Income Tax Severed Letters - 2014-03-12

Technical Interpretation - External

26 February 2014 External T.I. 2014-0518651E5 - 149(1)(c) - municipal corporation

CRA Tags
149(1.2), 149(1)(d.5), 149(1)(c)
Summary Under
Tax Topics - Income Tax Act - Section 149 - Subsection 149(1.2)
overview

Principal Issues: Whether the income of the municipality would be exempt under 149(1)(c)?

Position: Maybe.

Reasons: See discussion.

25 February 2014 External T.I. 2012-0448431E5 - Reporting of Income by Estate

CRA Tags
104(13), 104(6)
Summary Under
Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Specified partnership income
formula limitation in (b) not affected by s. 34.2 adjustments

Principal Issues: 1) Where the XXXXXXXXXX beneficiaries of an estate sign a distribution agreement and one of them decides to retain the property in the estate, is it the estate or the beneficiary that reports income earned on that property from the date of agreement until the property has been disposed?
2) Where the property is subsequently disposed of resulting in a capital loss, who will report the loss from the sale of the property?

Position: 1) It is a question of law. 2) It is again a question of law.

Reasons: See below.

24 February 2014 External T.I. 2013-0498081E5 - SBD and 34.2

CRA Tags
125(7) "specified partnership income", 34.2

Principal Issues: (1) Is an amount included in income under subsection 34.2(2) to be included in the amount determined for G in the formula definition of "specified partnership income" in subsection 125(7) if the amount is deemed to be active business income under the characterization rules in subsection 34.2(5)? (2) Is an amount included in income under subsection 34.2(2) to be included in the amount determined for K in the formula definition of "specified partnership income" in subsection 125(7) if the amount is deemed to be active business income under the characterization rules in subsection 34.2(5)? (3) For the purposes of determining the "specified partnership income" of a corporate partner of a top-tier partnership in a multi-tier partnership structure, should amounts deducted at the corporate partner level in respect of the partnerships be apportioned on a partnership-by-partnership basis?

Position: (1) Yes. (2) No. (3) Yes.

Reasons: (1) Wording of provision. (2) Wording of provision. (3) Based on subsection 125(6.1) and wording for H in the formula definition of "specified partnership income" in subsection 125(7).

24 February 2014 External T.I. 2013-0509111E5 - NRT ceasing to be a Deemed Resident

CRA Tags
94(2)(g), 94(2)(t)
Summary Under
Tax Topics - Income Tax Act - Section 94 - Subsection 94(2) - Paragraph 94(2)(t)
sale has immediate impact on residency

Principal Issues: To clarify technical notes stating that the application of 94(2)(t) will not affect the application of 94(2)(g) in respect of the original transfer by the corporation to the trust

Position: See letter

Reasons: See letter

19 February 2014 External T.I. 2013-0500561E5 F - Payment to a subtrust for minor

CRA Tags
104(18)(c)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(18)
exercise of discretion by family trust in favour of secondary infant trust

Principales Questions: When a trustee of a trust, of which conditions of subsection 104(18) do not apply, distributes income to subtrusts beneficiaries which each of them has a minor as sole beneficiary, will the provision of paragraph 104(18)(c) be met to the income of the subtrusts?

Position Adoptée: Question of fact. Possibly.

Raisons: Application of paragraph 104(18)(c)

6 February 2014 External T.I. 2013-0512191E5 - Mining Activities and SR & ED

CRA Tags
66.1(6) "Canadian Exploration Expense", 248(1) Scientific Research and Experimental Development
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Scientific Research & Experimental Development
CEE excluded even if renounced

Principal Issues: Can a corporation that has incurred CEE and flowed out these expenses to its flow-through shareholders also make a claim for SR & ED with respect to the same expenses?

Position: No.

Reasons: The definition of SR & ED specifically excludes certain mining activities as qualifying for SR & ED. If expenditures undertaken in respect of such activities qualify as CEE then the expenses will not qualify as SR & ED due to the exclusion.

3 February 2014 External T.I. 2013-0506641E5 - CCA class(es) for mineral claims and mining leases

CRA Tags
66.2(5), ITR 1101(4), ITR 1100(1)(g), 66(15), ITR Schedule V
Summary Under
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(1) - Paragraph 1100(1)(g)
volcanic aggregate

Principal Issues: What CCA classes do the taxpayer's mining claims and mining leases belong to?

