Income Tax Severed Letters - 2011-10-07

Ruling

2011 Ruling 2010-0388951R3 - Public Corporation Spin-Off

Unedited CRA Tags
55(2), 55(3)(b), 55(3.1)(a), 55(3.02)

Principal Issues: Is the proposed public company "no-types of property" spin-off exempt from the application of 55(2)?

Position: Not in these circumstances under current legislation.

Reasons: In the recent past the DC acquired another corporation that carried on a complementary business to that which it now sought to spin-off to a new public corporation. It is our view that this acquisition is described in paragraph 55(3.1)(a) with the result that 55(2) applies to the spin-off series of transactions. However, if legislation is enacted consistent with the November 26, 2004 Department of Finance comfort letter respecting the application of 55(3.1)(a), the taxpayers' series of transactions should not be subject to 55(2).

2011 Ruling 2011-0407301R3 - XXXXXXXXXX

Unedited CRA Tags
12(3), 12(4), 212(1)(b), 214(8), 116(6), 142.2, 142.5, 207.01(1), Reg. 4900, 7000

Principal Issues: 1) Are XXXXXXXXXX prescribed debt obligations?
2) Does withholding apply in respect of interest paid on XXXXXXXXXX held by non-resident investors?

Position: 1) No. 2) No.

Reasons: 1) Paragraphs 7000(1)(a) to (d) of the Regulations are not applicable. 2) The interest paid is considered to be 'fully exempt interest' as defined in subsection 212(3) of the Act for the purposes of subparagraph 212(1)(b)(i) of the Act.

2011 Ruling 2011-0400531R3 - XXXXXXXXXX

Unedited CRA Tags
95(2)(a)(ii)(B); 258(3)

Principal Issues: Whether the interest earned by Forco 2 on the Forco 2 Loan would be treated as income of Forco 2 from carrying on an active business by virtue of subparagraph 95(2)(a)(i) of the Income Tax Act?

Position: Yes.

Reasons: Subparagraph 95(2)(a)(i) will apply: (i) The interest income earned by Forco2 will be derived from activities that can reasonably be considered to be directly related to active business activities carried on in a country other than Canada by Opco [clause 95(2)(a)(i)(A)]; (ii) Pubco will have a qualifying interest in Opco throughout the year [subclause 95(2)(a)(i)(A)(I)]; and (iii) The income would be included in computing the amount prescribed to be the earnings or loss from an active business carried on outside Canada of Opco if that income were earned by it [clause 95(2)(a)(i)(B)].

Technical Interpretation - External

3 October 2011 External T.I. 2011-0392641E5 - Employee Life and Health Trust

Unedited CRA Tags
144.1

Principal Issues: Can an employer establish an ELHT where all of the employees of the corporation are "key employee".

Position: No

Reasons: Paragraph 144.2(2)(e) requires that at least 75% of the members of a class of beneficiaries must be non-key employees. In addition, 144.1(3) does not allow a trust to deduct designated employee benefits where the ELHT is operated primarily for the benefit of key employees.

27 September 2011 External T.I. 2011-0407961E5 - Taxability of Asteroid Mining Income

Unedited CRA Tags
2; 3; 66;

Principal Issues: Whether "net smelter return of an asteroid mine" is taxable under the ITA.

Position: Yes.

Reasons: Wording of the Act.

23 September 2011 External T.I. 2011-0413861E5 - Public Corporation Election

Unedited CRA Tags
89(1), 4803(2)(a)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 4803 - Subsection 4803(2) - Paragraph 4803(2)(a)
filed offering memorandum is similar document

Principal Issues: Whether an offering memorandum, under the Capital Raising Exemptions of the National Instrument 45-106 Prospectus and Registration Exemptions, B.C. Reg. 227/2009, would be considered to be a document similar to a prospectus for the purposes of paragraph 4803(2)(a) of the Regulations, in the context of a corporation wishing to elect to be a public corporation under paragraph (b) of the definition "public corporation" in subsection 89(1) of the Act.

Position: Generally yes.

Reasons: Wording of the Act and previous positions.