Income Tax Severed Letters - 2013-01-23

Technical Interpretation - External

11 December 2012 External T.I. 2011-0423441E5 F - Options d'achat d'actions et décès

CRA Tags
69(1)(c), 7(1)(e), 110(1)(d)(i), 49(3)(b)(ii)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 110 - Subsection 110(1.1)
no 110(1)(d) deduction available for deemed s. 7 benefit on death
Summary Under
Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(c)
cost to estate of employee stock options determined under s. 69(1)(c)

Principales Questions: 1) Le sous-alinéa 110(1)d)(i) a-t-il pour effet d'empêcher la déduction prévue à l'alinéa 110(1)d) de s'appliquer lorsqu'un contribuable décédé est réputé avoir reçu un avantage imposable dans des circonstances visées à l'alinéa 7(1)e) et ce, même si la succession du contribuable ou un bénéficiaire de la succession exerce subséquemment les options et acquiert les titres? 2) Comment détermine-t-on le coût d'acquisition des options pour la succession du contribuable décédé? 3) Si la succession exerce les options, comment détermine-t-on le coût d'acquisition des titres pour la succession?

Position Adoptée: 1) Oui. 2) Juste valeur marchande des options au moment où la succession les acquiert. 3) Le PBR des options est à inclure dans le calcul du coût.

Raisons: 1) Libellé du sous-alinéa 110(1)d)(i). 2) L'Agence accepte que l'alinéa 69(1)c) s'applique. 3) 49(3)b)(ii)

10 December 2012 External T.I. 2011-0429721E5 F - OETC - Employee stock options benefits

CRA Tags
122.3
Summary Under
Tax Topics - Income Tax Act - Section 122.3 - Subsection 122.3(1) - Paragraph 122.3(1)(d)
s. 7(1)(a) benefit apportioned based on Canadian and overseas duties performed - generally in year options issued
Summary Under
Tax Topics - Income Tax Act - Section 115 - Subsection 115(1) - Paragraph 115(1)(a) - Subparagraph 115(1)(a)(i)
s. 7(1)(a) benefit generally relates to duties performed in the grant year

Principal Issues: Pursuant to section 122.3, how do we calculate the overseas employment tax credit in two different hypothetical situations involving a stock option agreement.

Position: Question of fact.

Reasons: Eligibility for the OETC depends on whether all or substantially all of the duties of employment are performed by the employee outside of Canada. The long-standing view of the CRA on determining the location of services to which a stock option benefit relates was such that the benefit was generally considered to be attributable to services rendered in the year of grant, unless there was compelling evidence to suggest that some other period was more appropriate.

4 December 2012 External T.I. 2012-0470951E5 F - Technical News no. 11

CRA Tags
105(1)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 105 - Subsection 105(1)
no benefit where use of personal-use property of trust extends to an individual related to a trust beneficiary

Principales Questions: Whether the CRA's published position in the Technical News no. 11 in the case of personal-use property owned by a trust is still valid?

Position Adoptée: Yes.

Raisons: It is still the CRA's position that although a taxable benefit does arise from the rent-free use of trust property, such a benefit will not generally be assessed in the case of personal-use property owned by a trust, that is used by a beneficiary under the trust or any person related to the beneficiary.

29 November 2012 External T.I. 2012-0467841E5 - Capital gain versus income

CRA Tags
9(3), 9(1), 54, 38(a), 39(1)(a), 3, 248(1), 40(1)(a)
Summary Under
Tax Topics - Income Tax Act - Section 45 - Subsection 45(1) - Paragraph 45(1)(a)
conversion of vacant land to inventory when development work

See summary under s. 9 - capital gain v. profit - real estate.

Principal Issues: Whether a corporate taxpayer has the option to report a gain realized on the sale of a piece of land as partly on account of capital and partly on account of income where the income is computed based on "assessed value".

Position: Not enough information provided in this particular fact situation.

Reasons: According to paragraph 15 of IT-218R, a combination of income treatment and capital treatment may be possible in a situation where the ultimate sale of real estate that was converted from a capital property to inventory.

