Income Tax Severed Letters - 2022-11-23

Ruling

2021 Ruling 2021-0882111R3 - Multing Wing Split Up Butterfly

Unedited CRA Tags
55(2), 55(3)(b), 55(3.1), 249(4), 40(3.3), 40(3.4)

Principal Issues: Whether the butterfly dividend is exempt from 55(2) as a result of qualifying under 55(3)(b)?

Position: Yes.

Reasons: Proposed Transactions meet the requirements of 55(3)(b).

2021 Ruling 2021-0887311R3 - Multi-Wing Split up Butterfly

Unedited CRA Tags
55(2), 55(3)(b), 55(3.1),

Principal Issues: Whether the butterfly dividend is exempt from 55(2) as a result of qualifying under 55(3)(b)?

Position: Yes.

Reasons: Proposed transactions meet the requirements of paragraph 55(3)(b).

2020 Ruling 2020-0868531R3 - Loss Consolidation Ruling

Unedited CRA Tags
20(1)(c), 112, 80, 245

Principal Issues: Whether a particular loss consolidation arrangement is acceptable. In this arrangement, Lossco obtains a daylight loan from a third party and uses the proceeds to make an interest bearing loan to Profitco, its sister corporation, which uses the proceeds to invest in preferred shares of Lossco. The main issues are whether Lossco would be entitled to apply existing non-capital losses against the interest income received on the loan; and whether Profitco would be entitled to deduct the interest expense paid on the loan and the dividends received on the Lossco Preferred Shares.

Position: Yes.

Reasons: The proposed transactions conform to our requirements for these types of loss consolidation rulings, in this case on the basis that the entities involved are related and affiliated. The proposed transactions would be legally effective and commercially plausible.

Technical Interpretation - External

3 October 2022 External T.I. 2021-0882861E5 - Deductibility of future storage costs

Unedited CRA Tags
9(1), 18(1)(a), 18(1)(b), 18(1)(h), 67

Principal Issues: Whether costs incurred by a spouse of a business owner for the storage and maintenance of patient records after the cessation of a professional medical practice are deductible.

Position: Question of fact. Where the future storage and maintenance costs are connected to the period in which the business income was earned by the taxpayer the costs may be deductible, but not by the spouse.

Reasons: Consistent with Tournier v. The Queen, 2018 TCC 229, future storage and maintenance costs incurred by a taxpayer for maintaining records after the cessation of the taxpayer’s business may be deductible where such costs represent the enduring and current provisions of the business activities beyond the period in which the income was received. However, such costs must be incurred by the taxpayer and not some other person as the business is that of the taxpayer.