Income Tax Severed Letters - 2017-11-22

Ruling

2016 Ruling 2015-0611061R3 - Loss Consolidation Arrangement

Unedited CRA Tags
20(1)(c)

Principal Issues: Whether the proposed use of excess ITCs to offset income of a related and affiliated corporation is acceptable.

Position: Yes.

Reasons: The proposed transactions fall within CRA's policy for loss consolidation arrangements.

2016 Ruling 2015-0614081R3 - Flow through shares - farm-out agreement

Unedited CRA Tags
66(15), 66(12.71), 66.1(6), 66.2(6), 245(2)
U.S. public corporation can issue flow-through shares for CEE performed under a farm-in agreement with a Canadian sub
exploration under farm-in not integrated with existing mine workings

Principal Issues: (1) Whether expenses relating to a proposed exploration program will qualify as Canadian exploration expenses under paragraph (f) of the definition of CEE and will not be considered to be related to a mine that has come into production in reasonable commercial quantities or to a potential or actual extension thereof; (2) Whether, if such expenses are incurred by a non-resident corporation carrying on business in Canada pursuant to a "farm-out agreement", such expenses could be renounced to flow-through shareholders; (3) Whether the farmer will have proceeds of disposition as a result of farming out Canadian resource properties; and (4) Whether GAAR would apply to recharacterize the tax consequences of the Proposed Transactions.

Position: (1) Yes, (2) Yes, (3) No, (4) No.

Reasons: (1) Based on the facts presented and written opinions provided by Natural Resources Canada, (2) By virtue of engaging in exploration activities in Canada, the non-resident corporation will be carrying on business in Canada. Therefore, subsection 66(12.71) will not preclude the non-resident from renouncing CEE to flow-through shareholders; (3) The Farm-in Agreements satisfy the administrative position in Interpretation Bulletin IT-125R4; (4) The proposed transactions are consistent with the administrative position relating to farm-out arrangements and there would therefore not be a misuse or abuse.

2016 Ruling 2015-0624601R3 - Loss Consolidation

Unedited CRA Tags
20(1)(c); 88(1)

Principal Issues: Loss consolidation in which a lossco lends money to a profitco for the acquisition of shares of a newly incorporated company.

Position: Similar to other loss consolidation rulings that we have given.

Reasons: The proposed transactions comply with our requirements for loss consolidation arrangements.

Ministerial Correspondence

19 September 2017 Ministerial Correspondence 2017-0712611M4 - Qualified investment

Principal Issues: What constitutes a qualified investment?

Position: General comments provided.

28 June 2017 Ministerial Correspondence 2017-0709781M4 - Expanding the Home Buyers Plan for flood victims

Unedited CRA Tags
146.01

Principal Issues: Requesting the expansion of the Home Buyers Plan to include the rebuilding of flood victims homes.

Position: Referred to Finance.

Technical Interpretation - External

1 November 2017 External T.I. 2016-0674411E5 - Election under 110(1.1)

Unedited CRA Tags
7(3)(b), 110(1)(d), 110(1.1)

Principal Issues: Whether the mechanism in subsection 110(1.1) is available in a situation where paragraph 7(3)(b) already applies to deny the employer a deduction for the stock option expense and thus there is no deduction for the employer to "give up" as contemplated by subsection 110(1.1).

Position: Yes.

Reasons: Nothing in subsection 110(1.1) restricts its application to situations in which the employer is otherwise entitled to a deduction.