26 November 2012 External T.I. 2012-0432831E5 F - Dépenses - Immeuble locatif

CRA Tags
18(1)(h), 18(1)(b), 18(1)(a), 67, 20(1)(c)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i)
interest on mortgage on personal residence deductible if proceeds used to acquire rental property (until change in use)
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Improvements v. Repairs or Running Expense
major repairs required to be capitalized

Principales Questions: 1) Quel traitement est réservé par la Loi à des frais d'intérêt encourus suite à une hypothèque? 2) Les dépenses encourues pour les réparations de l'immeuble sont-elles courantes ou capitales? 1) How are interest fees attached to a hypothec treated by the ITA? 2) Are expenses to repair a building current or capital?

Position Adoptée: 1) Intérêt peut être déductible; 2) Question de fait; 1) The interest can be deductible; 2) Question of fact.

Raisons: 1) Emprunt est engagé pour tirer un revenu de bien donc intérêt déductible jusqu'à son changement d'usage; 2) Question de fait; 1) Loan is to earn income from property and the interest will be deductible until its change of use; 2) Question of fact.

22 November 2012 External T.I. 2012-0468941E5 F - TFSA - XXXXXXXXXX employee working outside Canada

CRA Tags
146, 207.03, 207.02, 207.01
Summary Under
Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Unused TFSA Contribution Room
room is not generated while a non-resident

Principales Questions: Whether a XXXXXXXXXX employee working outside Canada may be the holder of a TFSA.

Position Adoptée: None.

Raisons: General comments provided.

7 November 2012 External T.I. 2012-0466681E5 F - Frais de gestion environnementale

CRA Tags
6(1)(a)
Summary Under
Tax Topics - General Concepts - Fair Market Value - Other
mandatory ecocharges added to cost of electronic goods also included in their FMV
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)
ecocharges payable on any purchase of electronic goods included in benefit from their gift

Summary under General Concepts - Fair Market Value - Other.

Principales Questions: Est-ce que les frais de gestion environnementale (écofrais) doivent être ajoutés à la juste valeur marchande d'un cadeau ou d'une récompense pour les fins du calcul d'un avantage imposable?/Must environmental management fees be added to the fair market value of a gift or reward for the calculation of a taxable benefit?

Position Adoptée: Oui/Yes

Raisons: Il est obligatoire de les payer selon la législation ou réglementation provinciale./They are mandatory payments pursuant to a provincial legislation or regulation.

Conference

15 May 2012 Canadian Petroleum Tax Roundtable, 2012-0446431C6 - 2012 CPTS: Farmout Arrangement

CRA Tags
66(12.1)
Summary Under
Tax Topics - Income Tax Act - Section 66.2 - Subsection 66.2(5) - cumulative Canadian development expense - Element F
extension of farm-out position

Principal Issues: Question 4: Will the CRA's treatment of farmouts, as expressed in IT-125R4, par. 14, be extended to transactions where the farmor grants a royalty to the farmee?

Position: Generally, maintain the administrative treatment set forth in IT-125R4, par. 14.

Reasons: In light of the variety of interests that could be granted as consideration for the farmee's undertakings, it is appropriate to consider any particular interest that is to be granted in the context of an individual advance income tax ruling application and according to the historical basis for the administrative treatment.

12 June 2012 June STEP Roundtable, 2012-0442681C6 - STEP CRA Roundtable – June 2012 - Question 2

CRA Tags
86, 160(1), 160(4), 85
Summary Under
Tax Topics - Income Tax Act - Section 160 - Subsection 160(1)

Summary under s. 160(1).

Principal Issues: Would 160(1) or 160(4) apply in the case of a butterfly reorganization?

Position: Question of fact.

Technical Interpretation - Internal

8 November 2012 Internal T.I. 2012-0440231I7 - common-law partner

CRA Tags
248(1), 122.6

Principal Issues: If a couple has been living common-law and begin to live separate and apart on XXXXXXXXXX of the particular tax year and file their returns after the 90 day separation period is over what should they indicate as their marital status for the particular tax year? If they file returns for the particular tax year before the 90 day separation period is over what should they indicate as their marital status for the particular tax year?

Position: If either individual files his or her return after the 90 day separation period is over that individual should indicate on the first page of the return that he or she is separated. If either individual files his or her return before the 90 day separation period is over that individual should indicate on the first page of the return that he or she is living common-law. However, if after filing the return the couple continues to live separate and apart for 90 days or more they should file either a letter or RC65 "Marital Status Change" form and indicate that they have separated on XXXXXXXXXX, for the particular tax year.

Reasons: The definition of common-law.