Income Tax Severed Letters - 2013-09-04

Principal Issues: Whether paragraph 6(1)(e.1) of the Act applies to the premiums paid by a trust to an insurer for a group accidental death and dismemberment insurance plan and a group critical illness insurance plan?

Position: It is a question of fact, but likely yes.

Reasons: The CRA administratively looks at the particular plan provided through a health and welfare trust to determine whether premiums paid by the administrator are taxable to the employee. Paragraph 6(1)(e.1) of the Act likely applies where the plan provided through the health and welfare trust is a group sickness and accident insurance plan and the benefits are not payable on a periodic basis.

Principal Issues: Whether a taxpayer can add interest expense to the capital cost of a condominium where the money was borrowed to make various capital improvements to that condominium.

Position: A question of fact. In our view it would only be appropriate to capitalize interest under section 21 if the cost of a particular improvement has been properly added to the capital cost of the depreciable property for capital cost allowance purposes.

Reasons: Section 21 allows a taxpayer to elect to capitalize the cost of borrowed money when it is used to acquire depreciable property.

Principales Questions: 1. Le revenu versé à un employé qui consent à afficher sur son automobile le logo corporatif de son employeur serait-il considéré comme un revenu d'emploi? 2. Dans le cas d'un employé qui reçoit le montant publicitaire, l'allocation que l'employé reçoit pour l'usage de son véhicule conservera-t-elle son caractère raisonnable? [TRANSLATION] 1. Is the income paid to an employee considered to be employment income when the employee agrees to display the employer's corporate logo on his or her own automobile? 2. In the case of an employee who receives the amount for publicity, would the allowance received for the employee's use of his or her motor vehicle still be considered reasonable?

Position Adoptée: 1. Oui. 2. Question de fait. Le montant publicitaire pourrait avoir pour effet de réputer ne pas être raisonnable, en application du sous-alinéa 6(1)b)(x), l'allocation pour l'usage d'un véhicule à moteur. [TRANSLATION] 1. Yes. 2. Question of fact. The amount for publicity paid by the employer may have the effect of deeming not to be reasonable, as per subparagraph 6(1)(b)(x), the allowance for the use of a motor vehicle.

Raisons: 1. Le libellé du préambule de l'alinéa 6(1)a). 2. Le sous-alinéa 6(1)b)(x) exige que l'allocation soit uniquement calculée en fonction du nombre de kilomètres parcourus. Dépendamment des faits, ceci pourrait ne pas être le cas. [TRANSLATION] 1. The wording of the preamble in paragraph 6(1)(a). 2. Subparagraph 6(1)(b)(x) requires that the allowance be solely based on the number of kilometers for which the vehicle is used. Depending on the facts, this may not be the case.

Principal Issues: Must the corporate partner be a member of the partnership on March 22, 2011 in order to be able to claim a transitional reserve in respect of the partnership under subsection 34.2(11)?

Position: Yes.

Reasons: In order for a corporate partner to claim a transitional reserve under subsection 34.2(11), the corporate partner must have QTI in respect of the partnership. Based on the definition of QTI provided under subsection 34.2(1), the corporate partner must be a member of the partnership on March 22, 2011. Further, paragraph 34.2(13)(a) provides that the corporation must be a member of the partnership "continuously since before March 22, 2011".

Principales Questions: Quel est le traitement fiscal de sommes versées dans le cadre d'un règlement à l'amiable?
What is the tax treatment of amounts paid under an out-of-court settlement?

Position Adoptée: Commentaires généraux. General comments.

Raisons: Question de fait. Question of fact.

Principal Issues: 1. Where the property distributed to the beneficiary in satisfaction of his capital interest is 1000 shares of Corporation X can the subsection 107(2.001) election be made in respect of only 500 of those shares as long as an election is not made with respect to a fraction of a share? 2. How is the election under subsection 107(2.001) made as there is no prescribed form?

Position: 1. Yes 2. Attach a letter to the trust's T3 Income Tax and Information Return for the year in which the distribution is made.

Reasons: 1. Subsection 248(1) defines property to include a share. The election may apply to one or more shares of all the shares distributed. The election may apply to a fraction of a share where the share is legally subdivided before the distribution date.

