Income Tax Severed Letters - 2015-05-13

Ruling

2014 Ruling 2014-0534751R3 - Deemed dividends from ULC holdco and Art IV(7)(b)

CRA Tags
84(1), 245(2), Treaties Article X(2)(a), 212(2)(a), Treaties Article IV(7)(b)
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 4
2-step PUC increase and distribution by ULC coupled with dividend paid directly by exchangeable share sub of ULC to U.S. Parent

Principal Issues: Application of Article IV(7)(b) to deemed dividend payments by Canadian-resident entity that is fiscally transparent for United States income tax purposes.

Position: Article IV(7)(b) does not apply to the payments in question.

Reasons: For the purposes of Article IV(7)(b), the dividends will receive the same United States income tax treatment if the Canadian-resident entity were not fiscally transparent for United States income tax purposes.

Technical Interpretation - External

28 April 2015 External T.I. 2015-0576511E5 - Fishing vessels and Atlantic Investment Tax Credit

CRA Tags
127(9), Oceans Act 5, Oceans Act 4, Oceans Act 6, Interpretation Act 2.1, Oceans Act 25, ITR 4609, 37(1.3), Interpretation Act 35(1), Oceans Act 13, 255
Summary Under
Tax Topics - Income Tax Act - Section 127 - Subsection 127(9) - Qualified Property
qualification of fishing vessels used within 200-mile limit

Principal Issues: Whether a new fishing vessel can qualify for the AITC if it is primarily used in the prescribed offshore region?

Position: Yes.

Reasons: See below.

24 April 2015 External T.I. 2014-0560401E5 - Subsections 15(2) and 227(6.1) and Part XIII tax

CRA Tags
215, 15(2.6), Part XIII, 227(6.1), 15(2.1), 214(2), 15(2), 214(3)(a)
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.6)
repayment to assignee of original creditor
Summary Under
Tax Topics - Income Tax Act - Section 227 - Subsection 227(6.1)
repayment of assigned loan to assignee after 2 years

Principal Issues: In the context of an assignment of a debt receivable in circumstances which had resulted in subsection 15(2) applying and Part XIII tax having been assessed, if the debt is subsequently repaid by the debtor to the new creditor, can the Part XIII tax assessed be refunded?

Position: Yes and the amount of the subsection 227(6.1) refund would be the lesser of: (a) the amount of Part XIII tax paid; and (b) the amount of Part XIII tax that would be payable if a dividend equal to the amount of the repayment were paid at the time of the repayment. The hypothetical dividend described in paragraph 227(6.1)(b) is a dividend paid by the original creditor described in the preamble to the debtor.

Reasons: The words of subsection 227(6.1) merely state that the person has to repay the loan. It does not state that the person has to repay the loan to the original creditor that initially made the loan.

21 April 2015 External T.I. 2013-0494251E5 - 128.1(4) and Part XIII tax on future payments

CRA Tags
12(1)(g), 212(1)(d)(v), 248(1) property, 128.1(4)(b), Treaties Article XII
Summary Under
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(4) - Paragraph 128.1(4)(b)
right to client list utilization payments
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(d) - Subparagraph 212(1)(d)(v)
client list utilization payments to U.S. resident
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 12
client list utilization payments to U.S. resident

Principal Issues: (1) Is a right to receive income based on the use of or production from a client list subject to the deemed disposition on emigration? (2) Post emigration, how are such payments to the non-resident subsequently taxed in Canada?

Position: (1) Yes, a disposition of the right is deemed to occur as a result of emigration. (2) Subsequent payments would fall under paragraph 212(1)(d)(v) subject to relief under a tax treaty.

Reasons: (1) A right to such payments is a "property" as that term is defined in subsection 248(1) of the Act, and not otherwise excluded from the application of 128.1(4)(b). (2) Subsequent payments made to the non-resident of Canada that are dependant solely on the use of or production from a client list in Canada are contemplated under 212(1)(d)(v) of the Act. However, article XII(3) of the Canada-US Treaty generally provides an exemption from Part XIII taxation to a US resident in respect of payments arising in Canada for the use of, or the right to use, any patent or any information concerning industrial, commercial or scientific experience.

10 April 2015 External T.I. 2014-0535951E5 - Election under DSU Plan

CRA Tags
ITR 6801(d), 248(1)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 6801 - Paragraph 6801(d)
deadline for deferring compensation under DSU plan

Principal Issues: When must an employee make an election to defer salary or wages in the form of DSUs under a 6801(d) or DSU plan?

Position: Prior to the point in time when the employee has the right to receive, or constructively receive, the salary or wages that the employee can defer in the form of DSUs.

Reasons: Definition of "salary deferral arrangement" in subsection 248(1), the paragraph (l) exclusion thereunder, and the provisions of paragraph 6801(d) of the Regulations.

2 April 2015 External T.I. 2015-0571501E5 F - Perte sur certains transferts

CRA Tags
13(21.2), 20(1), ITR 1102(1)
Summary Under
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.2)
CCA claims made on hypothetical property while partnership is deemed to exist by s. 13(21.2)(f)

Principales Questions: Une société de personnes qui cesse d'exister peut-elle réclamer la déduction pour amortissement aux termes du paragraphe 13(21.2)? / Can a partnership that has ceased to exist claim CCA pursuant to subsection 13(21.2)?

Position Adoptée: Question de fait qui dépend notamment du moment où la société de personnes a cessé d'exister. / Question of fact which depends, amongst other things, on the moment it has ceased to exist.

Raisons: Si le paragraphe 13(21.2) s'applique, la société de personnes pourrait réclamer la DPA à l'égard du bien hypothétique pour la période durant laquelle elle est réputée ne pas avoir cessé d'exister. / If subsection 13(21.2) applies, the partnership could claim CCA with respect to the fictional property for the period during which it is deemed to have ceased to exist.