Income Tax Severed Letters - 2012-03-09

Principales Questions: 1) Dans une situation donnée, est-ce que des allocations pour le transport sont des avantages imposables en vertu de l'alinéa 6(1)b)?
2) Si oui, est-ce que ces allocations pour le transport sont visées par l'alinéa 6(6)b)?
3) Dans la situation où les allocations reçues seraient plutôt des allocations à titre de pension et de logement, est-ce que ces allocations seraient visées par l'alinéa 6(6)a)?

Position Adoptée: Question de fait.

Raisons: Commentaires généraux.

Principales Questions: What is meant by "share of any income in a partnership" used in subsection 249.1(2)?

Position Adoptée: In subsection 249.1(2), "share of any income in a partnership" would mean the share of income as provided in the partnership agreement (the entitlement) rather than the quantum that would be obtained using the amount of income at the end of the calendar year.

Raisons: Under a purely textual analysis, two different interpretations could arguably be possible. However, considering the context and the purpose of section 249.1 (which may be different from those of other provisions of the Act containing similar language), it was concluded that a person having an entitlement to income of a partnership under the partnership agreement should be considered to "have a share of income" of the partnership for the purpose of subsection 249.1(2).

Principal Issues: Whether legal and accounting fees associated with a business combination reported under ASPE have to be capitalized.

Position: Yes.

Reasons: 1) ASPE is not law. 2) In seeking to determine profit, the goal is to obtain an accurate picture of the taxpayer's profit, for purposes of Section 9 of the Income Tax Act (the "Act"). In the Supreme Court of Canada decision in Canderel Limited v. The Queen, 98 DTC 6100, Docket: 24663, the court concluded that the computation of profit is a matter of law, and that GAAP is an interpretative aid external to the legal determination of profit.

Principal Issues: When can a taxpayer make a relevant cost base election in respect of its foreign affiliate?

Position: See below

Principales Questions: 1. What are the tax consequences for a student who receives a bursary from a professional firm who has hired the student during the summer and who has made an employment offer to the said student when he will have completed his courses?
2. Will the reimbursement of tuition fees incurred by a student before being employed by a new employer represent a benefit conferred to that employee when the reimbursement occurs after the student starts working for that employer?

Position Adoptée: 1. General comments provided. However, amounts are likely to be included under subsections 5(1) and 6(3), under paragraphs 6(1)(a) or 6(1)(b) or under subparagraph 56(1)(n)(i).
2. Yes.

Raisons: 1. Question of fact.
2. The position taken in paragraph 18 of IT-470R does not apply because the tuition fees were incurred before the student started working for the employer. As such, the courses are not considered to have been taken primarily for the benefit of the employer.

Principal Issues: 1. What section of the Act restricts moving expenses to only be deductible against income from scholarships, fellowships, bursaries, etc. when a student moves to attend a post secondary institution? 2. Can moving expenses be deducted against employment income at a new work location where the student moves to attend a post secondary institution?

Position: 1. 62(1)(c)(ii) 2. Question of fact.

Reasons: 1. When an individual moves to attend a post-secondary educational institution on a full-time basis, subparagraph 62(1)(c)(ii) restricts a student's qualified moving expenses to only be claimed against income earned from scholarships, bursaries, research grants, etc. 2. Where the facts demonstrate that a dual-purpose relocation occurred (an individual moved to attend full time studies at a post-secondary institution and to gain employment), the individual would be permitted to deduct moving expenses from both sources of income (employment income earned at the new location and scholarship/bursary income.)

Principal Issues: In a joint custody situation, who can claim the child care expenses?

Position: Each parent would be entitled to claim for the child care expenses incurred by the parent when the child resided with that parent, providing all of the conditions of section 63 are met.

Reasons: Paragraph 63(1)(a)

Principal Issues: Whether the per diem payments received by the "day" homeshare providers fall under paragraph 81(1)(h) income tax exemption.

Position: No

Reasons: Subparagraph 81(1)(h)(ii)

Principal Issues: "Approved" status requested by XXXXXXXXXX for purposes of subsection 37(1)(a)(ii) of the Act.

Position: Approval recommended.

Reasons: Information submitted meets the conditions for approval, as set out in Application Policy Paper 96-10.

Principal Issues: 1. Would the CRA consider a repayment to constitute an amount paid out by a corporation to earn income from its business and therefore, be deductible by the corporation?
2. In the event CRA considers that the repayments are not deductible by the corporation,
(a). Would they be deductible by the individual?
(b). Would qualifying tuition amounts repaid be eligible for the tuition tax credit?
(c). If yes, would it be eligible for the tuition tax credit for the year in which the amount is repaid, or alternatively, for the year in which the original tuition costs arose?

Position: 1. No.
2(a). Yes to the extent that the repayments are made by the individual, the amounts were previously included in computing the individual's income from an office or employment, and the total of repayments does not exceed the total of amounts received by the individual.
2(b). Yes, providing the tuition fees meet the requirements provided under subparagraphs 118.5(1)(a)(i) or 118.5(1)(a)(ii) of the Act.
2(c). The year in which the original tuition costs arose.

Reasons: 1. The repayment is considered a personal expense of the shareholder rather than a business expense of the corporation.
2(a). Pursuant to paragraph 8(1)(n) of the Act.
2(b). The student/employee has in effect paid the tuition fees.
2(c). Section 118.5 of the ITA provides credits for tuition fees paid "in respect of the year" in which the student enrolled in an educational institution.

Principal Issues: Is the taxpayer allowed a moving expense deduction for legal fees and property transfer taxes related to the purchase of a new house after relocation?

Position: Question of fact but in this case no

Reasons: The taxpayer will be considered to have made two moves because the rented residence would be considered a "new residence" since the taxpayer ordinarily inhabited it after the relocation and prior to the purchase of the house. In accordance with the definition of eligible relocation in subsection 248(1) of the Act, the move from the rented residence to the house purchased at the new location would not likely qualify as an eligible relocation.