Principal Issues: Whether mortgage discharge penalties paid by an employer when an employee is required to relocate constitutes a taxable benefit under 6(23).
Position: Not a taxable benefit
Reasons: Mortgage discharge and prepayment penalties are selling costs of the old residence and not amounts paid in respect of financing of a residence.
1. This file is a XXXXXXXXXX deal which is almost identical to the one concerning XXXXXXXXXX, except that rulings are being given currently rather than opinions provided in the previous deals.
2. The issues concern (a) the applicability of section 18.1 to restrict the deductibility of the XXXXXXXXXX expenses incurred by the XXXXXXXXXX Partnership (b) the at-risk amount under subsection 96(2.2) (c) the deductibility of management expenses (d) the applicability of the limited-recourse provisions under section 143.2 regarding loans granted to Limited Partners for acquisition of their partnership interests and (e) put/call options in respect of the master limited partnership’s interest in the XXXXXXXXXX partnership.
Position:
1. We provided rulings similar to those given in file: #963096 and 983239.
2. Section 18.1 would not apply, if before the end of the taxation year in which the XXXXXXXXXX expenditures are made, income in respect of the XXXXXXXXXX exceeding XXXXXXXXXX % of such XXXXXXXXXX expenses is included in computing the XXXXXXXXXX Partnership's income for that year.
3 The Secondary Loans made by the bank to the Limited Partners are full recourse to the Limited Partners and are interest bearing. For the purpose of subsection 143.2(7), a proviso has been added to ruling regarding that interest on such loans be paid at least 60 days after the end of the year of the Limited Partners.
4. Similarly, a proviso was added to the ruling with regard to Put/Call Option available to the Partnership to dispose of its interest in the XXXXXXXXXX partnership.
Principal Issues:
1. Distress Preferred Share Ruling
2. Limited Partnership incorporating prior to issue of DPS
3. Non-arms length debt financed with DPS
Position: All OK
Reasons:
1. Financial difficulty established.
2. GAAR referral - OK primarily because majority historical limited partner would be majority shareholder of new corp.
3. Debt was refinanced by an arm`s length party prior to issuance of DPS and DPS similarly held by an arm`s length third party.
Principal Issues:
Whether a donation of shares to a public foundation constitutes a gift for income tax purposes, where the donation is subject to numerous conditions contained in an agreement between the donor's main shareholder and the foundation.
Position:
It constitutes a gift.
Reasons:
In previous files, we concluded that the fact that there are conditions attached to a gift does not, in itself, negate the gift (jurisprudence does not provide that conditions negate a gift). As with the other files, the donor in this case is freely parting with the funds or property, receives no benefit, other than recognition, in return and the funds or property can never revert to the donor or any related person.
Whether the proposed payment of damages to a registered pension plan by the former manager is a contribution as defined under paragraph 147.2(1)(b) of the Act.
Submitted by narmstrong on Sun, 12/31/2023 - 18:32
paid-in capital returned as dividend out of Delaware surplus
USco1, a subsidiary of Canco (held directly and through a Canadian subsidiary), will declare and make a distribution which will qualify as a...
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Principal Issues: Is a distribution by a US foreign affiliate a dividend so that there will be no benefit under subsection 15(1)?
Position: Yes, a dividend.
Reasons: XXXXXXXXXX corporate law provides for the issuance of par value shares. It is our understanding that paid-in capital can only be returned as a dividend payment from the corporate surplus account.
Principal Issues: Loan without interest from a foreign affiliate to the parent company of its Canadian corporate shareholder
Position: No benefit under subsection 15(1), 56(2) or 246(1) is considered to be conferred on the Canadian shareholder and its parent company. Neither subsection 15(2) nor section 80.4 applies to the parent company.
Reasons: Both subsections 15(2) and 80.4(2) do not apply to a Canadian resident corporation which receives the loan by virtue of the words “other than a corporation resident in Canada”..
Principal Issues: Would the amendment of a shareholders’ agreement to allow a surviving spouse to retain ownership of shares for the same period that the deceased spouse could have held them be considered to have vested indefeasibly for the purposes of subsection 70(6)?
