Income Tax Severed Letters - 2010-06-11

Ruling

2010 Ruling 2010-0358871R3 - Structured Settlement

Unedited CRA Tags
56(1)(d)

Principal Issues: An individual (Plaintiff) suffered personal injuries as a result of a motor vehicle accident. The Plaintiff commenced an action for damages against the estates of the deceased owner/driver (Defendants). Pursuant to an out of court settlement, the Defendants' insurer (pursuant to a Settlement Agreement And Release), will purchase a single-premium annuity contract with two life insurance companies to provide the proposed periodic payments to be received under the settlement agreement. The Defendants' insurer will direct the life insurance companies to pay the periodic payments under the annuity contracts to the Plaintiff. Will such payments be taxable in the hands of the recipient?

Position: No.

Reasons: The terms of the structured settlement are consistent with the CRA's position as set out in paragraph 5 of Interpretation Bulletin IT-365R2

2010 Ruling 2009-0325191R3 - Standard Split-up Butterfly

Unedited CRA Tags
Sections 55(3), 84(3), 85(1), 112; 191(4) and 191(5)

Principal Issues: Standard Butterfly Ruling

Position: Ruling issued.

Reasons: Satisfies all statutory and administrative requirements

Ministerial Correspondence

1 June 2010 Ministerial Correspondence 2008-0301601M4 - Scholarship Exemption and PDFs

Unedited CRA Tags
56(1)(n); 56(3); 118.6

Principal Issues: Are amounts received by post-doctoral fellows taxable?

Position: Yes

Reasons: Post-doctoral fellow generally receive either employment income or research grants. If they do receive scholarship income they generally do not qualify for a full scholarship exemption.

1 June 2010 Ministerial Correspondence 2010-0364891M4 - Indians- Employment Income Scenarios

Unedited CRA Tags
81(1)(a)

Principal Issues: Taxpayer questioned the taxation of Indian's income in various employment scenarios

Position: General discussion of the taxation of employment income of Indians using the Guidelines as reference

31 May 2010 Ministerial Correspondence 2010-0365741M4 F - Définition de conjoint de fait

Unedited CRA Tags
248(1)

Principales Questions: Est-ce qu'une personne qui en fréquente une autre depuis plus de 12 mois sans interruption peut être considérée comme un conjoint de fait, et ce, même si les deux personnes ne vivent pas ensemble.

Position Adoptée: Question de fait

Raisons: Le texte législatif

Technical Interpretation - External

4 June 2010 External T.I. 2010-0357631E5 - Principal residence exemption

Unedited CRA Tags
40(2)(b)

Principal Issues: 1. Whether a part-year would count as a year in term B of the principal residence exemption formula contained in paragraph 40(2)(b) of the Act? 2. Whether the filing of a subsection 45(2) election form would make a difference as to whether a part-year would count as a year in term B of the principal residence exemption? 3. Whether the ownership of the principal residence would make a difference as to whether a part-year would count as a year in term B of the principal residence exemption?

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

Reasons: 1. If the taxpayer was resident in Canada any time in the year (and not necessarily for the whole of the year), the year would count as taxation year for which the property was the taxpayer's principal residence. 2 & 3. As long as the Canadian property meets the definition of a "principal residence" in section 54, then the taxpayer's residence is the only factor that affects whether a part-year is counted as a year in term B of the formula in paragraph 40(2)(b).

XXXXXXXXXX 2010-035763
T. Elsey
June 4, 2010

4 June 2010 External T.I. 2010-0358811E5 F - Catégorie d'amortissement d'un moule

Unedited CRA Tags
Annexe II RIR
moulds potentially includible in Class 29 or 43

Principales Questions: Est-ce que des moules pourraient être compris dans la catégorie 43 même s'ils sont spécifiquement décrit à l'alinéa d) de la catégorie 12?

Position Adoptée: Question de fait.

Raisons: Dépend de leur date d'acquisition en vertu du sous-alinéa c)(iii) de la catégorie 29, s'ils ont été acquis par le contribuable pour être utilisés directement ou indirectement par le contribuable au Canada surtout pour la fabrication et la transformation de marchandises en vue de la vente ou de la location et s'ils sont normalement compris dans la catégorie 8.

