Income Tax Severed Letters - 2017-01-04

Ruling

2015 Ruling 2014-0563061R3 - 55(3)(a)

Unedited CRA Tags
55(2), 55(3)(a)

Principal Issues: Whether the proposed transactions described in the Ruling meet legislative and administrative requirements?

Position: Transactions meet requirements.

Reasons: Consistent with law and administrative requirements.

Technical Interpretation - External

29 September 2016 External T.I. 2016-0667811E5 - Transfer of retiring allowance to RRSP

Unedited CRA Tags
60(j.1)

Principal Issues: Whether the comments in IT-337R4 remain valid.

Position: Yes.

Reasons: Paragraph 60(j.1) is unchanged.

23 August 2016 External T.I. 2015-0614981E5 - Foreign Share for share Exchange

Unedited CRA Tags
85.1(5), 85.1(6)
Summary Under
Tax Topics - Income Tax Act - Section 85.1 - Subsection 85.1(5)
position on fractional share exchanges under 85.1(1) applies to 85.1(5) exchanges

Principal Issues: In the context of a foreign share for share exchange, where a vendor receives newly-issued shares of the purchaser and non-share consideration for each exchanged share, but the purchaser's offer does not indicate which fraction of each exchanged share is exchanged in consideration for the newly issued shares of the purchaser and which fraction of each exchanged share is exchanged for non-share consideration, can the rollover in subsection 85.1(5) still apply to the portion of the tendered shares that are exchanged solely for share consideration?

Position: No

Reasons: Where the purchaser’s offer does not clearly specify the fractional information noted in point 2 of paragraph 1.7 of the Folio, the requirements of 85.1(5) will not be met in a situation where a vendor receives newly issued shares of the purchaser and non-share consideration for each exchanged share.

19 August 2016 External T.I. 2015-0585471E5 - Thin cap rules and trusts

Unedited CRA Tags
18(5) "equity amounts"
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(5) - Equity Amount - Paragraph (b)
calculation of total contributions up to each month and then average

Principal Issues: What is meant by the words, “average of all amounts each of which is the total amount of all equity contributions to the trust made before a calendar month that ends in the year” in clause (b)(i)(A) of the definition of “equity amount” (of a trust) in subsection 18(5)?

Position: For each of the calendar months that end in the relevant taxation year, the trust would calculate the total applicable contributions to the trust from its creation to immediately before that calendar month. The trust would then calculate the average of these monthly totals.

Reasons: This meaning is based on a textual analysis of the words in the definition. This interpretation is consistent with the calculation of the average contributed surplus and paid up capital of a corporation in paragraph (a) of the definition.

25 July 2016 External T.I. 2016-0630781E5 - 104(13.3) and a CPP/QPP death benefit

Unedited CRA Tags
56(1)(a.1), 104(1), 104(13.1), 104(13.3), 104(24)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(24)
executor's year would not preclude a CPP death benefit from being payable to the beneficiaries in the year
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(13.3)
CPP benefit generally no longer eligible under 104(13.1)

Principal Issues: The requester asked for our confirmation of their assumptions regarding the application of 104(13.3): 1. the circumstances in which executors will be able to make a subsection 104(13.1) designation in 2016 and subsequent tax years will be limited to those situations in which the estate has no taxable income; and 2. the option to include the CPP/QPP death benefit on a T3 return will no longer be available.

Position: 1. We agree 2. Depending on the facts, the benefit will be taxed in the hands of the beneficiary or in the hands of the estate.

Reasons: 1. Wording of 104(13.3) 2. Question of fact to be determined considering all of the applicable circumstances including (where applicable) the terms of the will.

Technical Interpretation - Internal

10 May 2016 Internal T.I. 2016-0644761I7 - RPP borrowing

Unedited CRA Tags
8502(i)
Summary Under
Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(o.2) - Subparagraph 149(1)(o.2)(iii)
149(1)(o.2)(ii) corp. could incur purchase price indebtedness on internal transfer in excess of vendor’s cost
Summary Under
Tax Topics - Income Tax Regulations - Regulation 8502 - Paragraph 8502(i)
pension plan could correct excess borrowing on a going-forward basis through assumption of the debt by a 149(1)(o.2)(ii) sub with plan guarantees

Principal Issues: Whether a registered pension plan contravenes the borrowing restriction in Regulation 8502(i).

Position: Yes.

Reasons: The plan fails to meet the exception for real estate borrowings as the amount of borrowed money exceeded the cost of the property acquired.