Position: Yes, in this particular case.
Reasons: The surviving spouse would have the same rights as the deceased spouse and the amendment is not to restrict the surviving spouse’s rights after death.
Principal Issues: In the U.S., corporations are allowed to acquire their shares on the open market and hold them in a special treasury account. Will paragraph 7(3)(b) apply to deny the deduction in respect of a payment by a Canadian corporation to its U.S. Parent for its cost of shares reissued out of this special treasury account in satisfaction of the Canadian corporation’s employees stock option rights?
Position: Yes.
Reasons: It is clear that the provision was meant to apply.
Principal Issues: Whether the benefits under two different flexible employee benefit plans are taxable.
Position: General comments provided since the question involves a finding of fact.
Reasons: It seems that one of the plans would be subject to the comments in paragraph 18 of IT-529, since the documentation indicates that the employees would pay for the medical coverage, on a pre-tax basis. The other plan relates to the 1998 Budget proposal, which provides an income tax deduction to individual sole proprietors and partners in respect of contributions to a “private health services plan.” In an interpretation dated April 28, 1999 (#E9904155), we gave general comments concerning a plan that consisted of a contract between a proprietor and an administrator, under which the administrator agreed to reimburse the proprietor, his spouse and members of his household for actual medical and hospital expenses and received, as consideration, an amount equal to the amount reimbursed plus an administrative fee. We gave the opinion that such a plan does not qualify as a PHSP since it did not contain the necessary elements of insurance.
quaere whether s. 73(5) could apply to farm property transfer to a child trust
53
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Whether subsection 56(4) applies where there unrelated real estate agents assign their commission income to a corporation which is owned equally by the three of them.
Position: Depends on the facts.
Reasons: The question of whether or not commission income “assigned” to a corporation is the corporation’s for income tax purposes will depend on, among other things, the particular fact situation, the terms of the agreement among the parties, and a consideration of any jurisdictional restrictions imposed by federal or provincial statutes. As regards subsection 56(4), in general terms, this provision applies where a taxpayer transfers or assigns a right to an amount to a person with whom the taxpayer does not deal at arm’s length. If persons are not related to each other, it becomes a question of fact whether such persons deal with each other at arm’s length. Paragraph 24 of IT-419R states that there is a general presumption that a shareholder deals at arm’s length with the corporation in which he or she holds shares if the shareholder does not control, nor is otherwise related to, such corporation. In this situation, a shareholder may still be considered not to be dealing at arm’s length with a corporation if he or she is a member of a group of shareholders who act in concert to control the corporation. Acting in concert means a predetermined agreement to act in a certain manner.
Principal Issues: The company plans to send three of its employees to school to obtain degrees related to the employer's business. The proposed contracts governing the arrangements provide for the payment by the employer of tuition fees and related educational supplies, and an interest free loan which to be repaid according to a payment schedule upon returning to work. One contract provides for a non-reimbursable living allowance to be paid to student "B".
Position: The company paid tuition fees and supplies are non-taxable to the employees. It is a question of fact whether the non-reimbursable living allowance paid to student "B" is a non-taxable benefit. The loans are subject to deemed interest benefit under section 80.4
Reasons: Technical News #13 guidelines provide that where employer-paid training which may have been a benefit under paragraph 6(1)(a) prior to the release of the newsletter, would now be a non-taxable benefit when the primary beneficiary is the employer. Such benefits includes fees and associated costs such as meals, travel, accommodation.
Principal Issues: Whether a lump sum payment from and employer's long term disability plan is taxable or accorded the treatment in IT-365 R2 re damages
Position: Few details provided. General comments re IT-428 that payments our of a LTDP is taxable
Reasons: This is an employer sourced plan specifically covered by 6(1)(f) which is likely a lump sum for amounts paid periodically.
Principal Issues:
1.Are education costs of employees non-taxable under the guidelines in Technical News number 15 when employees may be reimbursed for courses supporting the development of specialized skills and knowledge related to the insurance business.
