Income Tax Severed Letters - 2010-04-30

Principales Questions: Est-ce que la Ligne directrice 4 s'appliquera aux employés de XXXXXXXXXX serait situé à l'extérieur d'une réserve et 80% de la clientèle serait des d'Indiens vivant dans une réserve.

Position Adoptée: Commentaires généraux. Probablement que les critères de la ligne directrice 4 ne seraient pas satisfaits.

Raisons: La clientèle visée ne serait pas composée exclusivement d'Indiens vivant pour la plupart dans une réserve.

Principal Issues: The income tax consequences arising from the purchase of a solar photovoltaic system on the residence of an individual. Several issues discussed including income recognition, expense deduction, CCA deductibility, and principal residence status.

Position: 1) Income under the contract considered income from a source that must be reported for income tax purposes; 2) Certain expenses deductible as noted herein; 3) CCA on the solar photovoltaic system is available, subject to the CCA deduction restrictions described in subsection 1100(24) of the Regulations; and 4) Principal residence status of home should be preserved.

Reasons: Reasons described herein.

Principal Issues: A couple legally separate during the year, do not cohabitate with anyone else, split caregiver costs 50/50 and they have 2 children that reside 50% of their time with each parent. 1) Does each parent have to pay the nanny directly or can the father reimburse the mother for 50% of the cost of the nanny and be eligible to claim the child care expense? 2) Assuming that each parent does not have to pay the nanny directly, can each parent claim 50% of the wages and employer's portion of the Canada pension plan contributions and employment insurance premiums from one T4 summary issued by the mother, as child care expense?

Position: 1) The father can reimburse the mother for his share of the child care expenses paid to the nanny by the mother provided that the requirement in subsection 63(1) of the Act is met. 2) Yes, providing all other conditions of section 63 are met.

Reasons: 1) Subsection 63(1) of the Act requires that a claim be substantiated by receipts issued by the payee, that is normally the caregiver. 2) The list of child care services in the definition of "child care expense" under subsection 63(3) is not an exhaustive list.

Principal Issues: Can employee stock options and warrants be contributed to a TFSA? If so, what is the amount of the contribution? What are the tax consequences of an employee stock option being contributed to a TFSA?

Position: Provided the conditions of 4900(1)(e) are satisfied, options and warrants will be qualified investments for a TFSA. Contributions of property such as options, warrants, or similar rights, must be contributed to a TFSA at the property's FMV and are subject to the TFSA holder's unused TFSA contribution room. When an employee stock option is exercised by a TFSA, the employee is deemed to have received a benefit in accordance with paragraph 7(1)(c) of the Act. If the option expires in the TFSA, no benefit will be deemed received by the employee, in accordance with section 7.

Reasons: Paragraph 4900(1)(e) of the Act. Property must be contributed at the property's FMV, which is a question of fact and an appropriate valuation method must be used in the particular circumstances. In the CRA's view, the intrinsic value of an option, warrant or similar right is not reflective of the option's, warrant's or similar right's FMV.