Income Tax Severed Letters - 2010-09-17

Technical Interpretation - External

13 September 2010 External T.I. 2010-0377811E5 - Charitable Donation

Unedited CRA Tags
118.1

Principal Issues: Whether, in a subsequent year, a taxpayer can claim charitable donations previously reported and carried forward on a spouse or common law partner's personal tax return.

Position: Yes.

Reasons: The CRA's administrative practice allows a taxpayer to initially choose which spouse or common law partner will report a donation or gift and allows for the subsequent transfer of any carryforward balances from one to the other.

13 September 2010 External T.I. 2010-0372541E5 - Taxable benefits - teachers

Unedited CRA Tags
6(1)(a)

Principal Issues: Whether reduced tuition fees for teachers at a private elementary/secondary school give rise to a taxable benefit.

Position: Generally taxable.

Reasons: Question of fact.

13 September 2010 External T.I. 2010-0378461E5 - Medical Expense Tax Credit

Unedited CRA Tags
118.2(1); 118.2(2)(l); 118.4(1).

Principal Issues: Would costs associated with the rental or purchase of a riding horse to be used for therapeutic purposes qualify for the medical expense tax credit?

Position: Question of fact, but in this case likely not.

Reasons: The physical impairment does not meet the requirements of paragraph 118.2(2)(l) of the Act. Further, the riding horses described are not "specially trained to assist patients in coping with an impairment".

9 September 2010 External T.I. 2010-0367501E5 - Self-contained domestic establishment

Unedited CRA Tags
248(1)

Principal Issues: Can a shared residence be a self-contained domestic establishment?

Position: Question of fact but it might be possible.

Reasons: All facts and circumstances need to be considered.

9 September 2010 External T.I. 2010-0371431E5 - Professional Development Allowance

Unedited CRA Tags
6(1)(a); 6(1)(b)

Principal Issues: Whether an annual amount provided by an employer to an employee for expenses related to professional development is taxable.

Position: It is a question of fact.

Reasons: If the payment is made regardless of whether any professional development costs will be incurred by the employee or if such professional development is primarily for the benefit of the employee then the payment would be taxable. If the payment represents a reimbursement of actual costs or an accountable advance in respect of expenses incurred by an employee for professional development that was undertaken primarily for the benefit of the employer then the payment would not be taxable to the employee.

8 September 2010 External T.I. 2010-0376441E5 - Liability of Legal Representatives

Unedited CRA Tags
146.3(5) & (6), 159(1), (2) & (3), 160, 160.2(2), 248(1) "legal representative"

Principal Issues: Whether a legal representative may be liable as executor and trustee of an estate.

Position: Question of fact.

Reasons: All relevant documentation needs to be reviewed and all pertinent facts determined.

7 September 2010 External T.I. 2009-0340861E5 F - Déduction pour amortissement - Catégorie 52

Unedited CRA Tags
20(1)a), 1104(2), catégorie 8, catégorie 52
not "general-purpose electronic data processing equipment" if no ability of user to alter the embedded program

Principales Questions: Est-ce qu'un Pulstar MIT utilisé par les chiropraticiens se qualifie à titre de " matériel électronique universel de traitement " de l'information?

Position Adoptée: Notre compréhension des informations ne nous permettent pas de conclure que le bien constitue du " matériel électronique universel de traitement de l'information " compte tenu que nous n'avons aucune indication que l'utilisateur du bien peut modifier le programme d'informatique enregistré.

Raisons: Nous sommes d'avis que le bien ne peut être inclus dans la Catégorie 52 de l'Annexe II du Règlement car le bien ne constitue pas du " matériel électronique universel de traitement de l'information " tel que définie au paragraphe 1104(2) du Règlement.

27 August 2010 External T.I. 2010-0377131E5 - Estate Lawsuit Settlement

Unedited CRA Tags
38; 39(1); 40(1)(a); 54.

Principal Issues: 1. Is the settlement taxable to the Estate? 2. If yes, is the amount taxable as a capital gain or income? 3. Are the legal fees deductible to the Estate?

Position: 1. The funds awarded should be included in income. 2. Assuming the shares were held on capital account, the award is a taxable capital gain to the Estate. 3. Question of fact, but likely yes.

Reasons: The settlement or award is considered "compensation for property injuriously affected" and would give rise to a capital gain by virtue of paragraph (e) of the definition of "proceeds of disposition" in section 54 of the Act. Assuming that there were no other issues to which the settlement pertained that might require some form of apportionment, we would consider the legal fees in this fact situation as essential to the receipt of the proceeds of disposition and therefore deductible in computing the gain by virtue of subparagraph 40(1)(a)(i) of the Act.

25 August 2010 External T.I. 2010-0374231E5 F - Safe income allocation

Unedited CRA Tags
55(2)
safe income required to be allocated to prefs and new common shares received on a s. 51 exchange even where the redemption amount of the prefs matched the amount of such safe income
Compliance Programs Branch now providing advance guidance on valuation methodology

Principales Questions: How should the safe income on hand attributable to the old common shares be allocated between preferred shares and common shares received in exchange for the old common shares pursuant to section 51 of the Act?

Position Adoptée: The safe income on hand attributable to the old common shares should be allocated to the new preferred shares and to the new common shares on a pro rata basis based on the relative amounts of the gain inherent in the preferred shares and in the new common shares at the time of the exchange.

Raisons: In our view, as the preferred shares and the new common shares would be issued as a consequence of the exchange of the old common shares and assuming that the ACB of the old common shares would be low, the gain inherent in the preferred shares and in the new common shares would include a share of the income earned or realized by the corporation and a share of the unrealized income of the corporation.

23 August 2010 External T.I. 2010-0373051E5 - Canada Employment Tax Credit.

Unedited CRA Tags
5; 6(1); 6(3); 6(4); 56; 118(10).

Principal Issues: Is a retired taxpayer eligible for the Canada Employment Tax Credit if he receives post-retirement benefits that are taxed as employment income?

Position: Where the post-retirement benefits are taxed as income from employment, the income qualifies for the credit.

Reasons: Interpretation of the relevant provisions of the Act.

11 August 2010 External T.I. 2010-0368971E5 - HRTC Eligible Expense under a change order

Unedited CRA Tags
Subsection 118.04(1)

Principal Issues: Will expenses incurred under a change order qualify for the HRTC, where the original contract was entered into before January 28, 2009?

Position: Not likely, Question of fact

Reasons: A change order or amendment becomes part of the original contract, unless the change order or amendment is a stand alone contract.

Technical Interpretation - Internal

12 August 2010 Internal T.I. 2009-0341731I7 - wholly dependent person tax credit

Unedited CRA Tags
118(1)(b), 118(4) 118(5)

Principal Issues: Can a father that pays child support to his spouse claim the wholly dependent person tax credit (the "credit")?

Position: No claim can be made by the father for the credit in respect of the particular child that the child support is in respect of.

Reasons: Where spouses have been living separate and apart throughout the year paragraph 118(5)(a) of the Act would apply to prevent the parent that is required to pay a support amount to his spouse or former spouse, in respect of a child, from claiming the credit under paragraph 118(1)(b) of the Act for that child.