Income Tax Severed Letters - 2019-01-02

Ruling

2016 Ruling 2016-0630761R3 - Transfer of Shares

Unedited CRA Tags
15(1), 40(3), 53(2)(b), 54, 56(2), 85.1(3), 85.1(4), 69(1), 69(4), 93(1), 93(1.1), 92(2), 93(1.11), 113(1), 258(3), 258(5), 5901(2), 5902(6)
Summary Under
Tax Topics - Income Tax Act - Section 93 - Subsection 93(1.11)
transfer of an FA with exempt earnings by FA Holdco to Can Subco required to occur at less than the shares’ FMV
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5901 - Subsection 5901(2) - Paragraph 5901(2)(b)
stated capital distribution from FA treated as pre-acq dividend
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1)
no conferral of benefit where CRA required sideways transfer to occur at less than FMV

Principal Issues: (1) Will a rollover of shares of a foreign affiliate from a Canadian corporation to another foreign affiliate followed by a transfer to a related Canadian resident corporation (that is not a “Canadian corporation”) for less than FMV trigger the benefit provisions in subsections 15(1), 56(2), 69(4) or 246(1)? (2) Will subsection 245(2) apply to the transfer?

Position: (1) In the particular circumstances, no. (2) No.

Reasons: (1) Ruling granted previously in similar circumstances - transaction not to confer benefit – in particular, transaction at less than FMV permitted tax deferred transaction with restriction of ACB of FA1 shares to amount transferred for. (2) The transactions are not a misuse or abuse of the Act or its provisions. There is no avoidance of income tax achieved, only a deferral – not clear that policy of Act intended to deny deferral in these circumstances.

Technical Interpretation - External

2 May 2018 External T.I. 2017-0730581E5 - Employment expenses - deductibility of outplacement services

Unedited CRA Tags
ITA: 6, 6(1)(a), 6(1)(a)(iv)(B), 8, 8(1) and (2)

Principal Issues: Whether the cost of outplacement services paid by an employee to seek employment are deductible from the employee’s income.

Position: No.

Reasons: See response.

Technical Interpretation - Internal

22 March 2018 Internal T.I. 2016-0681201I7 - Basic activity of daily living

Unedited CRA Tags
118.4(1)

Principal Issues: What is meant by "taken together" in subparagraph 118.4(1)(c.1)(ii) which states that, in the context of a basic activity of daily living, mental functions necessary for everyday life include "problem-solving, goal-setting and judgement (taken together)."

Position: It is a question of fact.

Reasons: All three activities taken together are considered mental functions necessary for everyday life (a basic activity of daily living) for purposes of paragraph 118.4(1)(c.1). Any single one of those activities would likely not. Whether a combination of any two of the three activities would be considered a basic activity of daily living would likely be a question of fact.