Income Tax Severed Letters - 2013-12-23

Ruling

2013 Ruling 2013-0488291R3 - Reorganization of Corporations - Rollover

CRA Tags
85(1), 52(2), 245(2), 84(3)
Summary Under
Tax Topics - General Concepts - Effective Date
no ruling on price adjustment clause
Summary Under
Tax Topics - Income Tax Act - Section 215 - Subsection 215(6)
Spinco taking responsibility for Part XIII remittance obligation of Parent
Summary Under
Tax Topics - Income Tax Act - Section 52 - Subsection 52(2)
taxable dividend spin-off of thinly capitalized sub

Principal Issues: Pubco will incorporate Newco. Pubco will transfer shares of the capital stock of various corporations to Newco. Pubco will distribute as a dividend in kind, the shares of the capital stock of Newco to its shareholders. Whether subsection 85(1) will apply to the transfer and whether 245(2) will apply to re-determine the consequences of subsection 85(1).

Position: Subject to subsection 69(11), subsection 85(1) will apply with respect to the transfer. Subsection 245(2) will not be applied to re-determine the consequences of subsection 85(1).

Reasons: The conditions to apply subsection 85(1) are met. The conditions to apply subsection 245(2) are not met.

2012 Ruling 2010-0391281R3 - Incentive Plan - Reimbursement Agreement

CRA Tags
245, 15(1), 246(1), 56(2)
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1)
reimbursement by Canco when RSUs vest

Principal Issues: Where Parent issues treasury shares to Subsidiary's employees in satisfaction of RSU awards (stock options) granted by Parent to the employees, and Subsidiary reimburses Parent for the FMV of the shares, pursuant to a reimbursement agreement, will a benefit be conferred by Subsidiary on Parent under subsections 246(1) and 15(1) of the Act? Will the reimbursement payment be subject to Part XIII of the Act? Will section 245 of the Act apply?

Position: No. No. No.

Reasons: Where Subsidiary reimburses Parent, pursuant to a reimbursement agreement, in respect of RSUs (stock options) awarded to Subsidiary employees and any increase in the intrinsic value of the RSUs (stock options), after the date of the reimbursement agreement, Subsidiary has a legal obligation to make the reimbursement payment and no benefit will be considered conferred on Parent. In general, a reimbursement payment made by a Canadian Subsidiary to a U.S. Parent, in respect of benefits received by the Canadian Subsidiary's employees under the U.S. Parent's stock option plan, would not constitute a payment that would be subject to Part XIII of the Act. The reimbursement payment made by the Canadian Subsidiary would not appear to result in a "tax benefit", as paragraph 7(3)(b) of the Act will deny the Canadian Subsidiary a deduction in respect of the payment.

Technical Interpretation - External

12 December 2013 External T.I. 2013-0484031E5 - Application of clause 256(7)(a)(i)(B)

CRA Tags
251(2), 256(7)(a)(i)(B)
Summary Under
Tax Topics - Income Tax Act - Section 256 - Subsection 256(7) - Paragraph 256(7)(a)
LP becomes controlling shareholder

Principal Issues: The application of clause 256(7)(a)(i)(B) where the controlling interest in a corporation is acquired by a limited partnership.

Position: In applying clause 256(7)(a)(i)(B), it is necessary to consider whether the partner or partners that control the voting rights in respect of the shares of the corporation held by the limited partnership would be related to the corporation immediately before control of the corporation was acquired.

Reasons: See below

13 November 2013 External T.I. 2012-0462421E5 - CPP & EI tax credit

CRA Tags
118.7

Principal Issues: Where an individual has been issued a T4 with employment income reported in error, can the CRA disallow the individual's CPP and EI tax credit claimed, after an amended T4 is issued?

Position: Yes

Reasons: Section 118.7 states the tax credit is computed on amounts payable by an individual regarding EI premiums and CPP contributions. If the amounts are not payable, then the tax credit could be disallowed.

7 November 2013 External T.I. 2013-0473771E5 - Shareholder of a Not-for-profit corporation

CRA Tags
248(1)
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1)
NPO member receiving "shareholder" benefit
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Shareholder
NPO member receiving "shareholder" benefit

Principal Issues: Whether a member of a not-for-profit corporation without share capital is a "shareholder" within the meaning of that term in subsection 248(1) for purposes of subsection 15(1)?

Position: Yes

Reasons: Textual, contextual and purposive approach to the interpretation of "shareholder". Also consistent with paragraph 9 of cancelled IT-409 which refers to a shareholder of a non-profit corporation without share capital.

24 October 2013 External T.I. 2013-0486321E5 - Former taxable Canadian property and 128.1(8).

CRA Tags
248(28) - "taxable Canadian property", 128.1(4)(b), 128.1(8)
Summary Under
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(8)
property no longer tcp before sale

Principal Issues: Whether a taxpayer can apply subsection 128.1(8) in respect of a property that was taxable Canadian property upon emigration, but not at the time of the actual post-emigration disposition?

Position: No.

Reasons: Subsection 128.1(8) requires that the property be taxable Canadian property at the time of the actual disposition.

8 July 2013 External T.I. 2012-0444981E5 - Deductibility of Employee RCA Contributions

CRA Tags
8(1)(m.2)

Principal Issues: Whether employee contributions to a SERP-RCA on conversion of past service benefits from a defined contribution basis to a defined benefit basis satisfy the condition in paragraph 8(1)(m.2) that the contribution be required as a condition of employment.

Position: Question of fact, but likely in this case.

Reasons: Although there is an elective element, it is not sufficiently connected to the contribution. Participation in the SERP-RCA is directly linked to the conversion and on-going participation in the RPP and any election made for the purposes of the RPP automatically applies for the purposes of the RCA.

8 March 2012 External T.I. 2011-0429881E5 - War XXXXXXXXXX Pension Received from Hong Kong

CRA Tags
81(1)(e), 81(1)(d)

Principal Issues: Whether a war XXXXXXXXXX pension received from Hong Kong Special Administrative Region by a resident of Canada is exempt from tax in Canada.

Position: Not enough information to provide a definitive answer.

Reasons: The payment must meet the requirements under paragraph 81(1)(e) of the Act.

17 December 2010 External T.I. 2009-0338841E5 - Characterization of Income from an RCA

CRA Tags
12(1)(n.3)
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(n.3)
business or property income

Principal Issues: Whether an amount included into income pursuant to paragraph 12(1)(n.3) would be characterized as business income?

Position: Yes.

Reasons: Wording of the Act.

Technical Interpretation - Internal

28 September 2012 Internal T.I. 2011-0426861I7 - HBP and LLP repayments by a non-resident

CRA Tags
146.01(5), 146.02(3), 150(1.1)(b)(iv), 146.01(3), 146.02(5), 150(1)

Principal Issues: Whether a non-resident individual can make designated repayments under subsection 146.01(3) or 146.02(3) on his or her HBP balance or LLP balance for taxation years throughout which he or she is non-resident.

Position: No.

Reasons: Pursuant to subsection 146.01(5) or 146.02(5), an individual's entire HBP balance or LLP balance, respectively, is included in computing his or her income on his or her tax return for the taxation year in which he or she ceased to be resident. By virtue of subsection 150(1) and subparagraph 150(1.1)(b)(iv), an individual is required to file a return of income under section 114 for the taxation year in which he or she ceased to be resident if, at the end of that year, his or her HBP balance or LLP balance is a positive amount.