Principal Issues: Whether XXXXXXXXXX company can exclude from income XXXXXXXXXX delivered to customers, which are returned in the first 90 days of the following year
Position: No.
Reasons: No reserve can be claimed because at year end the liability to credit customers for XXXXXXXXXX returned is contingent. Also, where title to the XXXXXXXXXX passes to the customer, and the customer has an absolute, but not necessarily immediate, obligation to pay for them, the sale price included in income cannot be retroactively adjusted for goods returned in a subsequent year.
Principal Issues:
1. Would the addition of a beneficiary to a discretionary trust, as permitted under the terms of the trust, result in a resettlement of the trust property?
2. Would the addition of a beneficiary to a discretionary trust result in a disposition of any part of the existing beneficiaries' interest in that trust?
3. If yes to 2., what is the FMV of that interest?
Position:
1. No.
2. Yes, it would result it a partial disposition of the interest of each of the existing beneficiaries.
3. While not free from doubt, the value of each beneficiary's interest at a particular point in time would approximate a proportionate share of the FMV of trust property at that time.
Reasons:
1. The terms of the trust have provided for the addition of beneficiaries from the beginning such that the trustees' exercise of their right to add such a beneficiary does not create a new trust.
2. The addition of another beneficiary varies the rights of the existing beneficiaries such that they are considered to have disposed of a portion of their interest in the trust.
3. CCRA response to this question at the 1992 BC Conference of the CTF was that it was admittedly difficult to quantify the value of an interest in a discretionary trust. It would be unreasonable to conclude that the FMV of an interest is a discretionary trust holding property with significant value has no value simply because it is difficult to measure. In absence of any term of the trust that would direct the trustees to favour one beneficiary over another, the even handed principle would suggest that value of each beneficiary's interest was approximately equal. Where the facts support a finding that one beneficiary has a lesser chance of receiving a distribution from the trust than another beneficiary, it may be appropriate to discount the value of one interest and increase the value of another.
Principal Issues: Will a non-resident investment fund not be considered to be carrying on business in Canada solely because of the provision of certain investment advisory and custodian services by residents of Canada?
Position: Ruling granted.
Reasons: Requirements of subsection 115.2(2) of the Income Tax Act have been met.
Principal Issues:
1. Whether the XXXXXXXXXX Note to be issued to a special purpose vehicle in a loan-backed innovative instrument financing will evidence borrowed money for the purpose of paragraph 20(1)(c).
2. Whether subsection 104(7.1) will apply to deny a deduction to the special purpose vehicle under paragraph 104(6)(b) of amounts payable to its unitholders.
Position Adoptée:
* Oui, si l'associé dispose en totalité de sa participation dans l'année où il se retire de la société de personnes, le sous-alinéa 53(1)e)(i) ou 53(2)c)(i) de la Loi s'appliquera, selon le cas, afin de considérer dans le calcul du PBR de sa participation dans l'année où il en dispose sa part du revenu ou de la perte dans la société de personnes relative à l'exercice se terminant dans cette année.
Principal Issues: Whether a transfer of the legal title, without any change in beneficial ownership, constitutes a disposition.
Position: No
Reasons: By virtue of paragraph (e) of the definition of "disposition" in subsection 248(1) of the Income Tax Act, a disposition does not include a transfer of property in which there is a change in the legal ownership without any change in the beneficial ownership.
Principal Issues: Will certain provisions of the Act relating to employee stock option plans apply to an employee's participation in a particular arrangement?
Position: Yes.
Reasons: The new plan satisfies the provisions pertaining to employee stock option plans. The conversion of future bonus/ director fee rights for options will not be a taxable event.
Principal Issues:
1. Will the addition of the payment options to the Supplementary Pension Plan result in the Supplementary Pension Plan Plan, or any part of the Supplementary Pension Plan Plan, being characterized as a "salary deferral arrangement" as defined in subsection 248(1) of the Income Tax Act (the "Act")?
2. Will the benefits payable from the Supplementary Pension Plan Plan be included in a member's income for tax purposes pursuant to subparagraph 56(1)(a)(i) of the Act when received by the member?
