Income Tax Severed Letters - 2013-06-05

Technical Interpretation - External

23 April 2013 External T.I. 2013-0476171E5 - Moving expenses - spouse's eligible expenses

CRA Tags
248(1), 62(3), 62(1)

Principal Issues: Can a taxpayer's spouse claim eligible moving expenses that were incurred by the taxpayer prior to the marriage (eligible relocation and marriage were in the same year)?

Position: In this case, yes.

Reasons: Where a taxpayer has an eligible relocation as a result of a change in residence, he/she would generally only be able to deduct the amount of eligible moving expenses that he/she actually paid. However, provided any expense otherwise complies with the requirements of section 62 of the Income Tax Act (for instance, the amount of any expense is reduced by the amount of any reimbursement or allowance received by either taxpayer in respect of such expense and such amount is only claimed as a deduction once), the CRA generally will allow some flexibility in allowing the taxpayer's spouse or common-law partner to claim the moving expense deduction or allow both individuals to decide how the deduction will be shared. This would be the case even if the individuals were not spouses or common-law partners, as those terms are defined in the Income Tax Act, at the time of the move as long as they were spouses or common-law partners at any time in the calendar year in which the move occurred.

22 April 2013 External T.I. 2012-0471831E5 - Functional currency reporting for partnerships

CRA Tags
261(6)
election by corporate partner

Principal Issues: Whether a partnership is required to file information related to the requirements for functional currency reporting under subsection 261(6) of the Act.

Position: Yes.

Reasons: All of the information requested on a partnership information return is prescribed information pursuant to subsection 229(1) of the Income Tax Regulations.

3 April 2013 External T.I. 2012-0460671E5 - Disproportionate UFT election

CRA Tags
ITR 5907(1), ITR 5900(1)(d), ITR 5900(1)(b), 113(1)(b)
disproportionate UFT for dividend paid by grandchild FA should be concurrently claimed by Canco to any permitted late claim

Principal Issues: If Canco receives a taxable surplus dividend in Year 2 from FA1 which had received a taxable surplus dividend in Year 1 from FA2, may Canco make a disproportionate UFT election in its return for Year 2 with respect to the dividend received by FA1 from FA2 in Year 1?

Position: Yes - in limited circumstances

Reasons: Canco must generally make any claim it wishes to make in respect of the FA2 dividend paid to FA1 in its return of income under Part I of the Act for Year 1. However, under limited circumstances, the CRA is prepared to accept a claim in Canco's return for Year 2 to the extent the claim is limited to the UFT of FA2 in respect of Canco that existed immediately after the FA2 dividend was paid subject to the proviso that it continued to exist in respect of Canco immediately before the FA1 dividend was paid (i.e., before the claim).

2 April 2013 External T.I. 2013-0475571E5 - Life insurance

CRA Tags
9, 12(1)(a), 20(1)(m), 32(1)(a)

Principal Issues: Whether life insurance commissions received by a self-employed agent are taxable in the year of receipt and whether a reserve is available.

Position: Taxable in the year of receipt. No reserve is available.

Reasons: The legislation.

22 March 2013 External T.I. 2012-0449511E5 - Special Work Site

CRA Tags
6(6)(b)(i), 6(1)(b)(vii.1), 6(6), 6(6)(a)(i)

Principal Issues: Whether travel amounts paid to an employee employed at a XXXXXXXXXX location may be excluded from income under subsection 6(6) of the Act?

Position: Question of fact. In this case, no.

Reasons: An employee must satisfy all the requirements in subsection 6(6) of the Act, in order for reasonable amounts for board and lodging, and transportation provided by the employer for a period while the employee is at the work site not to be considered a taxable benefit for income tax purposes. Where the services to be performed by an employee at the employer's place of business will be required on an on-going basis, despite the fact that a particular employees' individual contract duties are for a short term basis, the employment duties would not be considered of a temporary nature for a particular employee.

6 March 2013 External T.I. 2012-0468051E5 - Municipal Officer's tax free allowance

CRA Tags
81(3)

Principal Issues: Can a municipal officer choose to include in income the full amount of the expense allowance received from the municipality, ignoring subsection 81(3), and deduct the actual expenses incurred?

Position: Question of fact

Reasons: Subsection 81(3) is not discretionary, since the wording states "shall not be included". Deductions for officers and employees are limited to those specified in section 8 of the Income Tax Act.

16 January 2013 External T.I. 2012-0454441E5 - "Approved" Status

CRA Tags
37(1)(a)(ii), 248(1), 37(7)

Principal Issues: "Approved" status requested for the XXXXXXXXXX.

Position: Approval recommended.

Reasons: Information submitted meets the conditions for approval, as set out in Application Policy Paper 96-10 which provides certain requirements to be met in respect of (a) SR&ED, (b) facilities and personnel (c) non-profit status (d) the public as beneficiary and (e) adequate funding for the SR&ED activities. These requirements are described in this letter.

