Income Tax Severed Letters - 2015-04-01

Ruling

2014 Ruling 2014-0539031R3 - Butterfly Reorganization

CRA Tags
55(3)(b)

Principal Issues: Whether the amended facts will impact the rulings granted in the original letter?

Position: No

Reasons: The law

2014 Ruling 2013-0513211R3 - Butterfly Transaction

CRA Tags
88(2), 82(1), 55(3)(b), 85(1), 18(6), 191, 56(2), 55(3.1)(d), 245, 15(1), 246, 187, 112, 55(3.1)(b), 84(3), 55(3.1)(c), 55(2), 55(3.1)(a), 84(2)
Summary Under
Tax Topics - Income Tax Act - Section 186 - Subsection 186(1)
split-up CCPC butterfly was structured to avoid Part IV circularity
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution
transfer to TC subco to avoid Part IV circularity/88(2) wind-up of DC/83(2.1) rep

Principal Issues: Whether the proposed transactions qualify for the butterfly exemption found in paragraph 55(3)(b)?

Position: Yes

Reasons: The proposed transactions meet the requirements found in paragraph 55(3)(b) and are not subject to any of the butterfly exemption denial rules found in section 55(3.1).

2014 Ruling 2013-0498651R3 - Single-Wing Split-up Butterfly

CRA Tags
55(3)(b), 55(3.1)
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution
s. 85(1) transfer as capital property, of farm land potentially held for subdivision and sale, in single wing split-up/transfer at proportionate UCC

Principal Issues: Whether the proposed transactions qualify for the butterfly exemption found in paragraph 55(3)(b)?

Position: Yes

Reasons: The proposed transactions meet the requirements found in paragraph 55(3)(b) and are not subject to any of the butterfly exemption denial rules found in subsection 55(3.1).

2014 Ruling 2014-0528291R3 - Butterfly Reorganization

CRA Tags
55(3)(b)
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.1) - Paragraph 55(3.1)(a)
preliminary and subsequent transactions

Principal Issues: Whether the proposed transaction qualifies for the butterfly exemption rule

Position: Yes

Reasons: It meets all the requirements found in paragraph 55(3)(b) and is not subject to any of the butterfly exemption denial rules found in 55(3.1)(a), (b) and (c)

Technical Interpretation - External

13 March 2015 External T.I. 2015-0564611E5 - Definition of farming

CRA Tags
248(1) - "farming"
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Farming
breeding of rodents as food but not as pets

Principal Issues: Whether activities such as raising/breeding rodents to be sold as pets and food for reptiles and other animals would be considered farming.

Position: Possibly.

Reasons: See analysis

12 March 2015 External T.I. 2014-0541991E5 - Objection – Eligible Dividend Designation

Summary Under
Tax Topics - Income Tax Act - Section 89 - Subsection 89(14.1)
designation conditional on appeal result: not acceptable

Principal Issues: 1. For dividends paid before March 29, 2012, whether the CRA would accept an eligible dividend designation made outside the time period set out in subsection 89(14) in circumstances where the result of an appeal causes a taxpayer's GRIP balance to increase. 2. (a) For dividends paid after March 29, 2012, whether the CRA would accept an eligible dividend designation made outside the time period set out in subsection 89(14.1) in circumstances where the result of an appeal causes a taxpayer's GRIP balance to increase; and (b) if answer to (a) is no, whether the CRA would accept a contingent eligible dividend designation which would have been made within the time period set out in subsection 89(14.1) to be held in abeyance and only effective if the appeal upheld the assessment resulting in an increase in the GRIP balance.

Position: 1. No. 2. (a) No. (b) No.

Reasons: See analysis below.

9 March 2015 External T.I. 2012-0469761E5 F - Rights or things

CRA Tags
249(1)(b), 104(24), 150(1)(b), 70(2), 104(13), 104(19), 108(5)(a)
Summary Under
Tax Topics - Income Tax Act - Section 70 - Subsection 70(2)
right to a trust distribution to be paid out of a dividend declared but not paid by a trust investment

Principales Questions: In a situation where the trustees of a discretionary trust adopt a resolution pursuant to which the trust undertakes to pay to a beneficiary an amount corresponding to a dividend to be received by the trust, and the said beneficiary dies between the moment of the declaration of dividend and the payment of the dividend, does the beneficiary have a right or thing pursuant to subsection 70(2)?

Position Adoptée: Question of facts, but possible.

