Income Tax Severed Letters - 2016-06-29

Ruling

2016 Ruling 2015-0608841R3 - 55(3)(a) spin-off

CRA Tags
55(2), 55(3)(a), 251(2)(b)

Principal Issues: Whether corporations related to each other and to relevant individuals. Whether dividends exempt from the application of subsection 55(2) by virtue of paragraph 55(3)(a).

Position: Yes, favourable rulings given.

Reasons: Complies with paragraph 55(3)(a) and administrative positions.

2015 Ruling 2015-0579791R3 - Split-Up Butterfly

CRA Tags
55(2), 55(3)(b), 55(3.1), 85(1), 84(3), 112(1)

Principal Issues: Whether the proposed split-up butterfly meets the legislative and administrative requirements.

Position: Yes

Reasons: Proposed transactions meet the legislative and administrative requirements.

Technical Interpretation - External

16 June 2016 External T.I. 2015-0623031E5 F - Application of paragraph 7(1)(b)

CRA Tags
7(1)(b), 7(1.7)
Summary Under
Tax Topics - Income Tax Act - Section 7 - Subsection 7(1) - Paragraph 7(1)(b)
contingent amount included under s. 7(1)(b), cannot subsequently be excluded
Summary Under
Tax Topics - General Concepts - Effective Date
contingent amount included under s. 7(1)(b) cannot later be reversed

Principales Questions: 1) Whether an amount retained by the corporation from the agreed price is included in the value of the consideration for the disposition pursuant to subparagraph 7(1)(b)(i) if the payment of the retained amount could be reduced due to a lawsuit?
2) If the value of the consideration in paragraph 7(1)(b) includes the retained amount and results in a benefit for an employee in the year of the disposition of the stock option, can the employee request an amendment of his/her income tax return for the year of the disposition if the employee does not receive the full retained amount in a subsequent year?

Position Adoptée: 1) Yes.
2) No.

Raisons: 1) The expression "value of the consideration for the disposition" is broadly interpreted to include an amount which has not been received by an employee in the year of the disposition of the stock option.
2) The initial assessment during the year of disposition of the stock option by the employee is correct in law.

16 May 2016 External T.I. 2015-0576551E5 - Election for U.S. Traditional IRA

CRA Tags
56(1)(a)(i)(C.1), 56(12), Treaties Article XVIII(7)

Principal Issues: Whether an election is needed to defer tax on undistributed income accrued in a Traditional IRA per Article XVIII (7) of the Canada-US Tax Convention.

Position: No.

Reasons: An election is not necessary since the Act already provides for a deferral of taxation with respect to undistributed income accrued in a U.S. Traditional IRA.

Technical Interpretation - Internal

4 April 2016 Internal T.I. 2016-0625241I7 F - Application of section 207.31

CRA Tags
207.31
Summary Under
Tax Topics - Income Tax Act - Section 207.31
tax on sales of ecological lands applies even if no deduction was claimed
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 110.1 - Subsection 110.1(1) - Paragraph 110.1(1)(d)
tax on subsequent disposition irrespective of deduction claimed

Principal Issues: Does the application of section 207.31 depend on the claim of a tax benefit by a donor of a land donated as an ecological gift?

Position: No.

Reasons: Based on the legislation and the fact that the tax pursuant to section 207.31 is intended among other things to ensure the long-term protection of ecologically sensitive property donated as an ecological gift.

17 March 2016 Internal T.I. 2015-0608931I7 - professional liability insurance premiums

CRA Tags
6(1)(a), 8(1)(i)(i)

Principal Issues: Is the payment of professional liability insurance premiums a taxable benefit? If the employer reimburses past years, do they need to amend the T4? What if the employee claimed a deduction under 8(1)(i)(i)?

Position: Question of fact.

Reasons: If the employer is the primary beneficiary of the payment, the amount is not included in the employee’s income.

4 December 2015 Internal T.I. 2015-0606291I7 - Surplus Appropriations - Part VI Capital Tax

Principal Issues: Whether discretionary surplus appropriations form part of capital for purposes of calculating Part VI tax.

Position: Yes.

Reasons: Previous position. It remains our view that such amounts form part of “retained earnings, contributed surplus or any other surpluses” under subparagraph 190.13(b)(ii).