8 January 2013 External T.I. 2012-0459621E5 - Deemed disposition day on trust-to-trust transfer

CRA Tags
104(5.3), 248(25.1)(a), 104(4), 104(5.8)

Principal Issues: What is the deemed disposition day in respect of the transferee trust under subsection 104(5.8) where the trust-to-trust transfer takes place after the transferor trust's deemed disposition day of January 1, 1999 pursuant to subsection 104(5.3)?

Position: Given the facts provided, the deemed disposition day in respect of the transferee trust is 21 years after the January 1, 1999 deemed disposition day of the transferor trust.

Reasons: The transferor trust's deemed disposition day under subparagraph 104(5.3)(a)(i) is considered for purposes of clause 104(5.8)(a)(i)(A).

Conference

17 May 2013 Roundtable, 2013-0481421C6 - Transfer of life insurance policy to a retiree

CRA Tags
107, 148
advantage where an RCA trust owns a life insurance policy with more than a nominal death benefit

Principal Issues: (1) Does subsection 148(7) apply when a corporation transfers a life insurance policy to a senior executive officer who is also a shareholder for no consideration? (2) The computation of the adjusted cost basis (ACB) of a life insurance policy, to an individual who is a beneficiary of an RCA trust, where the policy has been transferred to the individual by the RCA trust.

Position: (1) Yes. (2) The ACB, to the individual, of the policy is equal to the fair market value of the policy at the time of the disposition of the policy by the RCA trust. The response also includes our comments regarding the advantage rules in the context of the holding of a life insurance policy by an RCA.

Reasons: The legislation.

17 May 2013 Roundtable, 2013-0481411C6 - Section 116 withholding - life insurance

CRA Tags
116(5.2), (5.3)

Principal Issues: Where a non-resident taxpayer transfers a life insurance policy in Canada to a non-arm's length person, what are the CRA's expectations for compliance?

Position: The purchaser is liable to withhold and remit an amount pursuant to subsection 116(5.3). However, where the non-resident vendor pays an amount on account of tax or provides adequate security, the CRA will issue a Certificate of Compliance under subsection 116(5.2), which could reduce the amount of withholding required under subsection 116(5.3).

Reasons: The legislative requirements.

17 May 2013 Roundtable, 2013-0479101C6 - T2SCH150 - 2013 CLHIA Roundtable

Principal Issues: Do life insurance companies have an obligation to file T2SCH150?

Position: Yes.

Reasons: T2SCH150 is a prescribed form containing prescribed information.

28 November 2010 CTF Roundtable, 2013-0487431C6 - Value of Vote-Only Shares – 2010 CTF Conference

CRA Tags
104(4)(a), 70(5)

Principal Issues: Estate Freeze Valuation of Shares. Question previously addressed in BCTC 2009.

Position: See below.

Reasons: See below.

28 November 2010 CTF Roundtable, 2010-0389111C6 - Leveraged Donation Arrangements

CRA Tags
118.1

Principal Issues: Following the Maréchaux decision, what are the CRA's views on providing advance tax rulings in respect of leveraged donation arrangements?

Position: See response.

30 October 2012 Ontario CTF Roundtable, 2012-0462951C6 - Ontario CTF - Penalty Relief

Principal Issues: 1. Whether a taxpayer who makes a voluntary disclosure that involves taxation years that end more than 10 years before the year in which the disclosure is made will be assessed a penalty for late-filing. 2. Whether a taxpayer who makes a voluntary disclosure that involves taxation years that end more than 10 years before the year in which the disclosure is made will be assessed a gross negligence penalty. 3. What criteria, if any, does CRA use for deciding whether to provide partial relief of interest for a period with respect to a voluntary disclosure?

Position: 1. Yes. 2. No, if CRA accepts the disclosure as valid. 3. Partial interest is waived within the 10 year limitation period for all voluntary disclosures that are considered valid.

Reasons: 1. Mandatory penalties such as the late filing penalty provided by subsection 162(7) of the Act cannot be waived in a taxation year that ends more than 10 years before the disclosure. 2. Discretionary penalties such as the gross negligence penalty provided by subsection 163(2) of the Act will not be applied if the CRA accepts the disclosure. 3. The waiving of partial interest within the 10 year limitation period is part of Voluntary Disclosure Program policy.

30 October 2012 Ontario CTF Roundtable, 2012-0462921C6 - Ontario CTF - 163(1) Penalty

CRA Tags
163(1)

Principal Issues: 1. Whether a penalty under subsection 163(1) is applicable in a situation where a taxpayer has earned employment income in a year but has failed to file the return of income required under section 150 of the Act, and two years previous the taxpayer filed a return of income in which he had failed to report dividend income he received in the year. 2. Request for comment on the perceived unfairness of the penalty provided by subsection 163(1). 3. Whether a due diligence defence is available with respect to a penalty under subsection 163(1) of the Act. 4. Whether the CRA will provide relief under the taxpayer relief provisions of the Act in situations where a taxpayer has been assessed a penalty under 163(1), however the taxpayer was not duly diligent in respect of the omission.

Position: 1. No. 2. General Comment provided. 3. Yes. 4. Yes, in certain circumstances.

