Income Tax Severed Letters - 2016-03-02

Ruling

2015 Ruling 2015-0565531R3 - Partner creating a professional corporation

CRA Tags
125(7), 56(2), 246(1), 103(1), 256(2.1), 96(1)

This ruling has been removed by CRA.

Technical Interpretation - External

16 February 2016 External T.I. 2015-0618601E5 - Earned or Unearned Revenue

CRA Tags
12(1)(x), 56.4, 18(1)(e)
no deferral of lump sum received on signing 15-year supplier loyalty agreement
lump sum received on signing 15-year supplier loyalty agreement was immediately recognized inducement
no deferral for amount included under s. 56.4(2) or 12(1)(x)

Principal Issues: Is the payment received by the taxpayer included in income the fiscal year it was received, or can it be deferred as unearned revenue and amortized over the duration of the contract?

Position: Included in income in the year received.

Reasons: There is no reserve available to the taxpayer under the Act for amounts included in income pursuant to subsection 56.4(2) or paragraph 12(1)(x).

8 February 2016 External T.I. 2014-0549281E5 - Paragraph 212(1)(d) and Patent License

CRA Tags
212(1)(d)(i)

Principal Issues: Whether paragraph 212(1)(d) applies to a payment made by a corporation resident in Canada (the "Taxpayer") to a non-resident of Canada and a resident of country A on behalf of its controlled foreign affiliate, a resident of country B. The Taxpayer initially entered into a licensing agreement for the worldwide rights to use a particular patent, but subsequently assigned the Patent Right Agreement to the controlled foreign affiliate.

Position: Question of fact.

Reasons: To the extent that the payment made by the corporation resident in Canada to the non-resident is a rent, royalty, or similar payment, the full amount of the payment would be subject to Part XIII withholding tax pursuant to paragraph 212(1)(d). Additionally, whether or not the payment was a rent, royalty or similar payment, subparagraph 212(1)(d)(i) would apply to the extent that the payment was for the use of or for the right to use in Canada the particular patent. The determination of whether or not paragraph 212(1)(d) applies to a particular payment by a Canadian resident to a non-resident person is a question of fact based on the legal nature of the transactions and the legal relationships between the parties involved in the series of transactions. A review of all the facts surrounding a particular situation would be required to conclude if the particular payment would be subject to Canadian withholding tax

2 February 2016 External T.I. 2016-0625261E5 - Payment for property injuriously affected

CRA Tags
54 "proceeds of disposition", 53(2)(d), 40(2)(b), 110.6(2), 44(2)

Principal Issues: What is the tax treatment of compensation received for land that has been injuriously affected?

Position: Results in a capital gain or loss. General comments provided.

Reasons: The law.

31 December 2015 External T.I. 2014-0556881E5 - Bill C-43 – Calendar year for testamentary trusts

CRA Tags
248(1)

Principal Issues: Change in tax treatment of testamentary trusts arising from Bill C-43 may result in a deemed tax year end of December 31, 2015. For testamentary trusts previously having a non-calendar year end, the receipt of dividends by the trust on December 31, where the trust habitually allocates this income to its beneficiaries at the trust tax year end, could result in the allocation of dividend income from two trust tax years for the 2015 tax year of the beneficiaries. Are there any transitional rules in place to alleviate reporting more than twelve months of trust income by the beneficiaries?

Position: There are no transitional rules.

Reasons: Bill C-43 did not contain any transitional rules.

10 December 2015 External T.I. 2015-0596851E5 - Refund of Section 116 Withholding

CRA Tags
116, 164(1)

Principal Issues: Whether a trust can receive a refund of the withholding tax remitted pursuant to section 116.

Position: We are not able to provide a ruling on this matter as it relates to a completed transaction. However, we have provided the taxpayer with guidance on where to submit request.

Reasons: See below.