Income Tax Severed Letters - 2010-07-23

Ministerial Correspondence

13 July 2010 Ministerial Correspondence 2009-0314831M4 - Taxation of Post-Doctoral Fellowships

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

Principal Issues: Whether a post-doctoral fellowship is exempt from tax (scholarship exemption s. 56(3)).

Position: Generally, no.

Reasons: See discussion in letter.

16 June 2010 Ministerial Correspondence 2008-0302461M4 - Taxation of Postdoctoral Fellowships

Unedited CRA Tags
56(1)(n), 56(1)(o), 56(3), 118.6

Principal Issues: 1. Whether a postdoctoral fellowship is exempt from tax (scholarship exemption s.56(3)). 2. Whether the amendments announced in the 2010 federal budget were a change in tax policy concerning the taxation of postdoctoral fellowships.

Position: 1. Generally, no. 2. No, the amendments clarified the intent of the legislation and confirmed the CRA's position.

Reasons: See discussion in letter.

Technical Interpretation - External

14 July 2010 External T.I. 2010-0361431E5 F - Usage d'une automobile fournie par l'employeur

Unedited CRA Tags
6(1)a),6(1)e); 6(1)k); 6(2), 248(1).
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(2)
days include all those where the employee has the keys, including on weekends

Principales Questions: 1. Est-ce que les jours de fins de semaine sont inclus dans le calcul des frais pour droit d'usage d'une automobile?
2. Est-ce que l'usage d'un véhicule à moteur fourni par un employeur pour le déplacement entre le domicile des employés et un lieu où les employés sont appelés d'urgence à travailler est de nature personnelle?

Position Adoptée: 1. Tous les jours où une automobile est mise à la disponibilité d'un employé - incluant les jours de fin de semaine - est inclus dans le calcul de l'usage d'une automobile fournie par un employeur, jusqu'au moment où l'employé en remet le contrôle à son employeur.
2. Question de fait. Les déplacements des employés les soirs et les fins de semaines en réponse aux appels d'urgence pour se rendre à un lieu fixe où l'employé se présente régulièrement seraient des déplacements de nature personnelle. Toutefois, si un employé se rend directement à un lieu où il est appelé à répondre à une situation d'urgence, endroit qui ne serait pas un lieu habituel de travail pour l'employé, le déplacement serait considéré comme lié à l'emploi.

Raisons: 1. Application du paragraphe 6(2) et le paragraphe 11 du Bulletin d'interprétation IT-63R.
2. Dépendamment si le lieu où des employés sont appelés à travailler d'urgence les soirs et les fins de semaine est un lieu de travail habituel. Positions antérieures de l'Agence du revenu du Canada.

13 July 2010 External T.I. 2010-0359781E5 - Qualified Small Business Corporation Share

Unedited CRA Tags
110.6(1) "qualified small business corporation share"; 110.6(2.1); 110.6(13); 110.6(5)

Principal Issues: 1. Whether an individual must be resident in Canada throughout the 24 months immediately preceding the time of the disposition in order for a share to meet the holding period requirement referred to in paragraph (b) of the definition of "qualified small business corporation share" ("QSBCS") in subsection 110.6(1). 2. Whether an individual is eligible to claim the capital gains exemption under subsection 110.6(2.1) on the disposition of a share assuming it meets the definition of QSBCS.

Position: 1. No. 2. Yes if the individual (other than a trust) is resident in Canada throughout the year the individual disposed of the share.

Reasons: 1. However, the share must not have been owned by anyone other than the individual or a person or partnership related to the individual throughout the 24 months. 2. The preamble of subsection 110.6(2.1).

12 July 2010 External T.I. 2004-0073371E5 - Provincial Income Allocation - Individuals

Unedited CRA Tags
Section 120 of the Income Tax Act; Part XXVI of the Income Tax Regulations

Principal Issues: How does Part XXVI of the Regulations apply to an individual who is a member of more than one partnership?

Position: See response

Reasons: See response

7 July 2010 External T.I. 2010-0359931E5 - Additional tax re Crown royalties - Ontario

Unedited CRA Tags
TA 36; Ontario Regulation 37/09; ITA 257

Principal Issues: Can a corporation have a negative notional resource allowance under the Taxation Act, 2007?

Position: No.

