Income Tax Severed Letters - 2012-10-10

Ruling

2012 Ruling 2010-0389911R3 F - Réincorporation à la masse

CRA Tags
54, 248(1)

Principal Issues: Quelles sont les conséquences fiscales d'une réincorporation à la masse et d'une XXXXXXXXXX effectuée conformément au droit XXXXXXXXXX?

POSITION ADOPTÉE: Sujet aux effets du droit XXXXXXXXXX, la réincorporation à la masse ne donne pas lieu à une disposition aux fins de la Loi de l'impôt sur le revenu.

Raisons: Loi de l'impôt sur le revenu et compréhension du droit XXXXXXXXXX applicable.

Technical Interpretation - External

19 September 2012 External T.I. 2012-0455781E5 - Disclosure of Taxpayer Information

CRA Tags
152(8), s. 152(7), 241(10), 241(5), OBCA 242(1)(b)

Principal Issues: 1. Whether the Minister can arbitrarily assess a defunct corporation.
2. Whether the Minister can disclose a corporation's tax information to a third party.
3. What claims might the Crown have on assets that have been escheated.
4. Whether the Minister can disclose that the defunct corporation owes any provincial tax.

Position: 1. Yes.
2. The Minister is barred from making such disclosure.
3.The Minister cannot disclose such to a third party.
4. The Minister cannot disclose such to a third party.

Reasons: 1. Pursuant to subsection 152(7) ITA, the Minister may raise an assessment where, for one, no return has been filed.
2 - 4. Section 241 of the ITA precludes the Minister from disclosing such information to a third party.

17 September 2012 External T.I. 2012-0461421E5 - Aircraft Spare Parts - Class 9(i)

Principal Issues: 1. Do all aircraft spare parts, whether used immediately or not go into class 9(i)? 2. If not all parts are spare parts, then which parts are spare parts? 3. What happens when a spare part is put into class 9 and then subsequently installed on an aircraft?

Position: 1. Yes, if they are considered spare parts. 2. See response. 3. See response

Reasons: 1. Regulation 9(i). 2. See answer. 3. See answer.

17 September 2012 External T.I. 2012-0457751E5 - Subparagraph 18(1)(l)

CRA Tags
18(1)(l), 18(1)

Principal Issues: Whether a self-employed professional golfer can deduct green fees paid for practice rounds.

Position: No.

Reasons: Wording of 18(1)(l) and that there are no exceptions provided for golf professionals.

13 September 2012 External T.I. 2012-0448801E5 - Corporate Instalments and Ontario CMT Credit

CRA Tags
Section 116 of Taxation Act of Ontario, 157, 157(4), ITR 5301, Section 53 of Taxation Act of Ontario

Principal Issues: Would an Ontario corporation minimum tax (CMT) credit that was claimed in the prior year reduce the current year Ontario instalment payments that are based on the “first instalment base”?

Position: Yes.

Reasons: The CMT credit is deducted in computing the amount of its Ontario tax payable for a taxation year and would therefore affect the “first instalment base” computation.

5 September 2012 External T.I. 2012-0457461E5 - medical expenses - travel

CRA Tags
118.2(2)(g), 118.2(2)(h), 118.2(2)(a)

Principal Issues: Whether an individual can claim travel expenses as eligible medical expenses for purposes of the medical expense tax credit?

Position: Question of fact.

Reasons: Wording of paragraphs 118.2(2)(g) and (h) as long as the requirements of those provisions are met.

15 August 2012 External T.I. 2012-0446741E5 - Interest Deductibility

CRA Tags
20(1)(c)

Principal Issues: Whether the interest on funds borrowed from a financial institution by a shareholder and used to acquire preferred shares of a corporation is deductible by the shareholder when there is a subsequent return of capital from the corporation to that shareholder.

Position: No.

Reasons: The borrowed money is not used for the purpose of earning income from a business or property.

10 August 2012 External T.I. 2012-0436411E5 - Accumulated Profits

CRA Tags
20(1)(c)

Principal Issues: Where a corporation’s retained earnings are increased by an amount that relates to an appraisal surplus, would a later decrease in the corporation’s retained earnings resulting from depreciation claimed in respect of that appraisal surplus be considered (i.e., reversed) when determining the accumulated profits of the corporation that were being used for purposes that would have qualified for interest deductibility had the capital been borrowed money. I.E., for the purpose of determining the amount that the corporation could borrow and deduct interest paid or payable thereon?

Position: Yes; when determining the accumulated profits of a corporation that were being used for purposes that would have qualified for interest deductibility had the capital been borrowed money (i.e., for the purpose of determining the amount that the corporation could borrow and deduct interest paid or payable thereon), we would consider (i.e., reverse) both increases and decreases to the corporation’s retained earnings resulting from an appraisal surplus included in the corporation’s retained earnings prior to that time.

Reasons: It is a corporation’s accumulated profits that were being used for purposes that would have qualified for interest deductibility had the capital been borrowed money immediately before shares are redeemed, capital is returned or dividends are paid that are relevant for the purpose of determining the amount that the corporation could borrow and deduct interest paid or payable thereon, and when determining a corporation’s accumulated profits at a point in time, it is the retained earnings of the corporation at that time that are relevant.

1 August 2012 External T.I. 2012-0446631E5 - Donation of depreciable property

CRA Tags
13(21), 110.1(1)(b), 20(16), 13(1), 69(1)(b)

Principal Issues: What are the tax consequences to a corporation that donates its depreciable property?

Position: Provided general comments.

30 July 2012 External T.I. 2012-0443931E5 - Interest Deductibility

CRA Tags
20(1)(c)

Principal Issues: Whether interest is deductible for income tax purposes in the situation described.

Position: No.

Reasons: In order for interest to be deductible the funds must be used for the purpose of gaining or producing income from a business or property. In this case the direct use of the borrowed funds is the purchase of a personal residence.

26 July 2012 External T.I. 2011-0422881E5 - Foster Care Payments Received from a Profit Entity

CRA Tags
Reg 233, 110(1), 56(1)(u), 81(1)(h)

Principal Issues: 1. Are per diem payments received by the foster parents from a For-Profit corporation considered as being received indirectly by the foster parents as per paragraph 81(1)(h)?
2. If so, where payments that fulfil 81(1)(h) of the Act, is the For-Profit corporation required to file the annual reporting of the amounts paid to the foster parents (i.e. T5007)?

Position: 1. Depends 2.Yes.

Reasons: 1. Question of Fact 2. Reg 233.

Technical Interpretation - Internal

6 July 2012 Internal T.I. 2012-0453461I7 F - rental losses Canada-France Treaty

CRA Tags
VI(1) Canada-France Treaty, 2(1)
no requirement to establish reasonable expectation of profit re deducting loss from French rental property if no personal element
s. 126(1) FTC re French income tax on rental income

Principal Issues: 1. whether, in computing his Canadian tax liability, a Canadian resident individual can deduct rental losses incurred in respect of an immovable property situated in France? 2. Whether, in computing his Canadian tax liability, a Canadian resident individual must include rental income earned in respect of an immovable property situated in France?

Position: 1. Yes, provided that there was a reasonable expectation of profit. 2. Yes

Reasons: Canadian residents are taxable in Canada on their worldwide income and there is no provision in the Canada-France Income Tax Convention that prevents Canada from taxing its residents on their worldwide income.