Raisons: Wording of the Act.

26 February 2015 External T.I. 2015-0569601E5 F - Contribution to a TFSA

CRA Tags
146.2(2)(c), 146.2(5)(c)
Summary Under
Tax Topics - Income Tax Act - Section 146.2 - Subsection 146.2(5) - Paragraph 146.2(5)(c)
direct contribution to spouse’s TFSA ends its status/gift to fund spousal contribution acceptable

Principales Questions: Can a spouse write a cheque to the TFSA of his or her spouse?

Position Adoptée: Maybe.

Raisons: It depends if the transaction is a donation or not.

25 February 2015 External T.I. 2013-0503941E5 F - Priority of subsections 135(2) or 135.1(3)

CRA Tags
135(2.1), 135.1(3), 135(2)
Summary Under
Tax Topics - Income Tax Act - Section 135.1 - Subsection 135.1(3)
non-deductible excess cannot be carried forward
Summary Under
Tax Topics - Income Tax Act - Section 135 - Subsection 135(2.1)
numerical carryforward example

Principales Questions: 1. Can patronage dividends not deductible for a particular taxation year under subsection 135.1(3) be deducted in a subsequent taxation year?

Position Adoptée: 1. No.

Raisons: 1. Previous position.

29 January 2015 External T.I. 2014-0517481E5 - Third Party Fundraising

CRA Tags
9, 149(1)(l)

Principal Issues: Issues relating to third party fundraising.

Position: General comments provided.

Reasons: See below.

24 September 2014 External T.I. 2014-0522261E5 - Shareholder benefit on leasehold improvements

CRA Tags
15(1)
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1)
shareholder benefit arising on tenant improvement must be determined even if reimbursement required on lease termination

Principal Issues: 1. If a shareholder/landlord reimburses its corporate tenant for the value of leasehold improvements at the end of the lease, will this mitigate or eliminate the shareholder benefit imposed by subsection 15(1)? 2. Assuming the shareholder described in Question 1 subsequently transfers the ownership of the commercial real estate to its Holdco and then the lease between the Holdco and the corporation (tenant) is extended, would this change the timing of the subsection 15(1) benefit to the shareholder/landlord?

Position: 1. Depends on the facts. 2. No.

Reasons: 1. Question of fact. 2. Same reasoning as response to question 1.

Technical Interpretation - Internal

16 March 2015 Internal T.I. 2013-0479861I7 - Section 116 & forfeited deposits on real property

CRA Tags
248(4), 248(1), 116
Summary Under
Tax Topics - Income Tax Act - Section 116 - Subsection 116(5)
forfeited sale deposit was proceeds of security interest rather than of tcp
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition - Paragraph (b)
forfeited sale deposit was proceeds
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(4)
forfeited sale deposit was proceeds of security interest rather than of tcp

Principal Issues: Whether a forfeited deposit in respect of a cancelled sale of real property in Canada owned by a non-resident is subject to section 116.

Position: Generally, no.

Reasons: Generally, the nature of the deposit is a security interest in respect of the agreement for sale which is excluded from being an interest in real property by subsection 248(4) and therefore not taxable Canadian property as defined by subsection 248(1).

27 January 2015 Internal T.I. 2014-0531331I7 F - Withholdings on retiring allowance

CRA Tags
153, ITR 102, ITR 103
Summary Under
Tax Topics - Income Tax Regulations - Regulation 103 - Subsection 103(4)
annual determination of withholding on retiring allowance instalments

Principales Questions: Does subsection 102(1) or subsection 103(4) of the ITR apply to a retiring allowance that is paid by instalments?

Position Adoptée: Subsection 103(4) applies

Raisons: Based on a textual, contextual and purposive interpretation of the law.

23 December 2014 Internal T.I. 2014-0535921I7 F - Commission d'agent de location

CRA Tags
18(1)(a), 20(1)(a), 18(1)(b)
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Improvements v. Repairs or Running Expense
leasing commissions currently deductible

Principales Questions: Les commissions versées par un propriétaire d'immeuble à un agent pour trouver des locataires sont-elles des dépenses courantes ou des dépenses capitalisables? / Are leasing commissions paid by a landlord to an agent to find tenants current expenditure or capital expenditure?

Position Adoptée: Question de faits, mais en général dépenses courantes / Question of facts, but usually current expenditures.

Raisons: N'apportent habituellement pas d'avantage durable / Do not usually bring an enduring benefit.