Income Tax Severed Letters - 2015-01-21

Ruling

2014 Ruling 2014-0527221R3 - Disposition of shares under Canada-Israel Treaty

CRA Tags
Treaties Article XIII, 2(3)(c), 248
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 13
"consist of" not a "derived from" test

Principal Issues: Whether a gain realized by a company resident in Israel on the disposition of shares of a Canadian corporation, in a situation where the Canadian corporation holds shares of another Canadian corporation and the shares of that other Canadian corporation derive their value principally from real or immovable property situated in Canada, will be exempt from Canadian tax under the Act by virtue of paragraph 4 of Article XIII of the Canada-Israel Tax Convention.

Position: Yes.

Reasons: The property of the Canadian corporation the shares of which are being disposed of cannot be said to consist principally of immovable property situated in Canada and therefore, the gain does not meet the requirements of paragraph 3 of Article XIII of the Canada-Israel Tax Treaty.

2014 Ruling 2012-0457101R3 - Proposed amendments to a Deferred Share Unit Plan

CRA Tags
ITA 248(1) "salary deferral arrangement", ITR 6801(d)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 6801 - Paragraph 6801(d)
creation of DSUs which track listed LP units through the use of a Newco to acquire sample LP units and issue tracking shares to employer

Principal Issues: Whether proposed amendments to an existing DSU Plan to add one new class of DSUs based on XXXXXXXXXX shares that track limited partnership interests in a particular limited partnership would result in the DSU Plan ceasing to satisfy the conditions in ITR 6801(d)

Position: The amendments will not, in and of themselves, affect the DSU Plan for the purposes of the conditions in ITR 6801(d).

Reasons: The XXXXXXXXXX shares fall within the parameters of ITR 6801(d) and, in particular, the postamble of ITR 6801(d). The DSU Plan provides, and the taxpayer's representative has confirmed, that no action may be taken to reduce the impact of any downward fluctuation in the fair market value of the XXXXXXXXXX shares.

2013 Ruling 2013-0478751R3 - 149(1)(c) Ruling - Indian Band and Partnership

CRA Tags
149(1)(c)

Principal Issues: Is the income allocation by a Limited Partnership to an Indian Band exempt from tax pursuant to 149(1)(c)?

Position: Yes

Reasons: The Indian Band is a public body performing a function of government.

2013 Ruling 2012-0451771R3 - Deferred Salary Leave Plan (DSLP) - ITR 6801(a)

CRA Tags
ITR 6801(a)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 6801 - Paragraph 6801(a)
self-funded sabbatical program

Principal Issues: Does the proposed Plan (a self-funded sabbatical program) qualify as a prescribed plan or arrangement pursuant to paragraph 6801(a) of the Income Tax Regulations?

Position: Yes.

Reasons: The legislation and regulation.

2013 Ruling 2013-0478761R3 - 149(1)(c) Ruling - Indian Band and Partnership

CRA Tags
149(1)(c)

Principal Issues: Is the income allocation by a Limited Partnership to an Indian Band exempt from tax pursuant to 149(1)(c)?

Position: Yes

Reasons: The Indian Band is a public body performing a function of government.

Technical Interpretation - External

23 December 2014 External T.I. 2013-0487791E5 F - Période d'amortissement du revenu d'emphytéose

CRA Tags
12(a)(1), 20(1)(m), 9(1)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition
sum received on granting an emphyteusis is proceeds of disposition
Summary Under
Tax Topics - Income Tax Act - Section 9 - Timing
sum received on granting an emphyteusis is proceeds because it is not a lease

Principales Questions: Est-il possible d'amortir le revenu provenant d'une emphytéose sur toute la durée de l'emphytéose? / Is it possible to amortize the income from an emphyteusis on the duration of the emphyteusis?

Position Adoptée: Non / No

Raisons: Lorsqu'une emphytéose est constituée à titre onéreux, la somme prévue, qu'elle soit payable par somme forfaitaire ou par versements, est considéré comme étant le produit de disposition du droit d'emphytéose ou d'une partie ou de la totalité du bien sujet à l'emphytéose. L'interprétation technique 2012-0472101E5 ne reflète plus notre position. / When an emphyteusis is made for consideration, the amount provided, whether payable by lump sum or by installments, is regarded as the proceeds of disposition of a right of emphyteusis or part or all of the property subject to the emphyteusis. Technical interpretation 2012-0472101E5 no longer reflects our position.