Reasons: 1. The penalty provided by subsection 163(1) is applicable in situations where the taxpayer has failed to report an amount in a return filed under section 150, and the taxpayer failed to report an amount in any return filed under section 150 for any of the three preceding years. Where the taxpayer has not filed a return required to be filed under section 150, the penalties provided by subsection 163(1) are not applicable. The penalty provided by 162(1) and/or 162(2) may be applicable for the failure to file a return of income under section 150 of the Act. 2. The CRA cannot comment on the perceived unfairness of a provision of the Act. Legislative changes are the responsibility of the Department of Finance. 3. The CRA accepts that a taxpayer can avoid a penalty provided by 163(1) if the taxpayer can show that he or she was duly diligent. 4. Taxpayer relief provisions of the Act.

17 May 2013 CLHIA Roundtable, 2013-0481401C6 - Form T1134 - 2013 CLHIA Roundtable

CRA Tags
95(1), 95(4), 233.4

Principal Issues: Is a reporting entity required to disclose on Form T1134, each foreign affiliate to which the reporting entity has an "equity percentage" even when that may result in repetitive reporting?

Position: Yes. However, the CRA is considering administrative relief in situations where such disclosure results in repetitive reporting.

Reasons: The legislation.

17 May 2013 CLHIA Roundtable, 2013-0479111C6 - WLRP Reimbursement by Insurance Corp Due to Error

CRA Tags
6(1)(a)

Principal Issues: Whether the reimbursement by an insurance corporation to an employee claimant to fix an error is a taxable employment benefit under 6(1)(a); in particular, a reimbursement of income tax, interest, penalties and accounting fees. Whether it makes a difference if the plan is a formally-insured one, or an administrative services only one.

Position: The reimbursement of income tax, interest and penalties will generally result in a taxable benefit for an employee. With regards to the accounting fees, it is the general position of the CRA that the reimbursement of an expense that would otherwise be deductible under the Act does not result in a taxable benefit unless there is a specific provision that requires otherwise. The general views of the CRA are not dependent on the type of plan.

Reasons: Income tax, interest and penalties are personal expenses. While the accounting fees are a personal expense, there may be a deduction available for the employee under 60(o) of the Act.

17 May 2013 CLHIA Roundtable, 2013-0481391C6 - Prescribed annuity contract

CRA Tags
304(2)(b)

Principal Issues: Whether a life annuity qualifies as a prescribed annuity contract where the terms of the contract provide for a lump sum payment to be made after the death of the holder even if the death occurs after the holder turns 91 years of age.

Position: No.

Reasons: Income Tax Regulations.

Technical Interpretation - Internal

2 May 2013 Internal T.I. 2013-0477561I7 - Carrying Charges

CRA Tags
9(1), 20(1)(bb), 18(1)(h), 18(1)(b), 18(1)(a), 67

Principal Issues: Deductibility of carrying charges on T1 final return and T3 trust return.

Position: General Comments provided.

19 March 2013 Internal T.I. 2010-0385931I7 - Taxable Canadian property and Partnerships

CRA Tags
248(1)
TCP rules not applying to foreign partners of partnership
partnership TCP gain but not TCP status attributed to partners

Principal Issues: Is the determination of whether a property is "taxable Canadian property" ("TCP") within the meaning of paragraph (e) of subsection 248(1) made at the partners' or the partnership level?

Position: For purposes of paragraph 2(3)(c), paragraph (e) of the definition of TCP in subsection 248(1) of the Act should be read by reference to the partners.

Reasons: While subsection 96(1) applies for the purpose of computing the partners' taxable income earned in Canada for purposes of subparagraph 115(1), it does not apply for the purposes of paragraph 2(3)(c) or section 116.

15 March 2013 Internal T.I. 2012-0459281I7 - Exigibility of Registered Education Savings Plans

CRA Tags
146.1, 224(1)

Principal Issues: Whether an RESP can be seized pursuant to subsection 224(1).

Position: Yes.

Reasons: The funds in an RESP are available to the subscriber at any time, and the promoter is a person who is liable to make such a payment to the subscriber. As a result, the Minister may issue a Requirement to Pay, pursuant to subsection 224(1), to intercept any amount that the subscriber may request. In addition, funds in the RESP that emanate from Canada Child Tax Benefit payments are not protected from seizure.

12 February 2013 Internal T.I. 2012-0437211I7 F - NRT rules and subsection 164(6)

CRA Tags
164(6), 94(3), 94(2)(j), 94(1)
s. 94 deemed resident trust could carry back under s. 164(6) re capital loss on non-TCP shares
personal residence of deceased potentially would not be personal-use property to estate
estate of resident deceased with one resident beneficiary was subject to s. 94(3)

Principales Questions: (1) Whether section 94 applies to deem a non-resident estate to be a resident of Canada for Canadian tax purposes? (2) Is the application of subsection 164(6) restricted to capital losses from the disposition of Taxable Canadian Property (TCP)?

Position Adoptée: (1) Yes (2) Non applicable

Raisons: (1) Application of the Act and previous interpretation (2) Non applicable