Principales Questions: Les frais de déplacement et d'hébergement engagés pour obtenir les services médicaux d'un médecin de famille à 330 km de la localité du contribuable sont-ils admissibles au crédit d'impôt pour frais médicaux, lorsque de tels déplacements sont occasionnés par une pénurie de médecins dans la localité où le contribuable habite? [TRANSLATION]: Are travel and accommodation expenses eligible for the medical expense tax credit when they are incurred to obtain the medical services of a general practitioner 330 km away from the individual's locality due to a shortage of physicians at the locality where the individual dwells?

Position Adoptée: Question de fait, mais probablement que oui, si les conditions à l'alinéa 118.2(2)g) ou h) sont satisfaites. Notamment, les conditions suivantes doivent être réunies : a) il n'est pas possible d'obtenir des services médicaux sensiblement équivalents dans la localité où le patient habite; b) l'itinéraire emprunté est raisonnablement direct; et c) il est raisonnable, compte tenu des circonstances, que le patient se rende en ce lieu afin d'obtenir ces soins pour lui-même. [TRANSLATION]: Question of fact, but probably yes, provided that the conditions in paragraph 118.2(2)(g) or (h) are met. In particular, all the following conditions must be met: a) it is not possible to obtain substantially equivalent medical services at the locality where the patient dwells; b) the route travelled is a reasonably direct one; c) it is reasonable, having regard to the circumstances, for the patient to travel to that place to obtain those services for himself or herself.

Raisons: L'ARC accepterait que la condition au point a) ci-haut serait satisfaite lorsqu'il est raisonnable que le patient, compte tenu des circonstances, se soit déplacé à la localité où les services médicaux ont été reçus. Dans ce cas, les circonstances étaient telles que le patient n'était pas en mesure d'obtenir des services médicaux dans sa localité. [TRANSLATION]: The CRA would accept that the condition in a) above may be met if, in the circumstances, it is reasonable for the patient to have travelled to the place where the medical services were obtained. In this case, the circumstances were such that the patient was unable to obtain medical services in his locality.

Principales Questions: Les frais médicaux payés à une technicienne spécialisée en orthophonie sont-ils admissibles aux fins du crédit d'impôt pour frais médicaux dans une situation donnée? [TRANSLATION] Are medical expenses that are paid in a given situation to a specialized speech therapy technician eligible for purposes of the medical expense tax credit?

Position Adoptée: Non, à moins que les actes de la technicienne spécialisée en orthophonie 1) aident le médecin (ou l'orthophoniste) à diagnostiquer ou à établir un traitement médical ou 2) soient à la fois prescrits et administrés sous la surveillance générale d'un médecin en titre. [TRANSLATION] No, unless the acts performed by the specialized technician in speech therapy 1) assist the medical practitioner (or the speech therapist) in reaching a diagnosis or in establishing a medical treatment or 2) are both prescribed and administered under the general supervision of a medical doctor.

Raisons: Aux fins de l'application de l'alinéa 118.4(2)a), nous ne sommes au courant d'aucune législation au Québec qui autoriserait les techniciennes spécialisées en orthophonie à exercer la médecine. Par ailleurs, les frais payés à la technicienne spécialisée en orthophonie ne sont pas admissibles ni en vertu de l'alinéa 118.2(2)o) ni en vertu de l'alinéa 118.2(2)l.9). Dans le premier cas, les actes de la technicienne n'aident pas le médecin (ou l'orthophoniste) à diagnostiquer ou à établir un traitement médical. Dans le deuxième cas, les conditions à l'alinéa 118.2(2)l.9) ne sont pas remplies, notamment du fait que le traitement en question n'est pas administré sous la surveillance générale d'un médecin en titre. [TRANSLATION] For purposes of applying paragraph 118.4(2)(a), we are unaware of any legislation in Quebec which authorizes specialized technicians in speech therapy to exercise such a health profession. In addition, fees paid to specialized technicians in speech therapy are not eligible expenses neither under paragraph 118.2(2)(o) nor under paragraph 118.2(2)l.9). In the first case, the acts performed by the technician do not assist a medical practitioner (or speech therapist) to reaching a diagnosis or in establishing a medical treatment. In the second case, the conditions under paragraph 118.2(2)(l.9) are not met; more specifically, the treatment in question is not administered under the general supervision of a medical doctor.