Income Tax Severed Letters - 2016-01-27

Ministerial Correspondence

26 August 2015 Ministerial Correspondence 2015-0600261M4 - Tax treaties & non-taxation of permanent residents

Principal Issues: Why does Canada allow certain new permanent residents to benefit from the Canadian health care system and education system without them paying tax in Canada as a result of a tax treaty that Canada has with the Republic of China.

Position: General comments given regarding the taxation of residents and non-residents, and the impact of tax treaties on taxation in Canada.

Reasons: See below.

10 August 2015 Ministerial Correspondence 2015-0598591M4 - Home accessibility tax credit

CRA Tags
118.2(2)

Principal Issues: Whether certain renovation costs would qualify for the home accessibility tax credit.

Position: Likely yes, depending on the facts. General comments given.

Reasons: The definitions in subsection 118.041(1).

20 July 2015 Ministerial Correspondence 2015-0593261M4 - Medical expenses - Modification of a van

CRA Tags
118.2(2)(l.7), 118.2(2)(m)

Principal Issues: 1. Request to revise the current limitations regarding the amount of expense that qualifies for the medical expense tax credit when a vehicle is adapted for use in transporting a patient who requires a wheelchair.

Position: 1. Tax policy decisions are the responsibility of the Department of Finance.

Reasons: See below.

Technical Interpretation - External

24 December 2015 External T.I. 2014-0530681E5 - examinations

CRA Tags
118.5(1)(d)

Principal Issues: Whether fees paid by individuals to the XXXXXXXXXX for examinations taken in the XXXXXXXXXX program to become a XXXXXXXXXX qualify as examination fees for the tuition tax credit under paragraph 118.5(1)(d) of the Income Tax Act (the “Act”).

Position: No, the fees do not qualify.

Reasons: A XXXXXXXXXX is not a professional status that is recognized under a federal or provincial statute where that status would allow an individual to practice the profession in Canada.

7 December 2015 External T.I. 2015-0585171E5 F - 7(1)(b) benefit and 110(1.1) election

CRA Tags
7(1)(b), 110(1)(d), 110(1.1)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 110 - Subsection 110(1.1)
election not available if employee stock options on Target shares are purchased by the purchaser rather than surrendered to Target

Principales Questions: Prior to the sale of the shares of a corporation to an arm’s length purchaser, in a situation where paragraph 7(1)(b) applies, whether the arm’s length purchaser who also wants to purchase the stock options of an employee can make an election under subsection 110(1.1).

Position Adoptée: No.

Raisons: While subsection 110(1.1) does not necessarily require that the person purchasing the stock options of an employee be otherwise entitled to a deduction in respect of the options, that person must be the particular qualifying person or a person with whom the particular qualifying person does not deal at arm’s length.

27 November 2015 External T.I. 2015-0599561E5 - Spousal support

CRA Tags
56.1(4), 56(1)(b), 60(b)

Principal Issues: Can garnishment payments be considered as spousal support?

Position: Not enough information given; general information provided.

Reasons: No evidence that garnishment amounts relate to spousal support.

2 November 2015 External T.I. 2015-0594431E5 - Ontario Energy & Property Tax Credit

Principal Issues: Are land lease payments for a mobile home eligible for determining the Ontario Energy & Property Tax Credit?

Position: Question of fact

Reasons: Payments must meet definition of Occupancy Cost in section 98 of the TA.

9 October 2015 External T.I. 2015-0589741E5 - International in-vitro fertilization (IVF)

CRA Tags
118.2

Principal Issues: Whether the cost of IVF performed overseas and related travel costs would be eligible medical expenses for a male taxpayer.

Position: Medical and diagnostic services in relation to IVF for services provided to the taxpayer would be eligible medical expenses provided that they are prescribed by a medical practitioner. Transportation costs and reasonable travel expenses qualify only if all of the conditions under 118.2(g) and (h) are met.

Reasons: The wording in 118.2(2)

28 July 2015 External T.I. 2014-0522271E5 - REIT Distribution - Article 21 Canada-Sweden Treaty

CRA Tags
122.1(1) "real estate investment trust", 212(1)(c), Treaties Article XXII
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 22
Treaty rate on REIT distributions to Swedish resident

Principal Issues: Do distributions from a REIT resident in Canada to a resident of Sweden qualify for relief under the Canada-Sweden Treaty?

Position: Yes.

8 July 2015 External T.I. 2011-0402791E5 - Reporting of cost reimbursements to a non-resident

CRA Tags
ITR 105(1)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 202 - Regulation 202(1) - Regulation 202(1)(a)
reporting applies to reimbursement charges exempted by s. 212(4)(a)

Principal Issues: Whether a Canadian resident corporation would be required to file certain information returns if a reimbursement payment is not subject to Part XIII tax.