2. Are employer-paid membership fees in professional associations taxable benefits.
Position:
1. Yes.
2. If the primary beneficiary is the employer, no benefit. If the primary beneficiary is the employee, there is a benefit.
Reasons:
1. The courses meet the conditions of specific employer related training per Technical News #13.
2. Per Technical News #15, it depends on whether the primary beneficiary is the employer or the employee.
Principal Issues: Whether one can transfer an amount from an RRSP to a Prepaid Funeral Trust on a tax-assisted basis.
Position: No.
Reasons: Amounts out of an RRSP are taxed on withdrawal unless transferred to another registered plan or eligible annuity; furthermore, interest in a pre-paid funeral trust is not a qualified investment for an RRSP.
Principal Issues: The application of the replacement property rules to rental properties
Position: Gave general comments on the definition in 248(1) re former business property and explained that there was a specific exclusion for rental properties
Reasons: There is a specific legislative rule that the old property cannot be a rental property.
Principal Issues: Whether children employees may be beneficiaries of a DPSP.
Position: Not if they are related to the "employer" corporation in contravention of paragraph 147(2)(k.2).
Reasons: Where shares held in trust and trust beneficiaries are the grandchildren, employee children are probably related to "specified shareholders" of the employer.
Principal Issues:
1) whether non-resident can open an RRSP;
2) tax rates applicable to Italian-resident recipient of RRSP payments
Position:
1) Yes
2) rates under Canada-Italy Tax Convention
Reasons:
1) Nothing in Act restricts residence of RRSP annuitant - Registered Plans confirms no prohibition against registering such a plan. N.B. RRIF cannot be registered unless first annuitant has a SIN - definition of “RRIF”;
2) Rates vary depending on amount received and whether "periodic pension payment", lump-sum or combination of both.
Principal Issues: Can we exempt the income earned on investments held in a U.K. Personal Equity Plan from income taxes in Canada because the U.K. does not tax such income?
Position: No.
Reasons: The Act does not provide for this favourable treatment.
Principal Issues: Does their policy for a proposed deferred salary leave plan satisfy the conditions described in paragraph 6801(a) of the Regulations?
Position: No.
Reasons: The policy does not cover all of the conditions that have to be satisfied before a plan or arrangement will be exempted from the SDA rules under paragraph 6801(a) of the Regulations.
Principal Issues: Does the taxpayer meet the conditions of section 54.1(1) where he moves back to a housing unit that is within 40 kilometers of his original housing unit that he still owns?
Position: Yes, but for prior years only.
Reasons: Subsection 54.1(2) should only be interpreted as an annual test in light of the opening words in subsection 54.1(1) of the Act
Submitted by Anonymous (not verified) on Sun, 11/29/2015 - 02:18
ITC received when deducted
A provincial investment tax credit is considered to be "received" by the taxpayer at the time it is deducted. Similarly, an investment tax credit...
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Principal Issues:
Treatment of provincial ITC earned on property. Is it the amount deducted in the year that reduces capital cost or is it the total ITC earned.
Position:
Amount deducted from provincial tax payable for the year
Reasons:
IT 53R confirms that assistance claimed in the year is received at that time. This would coincide with the requirement of 12(1)(x) which includes assistance in income when received unless excepted under 12(1)(x)(vi) if it has reduced the cost or capital cost of property.
Principal Issues: The extent to which a trustee in bankruptcy is liable for income taxes arising on a disposition of assets held in the estate of the bankrupt.
Position: Under law, it would appear that the bankrupt is liable for all of the income taxes arising in this situation. However, informally, the Revenue Collections Directorate said that this liability is limited to the assets under the trustee's control.
Reasons: Paragraph 128(2)(e) indicates that the trustee is liable for any income taxes arising in dealings of the estate of the bankrupt.
Principal Issues: Whether or not a life insurance policy issued by a non-resident insurer can qualify as an exempt policy.
Position: Generally not.
