Income Tax Severed Letters - 2011-01-21

Ruling

2010 Ruling 2010-0381821R3 - Related Foreign Entity Financing

Unedited CRA Tags
17(1), 17(2), 17(15), 15(1), 15(2), 15(2.2), 15(2.6), 15(9), 214(3)(a), 80.4(2), 80.4(3), 212(2), 91(1), 245

Principal Issues: Whether a loan from a controlled foreign affiliate (FinanceCo) to a related non-resident entity (Loanco) will trigger the application of subsection 15(2) and Part XIII.

Position: No

Reasons: The loan from FinanceCo to Loanco is between two non-residents, the exclusion in subsection 15(2.2) applies.

2010 Ruling 2010-0374301R3 - Foreign Affiliate Reorganization

Unedited CRA Tags
40(3); 53(2)(b)(ii); 95(1) FAPI;

Principal Issues: 1. What is the transferee corporation's cost of the property it acquires from the distributing corporation? 2. What is the cost of the shares of the transferee corporation to each of its shareholders? 3. Does the divisive reorganization give rise to FAPI?

Position: 1. The fair market value of the property acquired. 2. The fair market value of the shares acquired. 3. No.

Reasons: 1. The transferee's cost will be equal to the fair market value of its shares issued to its shareholders. 2. The shareholders' cost of the shares of the transferee corporation will be equal to the fair market value of the property transferred to the transferee corporation by the distributing corporation. 3. No income arises that is described in the definition of FAPI.

Ministerial Correspondence

17 September 2010 Ministerial Correspondence 2010-0377532M4 - Marital Status

Unedited CRA Tags
56.1;118(1);118(4);122.6;122.7

Principal Issues: 1. Can a legally separated couple continue to share the same residence but still meet the ITA requirement of living separate and apart?

Position: 1. Yes.

Reasons: 1. The couple must establish a general requirement that there is an intention to separate. However, when they continue to reside in the same residence, it is an issue of fact as to whether they are living separate and apart.

Technical Interpretation - External

7 January 2011 External T.I. 2009-0351591E5 - SIFT Normal Growth - replacing debt of subsidiary

Unedited CRA Tags
122.1(2)

Principal Issues: Whether the replacement of a subsidiary's debt o/s at Oct 31, 2006 with new equity issued by the parent (SIFT) is considered growth for the purposes of 122.1(2)?

Position: Yes. The exception stated in Finance's guidelines on the normal growth rules that a SIFT can replace debt outstanding at Oct 31 with new equity and such new equity would not be considered growth does not extend to the replacement of debt of a lower tier entity with new equity of the SIFT.

Reasons: Policy Intent of Normal Growth Guidelines.

20 December 2010 External T.I. 2010-0385151E5 - Business or Property Income

Unedited CRA Tags
9; 248(1) "farming"; 3

Principal Issues: Whether the income from a rental activity is considered business income or income from property.

Position: General comments.

Reasons: It is a question of fact which depends on the circumstances.

20 December 2010 External T.I. 2010-0384531E5 - Sale of Taxable Canadian Property by Non-Residents

Unedited CRA Tags
s. 164(6), 248(1)(d)
Summary Under
Tax Topics - Income Tax Act - Section 164 - Subsection 164(6)
s. 164(6) available to non-resident estate only regarding TCP

Principal Issues: 1. Whether the interpretation stated in document 932632 is still current.
2. Whether s. 164(6) applies where shares of a private corporation do not derive most of their value from real Canadian property.

Position: 1. Yes.
2. No.

Reasons: 1. This has been the CRA's long-standing position.
2. This has been the CRA's long-standing position.

14 December 2010 External T.I. 2010-0386401E5 - Qualified Farm Property

Unedited CRA Tags
110.6(1), 110.6(1.3)

Principal Issues: Whether certain farmland disposed is Qualified Farm Property eligible for the enhanced capital gains deduction.

Position: Question of fact. Appears probable in this case.

Reasons: The law. Facts provided suggest the property was full time farmed by eligible owner.

Technical Interpretation - Internal

6 December 2010 Internal T.I. 2010-0381061I7 - Non-resident Shareholder's Loans

Unedited CRA Tags
227(6.1); 15(2); 214(3)(a);

Principal Issues: How does a non-resident compute their subsection 227(6.1) Part XIII tax refund where a loan is made in a foreign currency and there has been a fluctuation in the value of the currency vis-à-vis the Canadian dollar between the time the loan was made and the time the loan is repaid.

Position: Refund cannot exceed the amount computed under paragraph 227(6.1)(b) of the Act.

Reasons: See Memo