Income Tax Severed Letters - 2016-12-14

Ministerial Correspondence

17 November 2016 Ministerial Correspondence 2016-0672771M4 - Dedicated Telephone Service for Service Providers

Principal Issues: The CRA should create a telephone line dedicated to accounting professionals.

Position: The CRA’s Income Tax Rulings Directorate will pilot a dedicated telephone service for service providers in July of 2017.

Technical Interpretation - External

9 November 2016 External T.I. 2016-0664451E5 - ECP Rules

Unedited CRA Tags
14(3); 14(5); 13(38); 13(42)
Summary Under
Tax Topics - Income Tax Act - Section 13 - Subsection 13(42) - Paragraph 13(42)(a)
restoration of UCC on arm's length sale of former ECP where CGD previously claimed

Principal Issues: Application of proposed subsections 13(38) and 13(42).

Reasons: See analysis.

7 September 2016 External T.I. 2014-0559751E5 - Subsection 115(3)

Unedited CRA Tags
2(3); 115
Summary Under
Tax Topics - Income Tax Act - Section 115 - Subsection 115(3)
comparison of the Treaty method for allocating non-resident pilot income to the domestic (s. 115(3)) method should be done on an annual basis
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 15
comparison of Treaty and domestic method for pilot income on annual basis

Principal Issues: Whether Article XV of the Treaty takes precedence over subsection 115(3) of the Act where the Treaty provides a more advantageous tax regime for a non-resident pilot.

Position: Yes. Where the pilot is eligible for benefits under the Treaty and the Treaty is more advantageous than the domestic law, Article XV of the Treaty would take precedence over subsection 115(3).

Reasons: The relieving provisions of the treaties generally override the domestic legislation.

3 February 2016 External T.I. 2014-0548111E5 - U.S. tax paid in respect of an LLC's income

Unedited CRA Tags
Subsections 20(11), 20(12), 126(1) and 126(7)
Summary Under
Tax Topics - Income Tax Act - Section 88 - Subsection 88(3) - Paragraph 88(3)(d)
no deemed dividend
Summary Under
Tax Topics - Income Tax Act - Section 126 - Subsection 126(7) - Non-Business-Income Tax
LLC tax paid by Cdn member not re business
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(11)
only income was taxable capital gains
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(12)
s. 20(14) deduction for US operating-income taxes imposed on Cdn LLC member even where his only Cdn income from LLC is taxable capital gain
Summary Under
Tax Topics - Income Tax Act - Section 126 - Subsection 126(1)
FTC for US operating-income taxes imposed on Cdn LLC member even where his only Cdn income from LLC is taxable capital gain
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 24
Treaty sourcing rule does not trench on domestic FTC

Principal Issues: Whether any or all of subsections 20(11), 20(12), and 126(1) can apply to allow/restrict a Canadian resident shareholder of a U.S. LLC to deduct in computing its income and/or obtain a foreign tax credit in a particular year in respect of U.S. income tax paid by the individual on its portion of the income of the LLC for that year where in that year the LLC paid no dividends and the individual disposed of its shares of the LLC.

Position: (i) Subsection 20(11) should not apply; (ii) subsections 20(12) and 126(1) could have application.

Reasons: (i) Subsection 20(11) should not apply since in the particular year the individual would not have included in its income any income from the LLC shares; (ii) in respect of subsections 126(1) and 20(12), the U.S. tax paid by the individual should be "non-business income tax" under subsection 126(7) and should be “in respect of that income” for purposes of subsection 20(12).

Technical Interpretation - Internal

6 February 2015 Internal T.I. 2015-0566681I7 F - Redevances perçues d'avance

Unedited CRA Tags
9(1), 12(1)a)
Summary Under
Tax Topics - Income Tax Act - Section 9 - Timing
lump sum irrevocable prepayment of contingent future royalties fully included
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(a)
irrevocable royalty prepayment under s. 12(1)(a) or 9
Words and Phrases
royalty

Principales Questions: La vérificatrice nous a demandé de corriger une erreur typographique qui s’est glissée au point #13 de l’interprétation # 2014-052475 où la date de fin d’année indiquée soit le « XXXXXXXXXX » aurait dû se lire le « XXXXXXXXXX ». De plus, au numéro 7, la référence à l’alinéa 111(1)a) aurait dû être une référence au paragraphe 111(5) de la Loi. / The auditor asked us to correct a typographical error contained in item 13 of the interpretation # 2014-052475 as the indicated year-end date which appears as "XXXXXXXXXX" should be read as "XXXXXXXXXX". Also, in item 7, reference to subsection 111(5) should have been made instead of paragraph 111(1)(a) of the Act.

Position Adoptée: Les modifications ont été apportées telles que demandées / The changes were made as requested.

Raisons: Les modifications ne changent aucunement la réponse énoncée dans l’interprétation # 2014-052475 mais assure le demandeur que nous avons pris compte de tous les faits dans l’étude de ce dossier. / Does not change the response set out in the interpretation # 2014-052475 but assured the requestor that we took into account all the relevant facts in the course of our analysis.