9 December 2014 External T.I. 2014-0529311E5 - Change the fiscal period end of a partnership

CRA Tags
249.1(1), 249.1(7), 249.1(9)
Summary Under
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(7)
partnership year end change must be for business purposes/avoid multi-tier misalignment

Principal Issues: In the particular scenario involving a multi-tier partnership structure and a departing partner, would a request to end the fiscal period of the partnership on the day before the sale of the partnership interest be granted?

Position: In our view, no.

Reasons: It appears that the request is being made in order to obtain a tax benefit since it is being made so as to ensure that the former partner is allocated a loss based on the shortened fiscal period. Additionally, granting a request to change the fiscal period end of a partnership in a multi-tier partnership structure that results in the fiscal period ends of the partnerships becoming misaligned would be contrary to the underlying rationale of paragraph 249.1(1)(c).

10 November 2014 External T.I. 2013-0513321E5 - Ontario CMT- mark-to-market accounting adjustments

CRA Tags
Ontario Regulation 37/09, Ontario Taxation Act 57(1)

Principal Issues: Whether an unrealized loss on the write-down of an intercompany loan is considered a mark-to-market change for purposes of computing adjusted net income for CMT purposes.

Position: Yes, if the write down is a mark-to-market change in respect of a specified mark to market property. Specified mark-to-market property means property subject to mark-to-market valuation under GAAP.

Reasons: Accounting loss differences are included in calculating a corporation's adjusted net income. The formula to calculate an accounting loss difference includes a mark-to-market change in respect of a specified mark-to-market property.

17 October 2014 External T.I. 2014-0532121E5 F - Frais professionnels - Divulgation volontaire

CRA Tags
9, 18(1)(a), 60(o)
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Legal and other Professional Fees
voluntary disclosure fees generally non-deductible
Summary Under
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(o)
fees become deductible from CRA indicating it will reassess

Principales Questions: (1) Les frais comptables et juridiques engagés en lien avec une DV sont-ils déductibles en vertu de l'article 9? Are legal and accounting fees related to a voluntary disclosure deductible under section 9?
(2) Sont-ils déductibles en vertu de l'alinéa 60o) ? Are they deductible under paragraph 60(o)?
(3) Les frais comptables et juridiques qui sont déductibles en vertu de la Loi doivent-ils être réclamés dans l'année où ils sont engagés ou dans les années auxquelles ils se rapportent? Should legal and accounting fees, which are deductible under the Act, be claimed in the year in which they were incurred or in the years to which they relate?

Position Adoptée: (1) Non, car l'ARC est d'avis que ces frais ne sont pas engagés pour produire un revenu d'entreprise ou de bien. No, since CRA takes the view that those fees are not incurred to produce business or property income.
(2) Seulement à partir du moment où le processus de la DV devient une opposition ou un appel au sens de l'alinéa 60o). Only when the voluntary disclosure process becomes an objection or an appeal under paragraph 60(o).
(3) Dans l'année où les frais comptables ou juridiques sont engagés. In the year in which the accountant or legal fees are incurred.

Raisons: La Loi et positions antérieures. The Act and previous positions.

1 October 2014 External T.I. 2013-0476081E5 F - Allocation pour une automobile

CRA Tags
9, 3, 6(1)(b)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b)
NPO drivers not taxable on $0.42 per kilometer received for driving services

Principales Questions: Quel est le traitement fiscal à accorder à une somme payée à des contribuables pour l'usage de leur automobile dans une situation donnée?
What is the tax treatment of an amount paid to taxpayers for the use of their automobile in a given situation?

Position Adoptée: Aucune. Commentaires généraux sur la nature des services rendus.
None. General comments regarding the nature of the services rendered.

Raisons: Question de fait. Question of fact.

25 September 2014 External T.I. 2014-0528211E5 F - Cotisation payée par l'employeur

CRA Tags
6(1), 5(1)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) - Subparagraph 6(1)(a)(i)
negotiated wage reduction in exchange for increased contributions to group sickness or accident insurance plan

Principales Questions: L'ARC considère-t-elle toujours que les primes payées par l'employeur dans une situation factuelle telle que présentée à l'interprétation 9721115F ne représentent pas vraiment la cotisation de l'employeur au régime d'assurance-collective mais bien celle des employés? / Does CRA still believe that premiums paid by an employer in a situation similar to the one in 9721115F will not be considered as employer contribution in respect of a private health services plan coverage but rather employee contribution?