Reasons: The determination is incumbent on the policyholder and when the policy is issued by a non-resident insurer the required information is usually not available.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
XXXXXXXXXX 991252
Wm. P. Guglich
Attention: XXXXXXXXXX
June 24, 1999
Dear Sirs:
Re: Employment Expense Deduction - Supplies and Equipment
Principal Issues: Whether investing of surplus cash in term deposits and making a loan to a shareholder considered "ordinary business of lending money"?
Position: No.
Reasons: Taxpayer not carrying on business of lending money.
Principal Issues:
Corporation carried on two unrelated businesses prior to acquisition of control. However, each business was related to separate SR&ED work. After control was acquired a business was discontinued while the other was carried on for profit. Is the whole of pre-acquisition pool of SR&ED expenditure related to the continued business to eventually allow the write-off of the pool from income of that one business after control was acquired.
Position:
The law under subsection 37(6.1) does not allow it.
Reasons:
The intent of the law under 37(1)(h) and 37(6.1), together with 249(4) is to restrict trading in corporations having undeducted SR&ED pools.
Submitted by narmstrong on Sat, 02/14/2026 - 02:32
receipt of PUC distribution for personal purposes does not reduce deductible interest if the shares remain as a source of income
In finding that money borrowed in order to acquire shares could continue to bear fully deductible interest, notwithstanding the receipt of a...
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Principales Questions:
Est-ce que les intérêts sur un emprunt, qui a été utilisé pour acheter des actions ordinaires, demeurent déductibles après la réduction du capital versé?
Principal Issues: In the Recalma decision, in identifying and assessing the various connecting factors which are relevant, the Courts placed considerable emphasis on whether the income generating activity of an on-reserve financial institution, the financial institution is part of the commercial mainstream. If an on-reserve financial institution’s income generating activity arises from loans to Indians and Indian businesses situated on reserve, should an Indian be exempt from taxation on his or her investment income because more than 90% (i.e., “all or substantially all” test) of the on-reserve financial institution’s income is “intimately connected” to the reserve? Should an Indian’s investment income earned in an on-reserve financial institution be taxed in proportion to the income earned by the financial institution off-reserve?
Position: Question of fact that is determined by evaluation of connecting factors.
Reasons: Based on Court’s comments in Recalma decision.
Submitted by narmstrong on Sat, 02/14/2026 - 04:03
maximum credit computed on a source-by-source basis
In the situation where a resident individual received interest income from three U.S. financial institutions, two of which withheld at a rate...
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Principales Questions:
Est-ce que le montant maximum que l’on pourrait accorder à titre de déduction pour impôt étranger en vertu du paragraphe 126(1) tient compte des revenus d’intérêts provenant des É.- U. ou ceux provenant de chacune des sources situées aux É.-U.?
sale proceeds were re-allocable under s. 68 to a timber licence notwithstanding no amount allocated to it in the arm’s length sale agreement and its non-transferability
Submitted by narmstrong on Mon, 02/16/2026 - 02:54
sale proceeds were re-allocable under s. 68 to a timber licence notwithstanding no amount allocated to it in the arm’s length sale agreement and its non-transferability
The taxpayer disposed of its hardwood harvesting and processing business. A valuation of the Quebec City TSO considered the taxpayer’s timber...
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sale proceeds were re-allocable under s. 68 to a timber licence notwithstanding no amount allocated to it in the arm’s length sale agreement and its non-transferability
sale proceeds were re-allocable under s. 68 to a timber licence notwithstanding no amount allocated to it in the arm’s length sale agreement and its non-transferability
sale proceeds were re-allocable under s. 68 to a timber licence notwithstanding no amount allocated to it in the arm’s length sale agreement and its non-transferability
sale proceeds were re-allocable under s. 68 to a timber licence notwithstanding no amount allocated to it in the arm’s length sale agreement and its non-transferability
Principal Issues:
Whether or not the amounts recorded in the Head Office Account of a non-resident insurer are included in the capital of the corporation for purposes of Part I.3 tax.
Position:
The total amount of the Head Office Account should be included in the capital for purposes of Part I.3 tax under 181.3(3)(d)(ii) except amounts already included under 181.3(3)(d)(i).
Reasons:
Head Office Account is equivalent to shareholders' equity and retained earnings.
