Income Tax Severed Letters - 2023-10-18

Ruling

2022 Ruling 2022-0937661R3 F - 104(4) and pipeline transaction

Unedited CRA Tags
84.1, 84(2), 104(4), 212.1, 245(2)
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2)
pipeline transaction to raise the funds for the application of the CRA s. 104(5.8) GAAR position to an inter vivos trust used to try to avoid the 21-year deemed disposition
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(5.8)
GAAR applicable to trust holding a corporate beneficiary that was distributed property from an inter vivos trust approaching its 21st anniversary
Summary Under
Tax Topics - Income Tax Act - Section 245 - Subsection 245(2)
GAAR treated as self-applying

Principales Questions: A trust will realize a capital gain as a result of the application of subparagraph 104(4)(b)(ii) to shares of a Canadian-controlled private corporation (Holdco) and will include the taxable capital gain realized in its income. After the 21st anniversary of the trust, the trust will distribute under subsection 107(2) some of its shares in the capital stock of Holdco to Father. Father will enter into a pipeline type transaction (the Proposed Transactions) and will receive a Note from Nouco. 1) Does section 84.1 apply to the Proposed Transactions? 2) Does subsection 84(2) apply to the Proposed Transactions? 3) Does section 245 apply to the Proposed Transactions?

Position Adoptée: 1) No. 2) No. 3) No.

Raisons: see below.

Technical Interpretation - External

20 September 2023 External T.I. 2023-0959371E5 - Salary received by a sole shareholder-employee

Unedited CRA Tags
Paragraph 81(1)(a) - ITA, Section 87 - Indian Act

Principal Issues: Whether salary paid to a sole shareholder-employee of a corporation qualifies for the tax exemption under the Indian Act.

Position: Depends on the factors related to the income-earning activities of the corporation.

Reasons: The Indian Act tax exemption is not dependent on the legal form or structure of a business but on the activities that generated the income.

Technical Interpretation - Internal

6 September 2023 Internal T.I. 2019-0805481I7 - Interaction of 17.1(1) & 247(2)

Unedited CRA Tags
15(2), 17.1, 247.
Summary Under
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2.1)
there is no conflict in applying both ss. 17.1 and 247(2) to impute interest on a PLOI
Summary Under
Tax Topics - Income Tax Act - Section 17.1 - Subsection 17.1(1)
interest can be imputed under s. 247(2) to a PLOI which already is subject to s. 17.1 imputed interest

Principal Issues: Whether subsection 247(2) could apply in conjunction with section 17.1 to the same transaction?

Position: Yes.

Reasons: No conflict.