Reasons: In accordance with subsection 7(3) of Ontario Regulation 37/09 of the Taxation Act, 2007, a corporation cannot have a negative notional resource allowance.

5 July 2010 External T.I. 2009-0331701E5 - Moving Expenses

Unedited CRA Tags
s. 62 ITA, p. 6(1)(a)

Principal Issues: 1. In the case of an employee relocation, does a reimbursement for unused school fees constitute a taxable benefit to the employee?
2. Is the employee entitled to a moving expense deduction for a loss resulting from non-refunded school fees in the case of an employee relocation?

Position: 1. Yes; a reimbursement for a loss attributable to unused school fees is a taxable benefit.
2. No, the amount is not deductible as a moving expense.

Reasons: 1. The reimbursement is a benefit under p. 6(1)(a) of the ITA.
2. The reimbursement is for a personal and living expense received by virtue of employment rather than a moving expense as defined under s.s. 62(3) of the ITA.

28 June 2010 External T.I. 2009-0341741E5 - Filing Returns of Income

Unedited CRA Tags
150(1)

Principal Issues: Whether a non-resident corporation is required to file federal or provincial tax return if its only activity relates to the sale of partnership interests to Canadian residents

Position: No.

Reasons: See below.

3 May 2010 External T.I. 2010-0361451E5 - HRTC-Replacement Motors-Eligible?

Unedited CRA Tags
118.04

Principal Issues: Does the purchase of replacement motors for a furnace qualify as an eligible expenditure for the HRTC?

Position: Yes

Reasons: The purchase of replacement motors for a furnace would be considered to be integral to the dwelling and enduring in nature and not a cost of routine repairs and maintenance, normally performed annually or more frequent basis.

9 April 2010 External T.I. 2009-0324381E5 - Payments to a deceased taxpayer

Unedited CRA Tags
Paragraph 70(1)(a); subsection 70(2)

Principal Issues: Whether statutory deductions should be withheld on payments made to deceased taxpayers

Position: Where the pay equity agreement is signed after the date of death of the taxpayer, the pay equity amount is not taxable nor is it subject to CPP and EI. Where the pay equity agreement is signed before or on the date of death, but paid after the date of death the pay equity amount is subject to income tax and CPP but not EI.

Reasons: Income was not determinable before the date of death

5 March 2010 External T.I. 2010-0355841E5 - Canada-PEI Business Development Programs

Unedited CRA Tags
9(1),12(1)(x),56(1)(n),200(2)(a),234(2)

Principal Issues: Whether the PEI Department of Agriculture must issue information slips to recipients of government assistance paid under certain Canada-PEI Business Development Programs.

Position: Yes. There are 4 sub-programs which involve the payment of government assistance substantially to individuals or entities engaged in a farming business. The assistance is, in the majority of cases, paid as compensation in respect of costs incurred in respect of a farming business and therefore should be reported by the payor on an AGR-1. As regards one sub-program (Skills Development) involving payments generally in respect of training, the recipients may not, in all cases, be engaged in a farming business nor the payments be made in respect of costs attributable to a farming business. Such government assistance is in the nature of a bursary, taxable under 56(1)(n). Such payments should be reported on a T4A.

Reasons: The law.

Technical Interpretation - Internal

20 May 2010 Internal T.I. 2008-0304421I7 - Inherited IRA or U.S. pension plan

Unedited CRA Tags
110(1)f)(i)

Principal Issues: In the case where a Canadian individual inherits an IRA or a U.S. pension plan, can the U.S. Estate taxes paid in respect of the plan or the regime be deducted by him against his taxable income in accordance with paragraph 1 of Article XVIII of the Canada - U.S. income tax convention and subparagraph 110(1)f)(i)

Position: Yes.

Reasons: Interpretation of the Canada - U.S. income tax convention and ITA.

3 May 2010 Internal T.I. 2009-0338901I7 - Adjusted Ontario SR & ED incentive balance

Unedited CRA Tags
TA 49(7)

Principal Issues: Interpretation of TA 49(7). What does the "adjusted Ontario incentive balance" represent? What does variable "Q" in the formula to calculate the adjusted Ontario incentive balance represent?

Position: The "adjusted Ontario incentive balance" represents the federal ITCs that would have been available for the incentive under 11.2 of the CTA. Variable "Q" determines the ITCs that expire in the following year.

Reasons: As determined under TA 49(7)