2 June 2010 External T.I. 2009-0343381E5 F - Frais de préposé aux soins

Unedited CRA Tags
118.2(2)b)
behavioural and cognitive therapy of autistic child 35 hour per week likely was not “care”
Words and Phrases
care

Principales Questions:
Dans une situation donnée, est-ce que certains frais engagés pour une thérapeute en analyse peuvent se qualifier de frais de préposé aux soins aux fins de l'alinéa 118.2(2)b) de la Loi?

Position Adoptée:
Question de fait.

Raisons:
Les frais de la thérapeute en analyse doivent notamment être engagés pour assister l'enfant déficient dans des activités quotidiennes qu'il ne peut effectuer lui-même à cause de sa déficience.

1 June 2010 External T.I. 2009-0349561E5 - Gift Certificates - Timing of Income Recognition

Unedited CRA Tags
9, 12(1)(a), 12(1)(b), 20(1)(m), 20(1)(m.2) and 20(24).

Principal Issues: The timing of the income recognition on the sale of gift cards by related businesses and whether a reserve under paragraph 20(1)(m) can be claimed. Also if the gift cards sold by one taxpayer can be used by the customer at a related business what are the implications?

Position:
While income should be recognized at the date of sale of the gift card the ultimate determination of income or income for income tax purposes remains a question of fact.

Reasons:
The law.

28 May 2010 External T.I. 2010-0357021E5 - HRTC- Condominium Corporation

Unedited CRA Tags
118.04(2)(a)

Principal Issues: 1. How are costs allocated to unit owners when there is a change in ownership?

Position: 1.Generally, the qualifying expenditures incurred by a condominium corporation are allocated to owners based on the governing documents of the condominium corporation. The condominium corporation must notify individual owners, in writing, of the individual owner's share the corporation's qualifying expenditures.

Reasons: the legislation

11 May 2010 External T.I. 2010-0366051E5 - Application of 149(1)(l) of the Act

Unedited CRA Tags
149(1)(l); 149(5)

Principal Issues: Will a corporation that is being incorporated under provincial non-profit legislation be tax-exempt under paragraph 149(1)(l) of the ITA?

Position: Question of fact; general comments provided.

Reasons: Whether an entity qualifies for the tax exemption can only be determined once the entity is established, has been operating and has filed a tax return.

6 May 2010 External T.I. 2009-0338291E5 - Deemed trust

Unedited CRA Tags
s. 153(1), 223(11.1), 227(4), (4.1) ITA; Regulation 2201; s. 81.1, 81.2 BIA; s. 111 Bankruptcy and Insolvency General Rules.

Principal Issues: 1. Whether the deemed trust applies without an assessment.
2. Whether the deemed trust takes priority over other creditors.
3. When would the CRA assert a claim for the deemed trust.
4. Whether the deemed tryst applies to personal income tax.

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

Reasons: 1. The deemed trust arises by operation of law. The CRA is not obliged to assess or register the deemed trust or give notice of its existence.
2. Any security interest registered after the deemed trust has arisen would not have priority.
3. The Crown's rights to the deemed trust are in the proceeds of any property liquidated; hence the CRA would assert a claim for the deemed trust when property to which the deemed trust attaches is liquidated.
4. The deemed trust applies to source deductions, not to personal income tax.

Conference

22 July 2009 Roundtable, 2008-0278801C6 - consolidated 2008 STEP Round Table

Unedited CRA Tags
15(1); 108(1); 75(2); 116; 94.1; 94(3)(a)(ix); 163.2; 146(10); 256(9); 43.1

Principal Issues: Critical illness insurance; joint last-to-die insurance policy; trustee and executor fees; CCA limitation and subsection 75(2); tax consequences of estate planning for principal residence; foreign tax credit of a deemed resident trust; form T1261; foreign investment entities; exempt amounts for the purpose of proposed subsection 94(3); Liechtenstein Foundation; GAAR and tax treaties; third-party civil penalties; RRSP frauds and strips, archived and cancelled Interpretation Bulletins; assessing policy following La Survivance, fifth protocol issues.

