Income Tax Severed Letters - 2011-12-02

Principal Issues: Whether compensation received in the form of reward points by a volunteer for services rendered is taxable under the Income Tax Act?

Position: A question of fact. The facts must be reviewed on an individual case-by-case basis in order to determine if the reward points received in exchange for services rendered is employment income, business income, or a non-taxable receipt.

Reasons: Where there is no employee/employer relationship and compensation is nominal and unlikely to ensure the provision of services, and does not represent the FMV of the services, there may be no tax implications. This determination may be affected if the value of the rewards points is unusually high or if points are awarded for a disproportionately minimal amount of work performed.

Principales Questions: Mr. A is the sole shareholder of OPCO, a CCPC. OPCO earns active business income. Mr. A is the policyholder of a life insurance policy on his life. OPCO is the beneficiary of the life insurance policy. OPCO pays the premiums relating to the life insurance policy. A policy loan is granted by the insurer to Mr. A. A) Whether the payment by OPCO of the premiums of the life insurance policy constitutes a shareholder benefit to Mr. A pursuant to subsection 15(1). B) Whether the policy loan granted by the insurer to Mr. A constitutes a shareholder benefit to Mr. A pursuant to subsection 15(1).

Position Adoptée: A) Yes. B) No.

Raisons: A) Question of fact and in accordance with previous positions. B) Question of fact.

Principal Issues: What is the administrative position taken by the CRA with respect to the late-filed designation under paragraph 88(1)(d) when the request is made many years after the winding-up of the subsidiary?

Position: Details provided with respect to the administrative position taken by the CRA.

Reasons: It depends on the facts of the particular situation and the decision to accept the request or not is at the CRA's discretion.

Principal Issues: Whether individuals and businesses are required to provide their SIN or BN to an entity required to complete an information slip.

Position: Yes.

Reasons: Subsection 237(1.1) requires individuals and business to provide their SIN or BN to any person required to make an information slip under the Act. Under subsection 237(2) of the Act the information slip preparer is required to make a reasonable effort to obtain the SIN or BN. Under subsection 162(6), individuals or businesses failing to provide their SIN or BN to the information slip preparer are liable to a penalty.

Principal Issues: Whether refund interest is applicable and owing in respect of the amount held on account of the Part XIII taxes that was in controversy.

Position: Yes.

Reasons: See below.

Principal Issues: 1. A parent would incorporate a corporation (the "subsidiary"). The subsidiary would acquire marketable securities. The parent would sell all the shares of the capital stock of the subsidiary to his child who would sell them afterwards to the parent corporation. At what time would the parent corporation be deemed to have last acquired control of the subsidiary for the purposes of the bump rules?

2. Would the marketable securities be eligible for a bump under paragraph 88(1)(c) if they are acquired a few hours or a few months after the time at which the parent would acquire control of the subsidiary?

3. If the marketable securities are transferred by the parent to the subsidiary and, as consideration for that transfer, the parent acquires shares of the subsidiary and, at the same time, control of the subsidiary (in a case, for example, where the parent would not have been the incorporator of the corporation), would the marketable securities be eligible for the bump under paragraph 88(1)(c)?

Position: 1. At the time the parent would acquire control of the subsidiary, that is at the time of its incorporation if the parent is the incorporator.

2. The marketable securities would not be eligible for the bump under paragraph 88(1)(c).

3. No. The marketable securities would be "ineligible property" under subparagraph 88(1)(c)(v).

Reasons: 1. Wording of paragraph 88(1)(d.2).

Principal Issues: Whether the word "answer" in s. 163(2) would include a verbal reply.

Position: No; "answer" refers to a written reply.

Reasons: The enumerated list in subsection 163(2) implies that the word "answer" refers to written documents. Furthermore, the terms in the list are referred to as "returns", which suggests that the terms relate to written documents. Therefore, the noscitur a sociis rule (associated words rule) applies, whereby a word takes its meaning from the words with which it is associated. Accordingly, "answer" refers to a written reply.