Income Tax Severed Letters - 2013-02-06

Summary under s. 104(19).

Principal Issues: When will a taxable dividend designated in respect of a beneficiary of a trust pursuant to subsection 104(19) be considered to have been received by the beneficiary?

Position: At the time that is the end of the taxation year of the trust in which the dividend was received by the trust.

Reasons: The conditions of subsection 104(19).

Principal Issues: Whether a term deposit or a GIC can be a capital property of the taxpayer.

Position: Depends.

Reasons: Question of fact.

Principal Issues: 1) Are amounts paid to an executor of an estate for the maintenance and sale of the estate property, deductible?
2) Can a portion of the executor's fees that relate to increasing the value of the property before it is disposed of, be added to the cost of the property?
3) Where the executor fee is considered to be an employment income to the executor, can the estate deduct the employer portion of the CPP contribution?

Position: 1) Question of fact.
2) If it can be established that the expense was incurred for the purpose of disposition of the property.
3) Probably not.

Reasons: 1) Expenses must have been incurred for the purpose of disposition of the property.
2) Pursuant to paragraph 53(1)(n), if it can be established that such amounts were incurred for the purpose of acquisition or disposition of the property.
3) Only if the executor fee is deductible by the estate.

Principal Issues: Whether a flow-through share qualifies as a "Canadian security" for the purposes of the election under 39(4).

Position: No.

Reasons: Does not meet the definition of a Canadian security under subsection 39(6) because a flow-through share is a prescribed share for the purposes of 39(6) definition as per paragraph 6200(d) of the Regulations.

Principales Questions: Des frais légaux engagés dans un litige concernant la servitude d'accès à un lac grevée sur un terrain peuvent-ils être pris en considération dans le calcul du gain en capital relatif au chalet situé sur ce terrain, à titre de dépense engagée ou effectuée en vue de réaliser une disposition?

Position Adoptée: Probablement que non.

Raisons: Application du sous-alinéa 40(1)a)(i) de la Loi de l'impôt sur le revenu et de la jurisprudence applicable.

Summary under s. 159(2).

Principal Issues: 1- Pursuant to subsection 159(2), is a general partner that is winding-up a limited partnership required to obtain a clearance certificate for the partnership before distributing the partnership property to the limited partners? 2- Pursuant to subsection 159(2), is a general partner (acting in that capacity) that is winding-up a limited partnership that is a Canadian partnership required to obtain a clearance certificate certifying that each respective limited partner has paid all income tax owing on partnership income allocated to that limited partner before the general partner can distribute any property to that limited partner on the winding-up of the partnership?

Position: 1- Yes, where certain provisions apply. 2- Generally, no.

Reasons: 1- Wording of certain provisions. For example, certain provisions provide that section 159 applies with any modifications that the circumstances require; accordingly, the reference to "taxpayer" in subsection 159(2) could be a reference to the partnership itself and, thus, the clearance certificate under that provision would be obtained for the partnership (i.e. analogous to a clearance certificate required for a corporation, trust or estate) 2- Wording of provisions.