate receivable in respect thereof.
4. Generally, yes.

Reasons:
1. The payment of GST by a purchaser of goods or services is deductible in computing income if it has been made for the purpose of gaining or producing income from a business or property, pursuant to the general rules of section 9 of the Act.
2. GST paid by a vendor as an agent that has collected the GST payable from a purchaser on a taxable supply and remitted it to Her Majesty as a discharge of the purchaser's liability is not deductible by the vendor (it is paid by the purchaser and is simply held in trust by the vendor to be remitted to the Crown).
3. In the case of "Tax-Extra" assessments, the vendor may claim a bad debt deduction under paragraph 20(1)(p) of the Act equal to the uncollected GST net of any GST rebate receivable in respect thereof. In the case of "Tax-Included" assessments, the GST would not be deductible for the same reasons as Question 2 (above).
4. Generally, GST paid or payable by an employer in connection with employee benefits provided by the employer would be deductible pursuant to the general rules of section 9 of the Act, unless the taxpayer makes an election under subsection 12(2.2) of the Act to exclude the amount of any ITC received from income which would otherwise be taxable pursuant to paragraph 12(1)(x) of the Act.