Position Adoptée: Question de faits / Question of facts.

Raisons: Question de faits / Question of facts.

3 September 2014 External T.I. 2014-0523861E5 F - Clause pénale

Summary Under
Tax Topics - Income Tax Act - Section 9 - Compensation Payments
any application of surrogatum principle to a penalty clause in a lease would depend inter alia on the lease and penalty terms

Principales Questions: Quel est le traitement fiscal des sommes versées dans le cadre d'une clause pénale contenue dans un bail commercial? / What is the tax treatment of amounts paid in connection with a penal clause in a commercial lease?

Position Adoptée: Nous ne pouvons ni confirmer ni infirmer que le principe de la substitution s'appliquerait ou ne s'appliquerait pas dans une situation spécifique./ We are not able to confirm or to deny whether the surrogatum principle would apply in a specific situation.

Raisons: Il s'agit d'une question de faits. / It is a question of fact.

Technical Interpretation - Internal

3 September 2014 Internal T.I. 2014-0533361I7 F - Ligne directrice 4

CRA Tags
81(1)(a)
Summary Under
Tax Topics - Other Legislation/Constitution - Federal - Indian Act - Section 87
Guideline 4 not met where Indian organization had non-Indian clients

Principales Questions: 1. Aux fins de la Ligne directrice 4, est-ce que ce sont les tâches liées à l'emploi ou les activités non commerciales de l'employeur qui doivent viser que le mieux-être des Indiens qui vivent, pour la plupart, dans les réserves? 2. Dans la mesure où ce sont les activités de l'employeur qui ne doivent viser que le mieux-être des Indiens qui vivent, pour la plupart, dans des réserves, est-ce que la ligne directrice 4 s'applique aux employés Indiens des bureaux urbains?
1. For the purposes of Guideline 4, which of the duties of the employment or the employer's non-commercial activities have to be carried on exclusively for the benefit of Indians who for the most part live on reserves? 2. To the extent that it is the employer's non-commercial activities that have to be carried on exclusively for the benefit of Indians who for the most part live on reserves, does Guideline 4 apply to urban offices Indian employees?

Position Adoptée: 1. Aux fins de la ligne directrice 4, ce sont les activités non commerciales de l'employeur qui ne doivent viser que le mieux-être des Indiens qui vivent, pour la plupart, dans les réserves. 2. Selon les faits fournis, la ligne directrice #4 ne s'applique pas dans la situation soumise.
1. For the purposes of Guideline 4, it is the employer's non-commercial activities that have to be carried on exclusively for the benefit of Indians who for the most part live on reserves. 2. Based on the facts provided, Guideline 4 does not apply in the present situation.

Raisons: 1. Libellé de la Ligne directrice 4 et positions antérieures à ce sujet. 2. Les activités non commerciales de l'employeur ne visent pas que le mieux-être des Indiens et l'employeur ne se consacre pas exclusivement au développement social, culturel, éducationnel ou économique d'Indiens.
1. Wording of the Act and previous positions on this subject. 2. The employer's non-commercial activities are not carried on exclusively for the benefit of Indians and the employer is not dedicated exclusively to the social, cultural, educational, or economic development of Indians.

29 August 2014 Internal T.I. 2014-0534251I7 - Indian Tax Exemption - Settlement Payments

CRA Tags
81(1)(a), 104(2), 104(13), 75(2), 149(1)(c)

Principal Issues: Whether federal settlement payments from a First Nation to its members would be considered income.

Position: Likely not.

Reasons: Appears to be a gift and not an enforceable obligation.

August 29, 2014

5 June 2014 Internal T.I. 2014-0532281I7 F - Chambre des communes-donataire reconnu 149.1(1)

CRA Tags
149.1(1), 149(1)(c)
Summary Under
Tax Topics - Income Tax Act - Section 149.1 - Subsection 149.1(1) - Qualified Donee - Paragraph (a) - Subparagraph (a)(iii)
Parliament does not perform a function of government
Words and Phrases
government

Principales Questions: Est-ce que la Chambre des communes est un organisme public remplissant une fonction gouvernementale selon 149.1(1)? / Whether the House of Commons can be considered a public body performing a function of government pursuant to 149.1(1)?

Position Adoptée: Non / No

Raisons: La Chambre des communes n'a pas de pouvoir exécutif. / The House of Commons doesn't have executive power.