Position: Yes, the Canadian resident corporation would be required to file information return(s) such as NR4, Schedule 29 and T106, as applicable.

Reasons: Regulation 202(1) and 233.1 of the Act.

8 July 2015 External T.I. 2011-0430021E5 - Section 119

Summary Under
Tax Topics - Income Tax Act - Section 119
Part XIII dividend tax credited against a departure gain on the shares if s. 40(3.7) stop loss

Principal Issues: Whether withholding tax paid on dividends may be credited against a departure gain on the shares.

Position: General comments provided.

Reasons: Question of fact.

15 June 2015 External T.I. 2014-0525501E5 - Royalty payments & the US or UK Treaties

CRA Tags
212(1)(d), Treaties Article XII
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 12
fees paid to the U.S. or U.K. for access to customer lists were exempt royalties

Principal Issues: 1) Is the fee paid from Canco to OwnerCo considered to be a "royalty" as provided under paragraph 4 of Article XII of the US Treaty and paragraph 4 of Article 12 of the UK Treaty? 2) If so, does paragraph 3(c) of Article XII of the US Treaty and paragraph 3(b) of Article 12 of the UK Treaty provide any relief?

Position: 1) Yes 2) Yes.

Reasons: 1) The payment was for "the use or the right to use,...any information concerning industrial, commercial or scientific experience" as included in the definition of "royalties" in the US Treaty and the UK Treaty. 2) Paragraph 3 of Article XII of the US Treaty (and paragraph 3 of Article 12 of the UK Treaty) generally provides an exemption from Part XIII taxation to a US resident (or UK resident, as applicable) in respect of payments arising in Canada for the use of, or the right to use, inter alia, any information concerning industrial, commercial, or scientific experience.

Technical Interpretation - Internal

9 November 2015 Internal T.I. 2015-0596311I7 - Segway - METC

CRA Tags
118.2(2)(i)

Principal Issues: Can a Segway be a “wheelchair” under paragraph 118.2(2)(i) of the Act for the purpose of the METC?

Position: No

Reasons: No provision of the Act allows a Segway as a medical expense for the METC. The ordinary meaning of the term wheelchair could not be extended to include a Segway.

5 November 2015 Internal T.I. 2015-0585381I7 - Paragraph 95(2)(k) - Fresh Start Rules

CRA Tags
95(2)(k), 95(2)(k.1)
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(k)
fresh start rule can apply to a newly-acquired foreign affiliate notwithstanding Standard Life

Principal Issues: Whether the decision in the Standard Life Assurance Company of Canada case has changed our conclusion in document 2014-0536581I7.

Position: No.

Reasons: There are substantial differences in interpreting the provisions of subsection 138(11.3) and paragraph 95(2)(k) of the Act in accordance with the textual, contextual and purposive approach developed by the jurisprudence and in the context of the relevant facts in the Standard Life Assurance Company of Canada case and our document 2014-0536581I7.

25 September 2015 Internal T.I. 2015-0567751I7 - annual and medical payments thalidomide survivor

Principal Issues: What are the income tax implications of annual payments and payments from an extraordinary medical assistance fund that will be paid by the Government of Canada via a contribution agreement with a third party administrator to each of the Canadian-born thalidomide survivors?

Position: They are not included in income and are not taxable.

Reasons: There is no link to a source of income.

14 September 2015 Internal T.I. 2015-0583031I7 - Registered Education Savings Plan (RESP)

CRA Tags
146.1(1), 248(1)

Principal Issues: (1) Whether the Act permits a distribution of property from an RESP trust (in-kind distribution) as a "refund of payments"; (2) whether, for purposes of the Act, an in-kind distribution from an RESP trust to a subscriber results in a disposition that occurs at fair market value (FMV); and, (3) the tax consequences to a subscriber where the FMV of the in-kind distribution from the RESP trust exceeds the "refund of payments".

Position: (1) Yes (2) Yes (3) The remaining amount will be an "accumulated income payment" which is generally subject to tax under Part I and Part X.5.

Reasons: (1) Subsection 146.1(1) of the Act does not set out any rules or limitations on the distribution of property as a "refund of payments". (2) Where an RESP trust makes a distribution (in-kind or otherwise) to a subscriber, the amount paid out of the plan constitutes a "disposition", as this term is defined in subsection 248(1) of the Act. The amount paid is considered to be at the FMV of the property at the time the amount was paid. (3) In accordance with the definition of "accumulated income payment" in subsection 146.1(1). Subsection 204.94(2) of the Act applies a 20% tax to amounts withdrawn as AIP where the amounts are not eligible for a rollover to another registered plan.