Income Tax Severed Letters - 2014-08-06

Ruling

2014 Ruling 2013-0509431R3 - Part XIII tax and distributions from a trust

CRA Tags
105(1), 108(5), 212(11), 104(13), 104(6), Treaties Article XXII(2), 212(1)(c)
distributions to U.S. residents funded out of ROC payments and cross-border interest
distributions to U.S. residents funded out of ROC payments and cross-border interest

Principal Issues: Whether certain distributions from a mutual fund trust to non-resident unit holders are exempt from Part XIII withholding tax

Position: Yes

Reasons: To the extent that a portion of a distribution from the fund to a non-resident unit holder is in excess of the amount that is included in computing the income of such unit holder under subsection 104(13) of the Act, such portion of the distribution is outside of the scope of paragraph 212(1)(c) of Act. In addition, if the distribution is made to a unit holder who qualifies for the benefits of the Canada-U.S. Tax Treaty and the fund is not treated as fiscally transparent under the laws of the United States, a portion of the distribution made by the fund out of income earned outside of Canada is not subject to tax under paragraph 212(1)(c) of the Act as such portion of the distribution meets the exemption in paragraph (2) of Article XXII of the Canada-U.S. Tax Treaty.

2014 Ruling 2013-0511991R3 - Loss consolidation

CRA Tags
55(3)(a), 88(1.1), 20(1)(c)
losses transferred to Newco which is wound-up into profitco, s. 88(1.1) loss transfer not effective until articles of dissolution, provincial GAAR ruling, cashless un-wind
s. 88(1.1) loss transfer not effective until articles of dissolution

Principal Issues: Loss consolidation.

Position: Favourable rulings issued.

Reasons: Meets statutory and administrative requirements.

Technical Interpretation - External

25 July 2014 External T.I. 2014-0524211E5 - Medical Expense - Lift Chair

CRA Tags
118.2(2)(1.2), ITR 5700, 118.2(2)(m), 118.2(2)(i)

Principal Issues: Whether a lift armchair is an eligible medical expense for the purposes of the METC?

Position: No.

Reasons: A lift armchair is not included as a medical expense under subsection 118.2(2) of the Act or under section 5700 of the Regulations.

24 July 2014 External T.I. 2014-0522861E5 - Section 110.5 and provincial FTC

CRA Tags
Ontario Taxation Act 34, 110.5, 126
NBIT may be fully offset by federal credit so that no Ontario FTC available

Principal Issues: Is the amount of income that may be added under section 110.5 limited by the availability of a foreign tax credit at the provincial level?

Position: No.

Reasons: Section 110.5 limits the amount of income that may be added only as set out in paragraphs (a) and (b) thereof.

22 July 2014 External T.I. 2014-0526631E5 - Definition of equity amount - cost of ECP

CRA Tags
18(5)

Principal Issues: Whether, in computing the "equity amount" under subsection 18(5) of the Act, a taxpayer should include the original acquisition cost in respect of eligible capital property or the "cost amount" within the meaning assigned by subsection 248(1) of the Act.

Position: The original acquisition cost of eligible capital property should be taken into account in computing the "equity amount".

Reasons: Interpretation of the definition of "equity amount" in subsection 18(5) of the Act and CRA's prior position.

22 July 2014 External T.I. 2014-0528671E5 - recumbent exercise bike

CRA Tags
ITR 5700, 118.2(2)

Principal Issues: Does a recumbent exercise bike prescribed by a medical practitioner qualify as an eligible medical expense for purposes of the medical expense tax credit?

Position: No.

Reasons: A recumbent exercise bike is not included in subsection 118.2(2) of the Income Tax Act and it is not prescribed under section 5700 of the Income Tax Regulations.

21 July 2014 External T.I. 2014-0530261E5 - support amount

CRA Tags
56.1(4), 56(1)(b)

Principal Issues: Is a lump-sum payment to a recipient by her former spouse that was not paid pursuant to a written agreement or a court order, a support amount?

Position: The amount paid does not appear to be a support amount and therefore would not be taxable to the recipient under paragraph 56(1)(b) of the Act.

Reasons: A lump-sum payment by a former spouse that is not payable under an order of a competent tribunal or under a written agreement and not payable on a periodic basis is not a support amount under subsection 56.1(4) of the Act.