Position: 1. No 2. Yes
Reasons:
1. Does not meet the definition of an SDA since specifically excluded under (a) of the exclusions in the definition.
2. The proposed payments meet the definition of "superannuation or pension benefit" as defined in subsection 248(1) of the Act.
Principal Issues: Does subsection 111(5) allow the losses of a loss company to be carried forward by an acquiror corporation if the acquisition is carried out in two stages - acquisition of the assets of the loss business followed 15 months later by an acquisition of control of the loss company - if all the requirements of subsection 111(5) respecting the carrying on of the business are satisfied?
Position: Yes.
Reasons: The technical requirements of subsection 111(5) are satisfied.
Submitted by narmstrong on Sun, 09/17/2023 - 02:48
exclusion of s. 7(2) trusts for greater certainty
CCRA indicated that the amendment of para. (a.1) to explicitly exclude s. 7(2) trusts confirmed that, under the more ambiguous previous language,...
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Principales Questions:
Est-ce qu'une fiducie sujette au paragraphe 7(2) est visée à l'alinéa a.1) de la définition de " fiducie " au paragraphe 108(1) de la Loi?
Principal Issues:
Whether amounts paid to a contract researcher would qualify as scientific research and experimental development carried on in Canada
Position:
Requirements of paragraph 37(1)(a)(i) satisfied if payer did not enter into the research contract as an agent of its parent corporation
Reasons:
If agency relationship exists between parent and subsidiary, contract research will not be completed on behalf of the payer - all factors relevant, not only Application policy paper #94-4
Principal Issues:
Is a public corporation that is no longer listed on a prescribed stock exchange in Canada still a qualified investment for an RRSP?
Position: It may be.
Reasons:
If the company is still a public corporation pursuant to paragraph (c) of the definition of "public corporation" in subsection 89(1) it will continue to be a qualified investment by virtue of paragraph 4900(1)(b).
Principal Issues: Whether several wind turbines to be acquired and installed in a wind farm project would qualify as "test wind turbines" for the purposes of section 1219 of the Regulations?
Position: Yes, provided that the draft amendments to section 1219 of the Regulations would be enacted as proposed by Finance on July 26, 2002.
Reasons: By virtue of the existing paragraph 1219(3)(a) of the Regulations, only the first wind turbine in each wind farm project would qualify as "test wind turbine". However, pursuant to the proposed amendments to this paragraph dated July 26, 2002, more than one wind turbine in a wind farm project could qualify as "test wind turbines" provided other requirements are met.
Principal Issues: A Canadian corporation has an outstanding debt to a specified non-resident. The first level of interest is accruing, but is not due. If a second level of interest (i.e. compound interest) is paid on the first level of interest, will we consider the first level of interest to be "outstanding debts to specified non-residents" as defined in subsection 18(5) of the Act?
Position: Yes
Reasons: We consider that the first level of interest is "outstanding" for purposes of subsection 18(5).
Principal Issues:
Does tax-exempt status apply to payments to a status Indian from her RRIF?
Position: Question of Fact.
Reasons:
If RRIF funds originated as an RPP entitlement related to tax-exempt employment income, the Guidelines exempt both principal & investment income paid to a status Indian from taxation.
Principal Issues: A letter has been sent to us that involves an unreported deemed disposition (a change in use) of a rental property in a taxation year in respect of which the "normal reassessment period" (as described in subsection 152(3.1) of the Income Tax Act (the "Act")) has expired. However, an additional assessment or reassessment can be issued under paragraph 152(4)(a) of the Act if the taxpayer "has made any misrepresentation attributable to neglect, carelessness or wilful default or has committed fraud in filing the return or in supplying any information" under the Act. Since it is necessary to review all the relevant facts of an actual situation in relation to paragraph 152(4)(a) of the Act and the review of completed transactions falls within the responsibilities of Tax Services Offices, we have referred the letter to the Toronto North Tax Services Office.
Principal Issues:
Can certain costs incurred by a group RRSP sponsor be paid by the trust governed by the RRSP?
Position: It is a question of fact.
Reasons:
Only the costs that belong to the group RRSP may be paid from the funds held by the group RRSP. Without any information, we could not make this determination.
Principal Issues: Whether subsection 116(4) certificate issued to the purchaser in respect of property acquired from non-resident can be relied on in circumstances described?
Position: No.
