Income Tax Severed Letters - 2017-03-08

Technical Interpretation - External

11 January 2017 External T.I. 2016-0635351E5 - Employee-shareholder private health services plan

Unedited CRA Tags
6(1)(a)(i); 15(1); 18(1)(a); 56(2)
a qualifying PHSP could encompass the only two employees of a corporation who are the sole shareholder and spouse

Principal Issues: The taxability of PHSP premiums paid on behalf of an employee-shareholder and related persons.

Position: Question of fact.

Reasons: See response.

Technical Interpretation - Internal

29 November 2016 Internal T.I. 2016-0648571I7 - Determination in respect of a partnership

Unedited CRA Tags
152(1.2), 152(1.4), 152(3.1), 152(4)
3-year deadline can be extended under s. 152(4)(a)(i)
s. 152(4) statute-barring rules assimilated into s. 152(1.4)

Principal Issues: Whether the Minister may make a determination beyond the period provided by subsection 152(1.4) with respect to a partnership, where there is a misrepresentation that is attributable to neglect, carelessness or wilful default or the partnership committed fraud in filing the return.

Position: Yes.

Reasons: Pursuant to subsection 152(1.2), Division I as it relates to assessments or reassessments apply to determinations or redeterminations under that Division with the necessary modifications.

15 November 2016 Internal T.I. 2016-0656351I7 - Corporate Minimum Tax Eligible Loss Calculation

Unedited CRA Tags
56(1), 57(1), 58(1), 58(2) and 58(3) of the Taxation Act, 2007
eligible losses for Ontario CMT purposes are not affected by changes in the Ontario allocation factor

Principal Issues: Whether the CMT eligible loss calculation takes into account adjusted net losses arising in previous taxation years in which the corporation had no permanent establishment in Ontario?

Position: Yes, providing the adjusted net losses arise in a taxation year that ended in any of the previous 10 taxation years, if the previous taxation year ended before March 23, 2007. Adjusted net losses that arise in a taxation year ending after March 22, 2007 may be used, to the extent permitted, in the calculation of the CMT eligible loss in the subsequent 20 taxation years. A corporation’s CMT eligible loss for a particular taxation year is the sum of the corporation’s adjusted net losses less any CMT eligible losses that were deducted or deemed to have been deducted for the previous taxation years.

Reasons: CMT eligible losses are not adjusted to reflect changes in a corporation's Ontario allocation and are calculated as if the corporation was subject to CMT in every year.

14 November 2016 Internal T.I. 2015-0600281I7 - Ontario Corporate Minimum Tax - net income

Unedited CRA Tags
54(2), 56(1), 57(1), 58(1), of the Taxation Act, 2007; subsection 9(1) of Ontario Regulation 37/09
Corporations on IFRS should use “Total comprehensive income” as their starting point for ANI/ANL

Principal Issues: Whether net income for Ontario Corporate Minimum Tax (CMT) purposes includes other comprehensive income reported under International Financial Reporting Standards (IFRS).

Position: Yes

Reasons: Net income for Ontario CMT purposes is a corporation’s financial statement net income, before income taxes, determined in accordance with Generally Accepted Accounting Principles (GAAP). Where a corporation uses IFRS for purposes of GAAP, it is appropriate to use “Total comprehensive income” as a starting point in determining adjusted net income/adjusted net loss (“ANI/ANL”), provided the consolidation and equity methods of accounting are not used. However, some items reported in the “Statement of Comprehensive Income” may need to be removed in arriving at the corporation’s ANI/ANL.

26 October 2016 Internal T.I. 2016-0625041I7 - Eligible losses following vertical amalgamation

Unedited CRA Tags
ss 56(1), 57(1), 58(1), 58(4), 58(4,1), 58(5) of the Taxation Act 2007; s. 87, 88 of the Income Tax Act

Principal Issues: Whether a predecessor or subsidiary corporation’s eligible loss for Ontario Corporate Minimum Tax purposes can be carried over to its successor or parent corporation following a vertical amalgamation or wind-up completed after March 21, 2007.

Position: No, subject to the conditions in ss. 58(4.1) or ss. 58(5) of the Taxation Act, 2007.

Reasons: Where a vertical amalgamation to which subsection 87(1) of the ITA applies occurs after March 21, 2007, the carryover of a predecessor corporation’s eligible losses to the successor corporation for CMT purposes is not permitted under the Taxation Act, 2007, in certain circumstances. For winding-ups completed after March 21, 2007 that are subject to the rules in subsection 88(1) of the ITA, eligible losses of a subsidiary are not permitted to be carried-over for CMT purposes to its parent under the Taxation Act, 2007.

12 October 2016 Internal T.I. 2016-0637781I7 - Employee loan or debt extinguished or settled

Unedited CRA Tags
ITA: 6(1)(a); 6(15); 6(15.1); 128(2)(a); 248(1); FAA: 23(2.1); 25(1); BIA: 2; 158; Debt Write-off Regulations, 1994; CLPA: 32
writing-off a statute-barred debt of an employee or remitting for financial hardship triggers benefit
Words and Phrases
settle

Principal Issues: Is an amount owed by an employee to an employer included in income if that amount is written off under the Financial Administration Act?

Position: See response.

Reasons: See response.