Position: Could belong to Regulation 1100(1)(g) - subject to Sch. V of the Regulations. General comments provided.

Reasons: Appear to be industrial minerals (other than mineral resource).

29 January 2014 External T.I. 2013-0507021E5 - Medical Expenses - Tuition

CRA Tags
118.2(2)(e)

Principal Issues: Whether tuition fees paid for a child who has multiple severe food allergies would qualify as a medical expense?

Position: No.

Reasons: Does not meet the requirements under paragraph 118.2(2)(e).

28 January 2014 External T.I. 2013-0506991E5 - Prescribed Security Interest

CRA Tags
227(4.2), 248(26), section 6 of the Interest Act, 2201(1) and (2) of the Income Tax Regulations, 227(4), 227(4.1), 153(1)
Summary Under
Tax Topics - Income Tax Act - Section 227 - Subsection 227(4)
prescribed security interest reduced by interest payments

Principal Issues: 1. In computing the prescribed security interest, are amounts of principal and/or interest included at the time of a failure to remit withholdings under the Act? 2. Following a failure to remit withholdings, is it the CRA's view that principal and/or interest will constitute payments on account of the obligation by which the prescribed security interest is reduced?

Position: 1. Both principal and interest are included in calculating the amount of the prescribed security interest at the time of a failure to remit withholdings under the Act. 2. Following a failure to remit withholdings, all payments on account of principal and interest are applied to reduce the prescribed security interest.

Reasons: The Act, the Regulations and jurisprudence support this position which is consistent with tax policy on this issue.

23 January 2014 External T.I. 2013-0515721E5 F - Deferred Salary Leave Plan

CRA Tags
ITR 6801(a)(i), ITR 6801(a)(v)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 6801 - Paragraph 6801(a) - Subparagraph 6801(a)(v)
full-time employee cannot return on a part-time basis
Summary Under
Tax Topics - Income Tax Regulations - Regulation 6801 - Paragraph 6801(a) - Subparagraph 6801(a)(iii)
can have a salary deferral period, then leave, then payback period

Principales Questions: 1. In the context of a Deferred Salary Leave Plan, where an employee who works full time before his leave of absence of XXXXXXXXXX and returns to his employment on a part time basis for a period of XXXXXXXXXX years, will the provisions of subparagraph 6801(a)(v) of the Regulations be met?
2. With respect to a XXXXXXXXXX-year Deferred Salary Leave Plan, can an employee take the leave of absence during the Plan (before the end of the Plan in year XXXXXXXXXX)?

Position Adoptée: 1. No. An employee who worked full time before his leave of absence must return to a full time employment for a period equal to the duration of the leave of absence.
2. Yes, if a deferral period precedes the leave of absence and if the other conditions in paragraph 6801a) of the Regulations are fulfilled.

Raisons: 1. Subparagraph 6801(a)(v) of the Regulations and previous positions.
2. Subparagraphs 6801(a)(i) and (iii) of the Regulations and previous positions.

Technical Interpretation - Internal

26 February 2014 Internal T.I. 2013-0510991I7 - Public Transit Amount

CRA Tags
118.02

Principal Issues: Clarification of document E2007-0243821M4 description of uninterrupted period for public transit amount – electronic payment card

Position: See later document E2009-0316211E5

Reasons: Legislation

25 February 2014 Internal T.I. 2014-0517191I7 - Late or amended 104(21) designation

CRA Tags
104(21)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(21)
late designation not available for undistributed amounts

Principal Issues: Whether a late or amended designation under 104(21) is available in the current case?

Position: No.

Reasons: Designation has to be made in the return of its income for the year.

20 January 2014 Internal T.I. 2013-0506711I7 - Meaning of "medical expenses" in Reg. 233(2)

CRA Tags
ITR 233(1), ITR 233(2), 56(1)(u)

Principal Issues: Whether amounts paid in respect of "medication dispensers" and "personal alert assistance" devices would be considered as amounts paid in respect of medical expenses incurred by or on behalf of the payee within the meaning of subsection 233(2) of the Regulations?

Position: No

Reasons: CRA policy