Technical Interpretation - Internal

19 May 2010 Internal T.I. 2009-0316521I7 - Realising Deemed Security Interest Post-Bankruptcy

Unedited CRA Tags
s. 223(11.1) ITA; s 69.3(2) BIA

Principal Issues: Whether a post-bankruptcy refund of a bankrupt could be applied as set off against the deemed security interest.

Position: No.

Reasons: For set-off to be effective, the asset must exist before the date of bankruptcy.

6 May 2010 Internal T.I. 2010-0360191I7 - Criminal/Bankruptcy Proceedings against a Taxpayer

Unedited CRA Tags
s. 222, 239(1)(d) ITA; s. 313, 327(1)(c) ETA; s. 42(1), 43(1) BIA

Principal Issues: Whether case law exists to support the prosecution and bankruptcy of a delinquent tax debtor.

Position: Yes.

Reasons: The Minister may resort to a court of competent jurisdiction to institute civil proceedings to collect a tax debt.

20 April 2010 Internal T.I. 2010-0355231I7 - Clergy residence deduction

Unedited CRA Tags
8(1)(c)

Principal Issues: Is XXXXXXXXXX .considered a religious order for the purpose of claiming a clergy residence deduction pursuant to paragraph 8(1)(c) of the Act ?

Position: No.

Reasons: The organization does not satisfy all the six conditions necessary for the purpose of qualifying as a religious order.

12 April 2010 Internal T.I. 2010-0358181I7 - Clergy Residence Deduction

Unedited CRA Tags
8(1)(c)

Principal Issues: Does an employee, whose main responsibility is to oversee the development of all external communication media for XXXXXXXXXX , qualify for a clergy residence deduction?

Position: No.

Reasons: Does not satisfy the conditions for 'status' test.

29 March 2010 Internal T.I. 2010-0357191I7 - The Reassment Period for a Section 160 Assment

Unedited CRA Tags
152, 160

Principal Issues: Whether reassessments of a section 160 assessment are statute-barred, if raised beyond 3 years of the original assessment.

Position: Yes.

Reasons: Subsection 160(2) is the authority to issue a subsection 160(1) assessment. When issued, such an assessment is treated as a section 152 assessment. Accordingly, subsection 152(4) applies.

29 March 2010 Internal T.I. 2009-0344291I7 - Calculating Gross Negligence Penalty

Unedited CRA Tags
163(2), (2.1)

Principal Issues: Whether the gross negligence penalty is calculated on the entire unreported amount.

Position: It depends on the facts and whether a deductible amount is wholly attributable to the unreported amount.

Reasons: If the deductible amount is wholly attributable to the unreported amount, the penalty is calculated after the amount is deducted; if not, the penalty is calculated on the unreported amount first before considering the deductible amount.

24 March 2010 Internal T.I. 2008-0294031I7 - Offsetting Arrears Interest with Refund Interest

Unedited CRA Tags
S. 161.1(2), 220(3.1), 221.2(2)

Principal Issues: Whether interest relief is available where refund interest is paid and arrears interest is charged.

Position: No; based on the facts.

Reasons: 1. The taxpayer had ample time and opportunities to withhold and pay the liability.
2. The Act does not allow offset of interest on Part I tax against interest on Part XIII tax.

March 24, 2010

14 April 2009 Internal T.I. 2009-0313781I7 - Arrears Interest on Requested Adjustments

Unedited CRA Tags
s. 161(7)(b)

Principal Issues: Whether s. 161(7)(b)(ii) or s. 161(7)(b)(iv) applies when an adjustment to taxable income arises.

Position: It depends on the circumstances that give rise to the adjustment.

Reasons: The intent of s. 161(7) is to cover situations where a taxpayer ignores payment of taxes, with the expectation of incurring losses to be carried back to erase the tax liability. Where there is no such intent, subparagraph 161(7)(b)(ii) would be applicable instead of subparagraph 161(7)(b)(iv).