Income Tax Severed Letters - 2015-03-25

Technical Interpretation - External

4 March 2015 External T.I. 2014-0537941E5 - Non-Profit Organization – fibre-optic cable

CRA Tags
149(1)(l)
Summary Under
Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(l)
substantial fibre-optic cable network likely not consistent

Principal Issues: Whether the income generated from the fibre-optic cable network would jeopardize the not-for-profit status of the Institute.

Position: Likely yes.

Reasons: It does not appear that this income is incidental or arises from activities directly connected to its not-for-profit objectives.

10 February 2015 External T.I. 2013-0484501E5 - Treaties Article XV

Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 15
$10,000 safe harbour for Canadian employment income of U.S. resident applied on calendar year basis even where he was a part-year resident

Principal Issues: Where an individual has derived income from the exercise of an employment in Canada throughout a taxation year, but ceased to be a resident of Canada to become a resident of the United States at a particular point in that year, does the remuneration described in subparagraph 2(a) of Article XV include all remuneration derived by the individual from the exercise of that employment throughout the year?

Position: Yes.

Reasons: In applying Article XV in the case of a resident of the United States, all remuneration derived in a taxation year by the individual from employment exercised in Canada is included for purposes of the de minimis test in subparagraph 2(a) to the extent that the remuneration is derived by the individual from the same employment.

3 February 2015 External T.I. 2015-0567231E5 - Qualified farm or fishing property

CRA Tags
110.6
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(2)
widow not required to continue farming business

Principal Issues: Whether property is qualified farm or fishing property.

Position: Question of fact.

Reasons: See below.

Technical Interpretation - Internal

6 March 2015 Internal T.I. 2014-0549761I7 - Internally generated goodwill & excluded property

CRA Tags
110.6(1), 95(1), 149(10)
Summary Under
Tax Topics - Income Tax Act - Section 149 - Subsection 149(10)
unpurchased goodwill is taken into account
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Small Business Corporation
unpurchased goodwill is taken into account
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property
unpurchased goodwill is taken into account

Principal Issues: Whether internally generated goodwill should be considered in the determination of the excluded property status of shares of a foreign affiliate held by another foreign affiliate?

Position: Yes.

Reasons: Based on a textual, contextual and purposive analysis of the Act.

21 January 2015 Internal T.I. 2014-0540631I7 - S.261 and loss carryback request

CRA Tags
157(1), 248(1) "specified future tax consequences", 161(7), 162(11), 261(5), 261(3), 261(11)
Summary Under
Tax Topics - Income Tax Act - Section 157 - Subsection 157(1) - Paragraph 157(1)(a)
instalment method of a functional currency reporter after loss carryback
Summary Under
Tax Topics - Income Tax Act - Section 261 - Subsection 261(11) - Paragraph 261(11)(a)
CRA applies most favourable instalment method in assessing for carried-back losses of a functional currency reporter

Principal Issues: Where an amount is deducted under paragraph 111(1)(a) for a taxation year in respect of a subsequent year non-capital loss, in recalculating a functional currency elector's CAD taxes payable for that taxation year in order to compute the reporter's refund,
a. which instalment method should be used, and
b. should previously deducted non-capital losses from other subsequent years be considered?

Position: a. There is no statutory required method, it is reasonable to use the method that results in the least total Canadian dollar taxes payable.
b. All subsequent year non-capital losses that have previously been deducted under paragraph 111(1)(a) should be considered.

Reasons: a. No instalment method dictated by paragraphs 157(1)(a) or (b) or 261(11)(a) or (b).
b. A deduction in a particular taxation year under paragraph 111(1)(a) is the total amount claimed in respect of losses for the 20 preceding and 3 subsequent taxation years. There are no exceptions similar to subsection 161(7) that would apply where the deduction is in respect of a loss for a subsequent taxation year.

20 January 2015 Internal T.I. 2014-0551121I7 F - Interest deductibility

CRA Tags
20(1)(c)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c)
deductible interest incurred before amalgamation not paid until thereafter

Principales Questions: Does paragraph 20(1)(c) apply where the debtor and creditor are amalgamated after the interest amounts are due, but before the amounts are paid?

Position Adoptée: Yes.

Raisons: Paragraph 20(1)(c) only requires that the interest be payable.