Income Tax Severed Letters - 2018-08-08

Ruling

2017 Ruling 2017-0715791R3 F - 55(3)(a) internal reorganization

Unedited CRA Tags
55(2), 55(3)(a), 55(3.01), 55(5)(e), 55(4)

Principales Questions: Whether the 55(3)(a) exemption applies to the deemed dividends resulting from the reorganization.

Position Adoptée: Yes.

Raisons: Wording of the Act and previous positions.

Technical Interpretation - External

5 June 2018 External T.I. 2017-0738081E5 - Interest exp of foreign affiliate holding company

Unedited CRA Tags
95(1) definition of “foreign accrual property income”, 95(2)(f), 95(2)(f.11), 20(1)(c), Reg. 5907(2.03), Reg. 5907(2.7), Reg. 5907(1) definition of “earnings” and “loss”
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(f)
Canco may choose not to deduct interest expense of a CFA so as not to generate a FAPL
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Property Income - A
deduction of interest in computing FAPI is discretionary

Principal Issues: Whether it is mandatory to claim the maximum deduction available under paragraph 20(1)(c) when computing the foreign accrual property income/loss of a foreign affiliate.

Position: No.

Reasons: Reg. 5907(2.03) is not applicable to the computation of foreign accrual property income/loss. Paragraph 20(1)(c), which is applicable in computing income/loss from property of a foreign affiliate pursuant to paragraph 95(2)(f), is discretionary in nature.

30 May 2018 External T.I. 2017-0717981E5 - Clearance certificate for a non-resident

Unedited CRA Tags
116(1); 159(2); 248(1)
Summary Under
Tax Topics - Income Tax Act - Section 159 - Subsection 159(2)
executors of non-resident estates that could have Canadian tax liabilities to apply for a clearance certificate
Summary Under
Tax Topics - Income Tax Act - Section 116 - Subsection 116(3)
non-resident beneficiaries whose capital interests are TCP are required to apply for certificate

Principal Issues: Non-resident estate distributing assets to non-resident beneficiaries....Is a clearance certificate required?

Position: General comments given-- different requirements depend upon the nature of the property being distributed.

Reasons: Given that the distribution of assets is a disposition of the non-resident beneficiaries capital interest in the trust, if the capital interest meets the definition of taxable Canadian property then subsection 116(1) must be complied with. Where the deceased was a former resident it is advisable for the legal representative to obtain a clearance certificate.

24 May 2018 External T.I. 2017-0710641E5 - Interest Charge Domestic International Sales Corp

Unedited CRA Tags
Reg. 5907(1), (11) and (11.2)(a)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(11.2)
U.S. IC-DISC is “resident” of the U.S. for Treaty purposes as the U.S. asserts its jurisdiction to tax and grants benefits only on continued meeting of conditions
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1) - Exempt Earnings - Paragraph (d)
CMC of FA must be in the DTC and it must be liable to tax therein (albeit, may be conditionally exempted)
Summary Under
Tax Topics - Income Tax Act - Section 250 - Subsection 250(5)
whether a corp resident in the U.S. for Treaty purposes is deemed to be resident there for ITA purposes

Principal Issues: Whether an IC-DISC is resident in the U.S. for purposes of Part LIX of the Income Tax Regulations.

Position: Yes.

Reasons: The IC-DISC is liable to tax in the U.S. by reason of its place of incorporation.

Technical Interpretation - Internal

17 April 2018 Internal T.I. 2018-0739141I7 - Amending a statute barred partnership return

Unedited CRA Tags
152(1.2), 152(1.4), 152(3.1), 152(4)
Summary Under
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1.4)
CRA can treat a late request for a T5013 amendment (which cannot be dealt with under s. 152(1.4)) as a request to assess the partner returns directly
Summary Under
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4)
CRA can treat late T5013 amendment request as one for direct partner assessments/partner returns generally can be amended beyond three years if no change in tax payable

Principal Issues: 1. Whether the Minister may accept an amended partnership information return for a taxation year that is beyond the limitation period provided by subsection 152(1.4) of the Act, where no determination has been made prior to this period. 2. Whether the Minister may accept the request to amend a member of a partnership’s return of income, where no determination of the partnership information return for the particular year has be made and the partnership return is beyond the period provided by subsection 152(1.4) of the Act.

Position: 1. The Minister is not obligated to accept the amended partnership return. 2. Yes, in some circumstances.

Reasons: 1. In a situation where an amended partnership return has been filed beyond the three year period provided by subsection 152(1.4), the Minister is precluded from making a determination unless a waiver was filed, or one of the exceptions in 152(4) apply. Nevertheless, a partnership return is an information return only. Therefore, the Minister may accept the amended partnership return even though the Minister is precluded from making a partnership determination. 2. Subsection 152(4) provides that the Minister may reassess the return of income of a member of a partnership, without making a determination of the partnership under 152(1.4), provided the member’s return of income for the particular taxation year is not statute barred. An adjustment may also be accepted if it does not result in a change from a nil assessment to one with tax, interest or penalties payable.