Reasons: Subsection 116(4) was not complied with and this would be clear to the purchaser from a review of a copy of the certificate; purchaser liable for tax pursuant to subsection 116(5).
Principal Issues: Whether the cost of a "Rick Shaw" is eligible for the medical expense tax credit. The "Rick Shaw" is designed for use as a bike trailer for disabled children and adults weighing up to 200 pounds and may be converted to a wheelchair by simply attaching the two front detachable wheels that come with it.
Position: Yes, if purchased for someone that requires a wheelchair.
Reasons: Based on the ordinary meaning of the term "wheelchair."
Principal Issues: 2002 CTF: Silicon Graphics (FCA)
Position: Impact of Silicon Graphics decision regarding control by groups and de facto control; also discusses a recent position on paragraph (b) of the CCPC definition
Submitted by narmstrong on Sun, 09/24/2023 - 00:33
change in policy re CDA credit for life insurance proceeds paid to creditor is retroactive re the computation
In 2002-0122944 F, CCRA indicated that the CDA of a corporation for purposes of an s. 83(2) election made after July 8, 2002 could include the...
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Principale Question:
Quel est la date d'application de notre nouvelle position énoncée dans le dossier 2002-012294?
Position Adoptée:
Notre nouvelle position s'applique à l'égard de toutes les cotisations ou les nouvelles cotisations futures en vertu de la partie III de la Loi.
RAISON POUR POSITION ADOPTÉE:
Notre politique habituelle énoncée au paragraphe 5 de l'index des bulletins d'interprétation et nouvelles techniques de l'impôt.
XXXXXXXXXX 2002-016081
L. J. Roy, CGA
Le 5 novembre 2002
Submitted by narmstrong on Sun, 09/24/2023 - 15:38
no credit to CDA of creditor on receiving life insurance proceeds pursuant to pledged policy of debtor
In 2002-0122944 F, CCRA indicated that the CDA of a corporation for purposes of an s. 83(2) election made after July 8, 2002 could include the...
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Position Adoptée:
Non.
RAISON POUR POSITION ADOPTÉE:
Les droits du créancier hypothécaire à l'égard de l'hypothèque sont des droits de perception conférés par l'hypothèque sur le droit de créance du titulaire à l'égard de l'assureur. En outre, le créancier hypothécaire reçoit le produit de l'assurance-vie en paiement de la dette du débiteur titulaire de la police d'assurance-vie.
XXXXXXXXXX 2002-016169
L. J. Roy, CGA
Le 5 novembre 2002
Principal Issues: (1) Is an employee of a specified employer who worked at a work site outside Canada for a period of more than 6 consecutive months, commuting to the work site each day for 5 days a week, working at such site for the full day, and returning to his or her home each evening eligible for the overseas employment tax credit ("OETC")? (2) Other general questions on the OETC.
Position: (1) Yes, assuming that throughout that "qualifying period" the employee performed all or substantially all (that is, at least 90%) the duties of his or her employment: (i) outside Canada; and (ii) in connection with a contract under which Canco carried on business in the U.S. with respect to a "qualifying activity". However, it is not clear whether this conclusion is consistent with the policy intent of section 122.3 of the ITA. (2) See attached letter.
Reasons: (1) All the requirements for the OETC under section 122.3 of the ITA appear to be satisfied; the daily commute from Canada to the work site outside Canada and then back to Canada each evening does not appear to preclude the employee from having a "qualifying period". (2) See attached letter.
Principal Issues: Eligibility for the education tax credit.
Position: Question of Fact.
Reasons:
Eligibility for the education tax credit is to be determined on a case-by-case basis. An individual must satisfy all of the conditions of section 118.6.
Principal Issues:
Can we state that all status Indian employees of stores located on lands that are adjacent to remote reserves would be exempt from income taxes?
Position: No.
Reasons:
This determination is always a question of fact requiring a review of the facts in each particular case.
Principal Issues: Would income of a foreign affiliate derived from the leasing of boats to another non-resident corporation be foreign accrual property income ("FAPI") or income from an active business?
Position: Insufficient information to determine the issue.
Reasons: The income in question would be FAPI unless the exclusion to the definition of "investment business" in subsection 95(1) applies or subparagraph 95(2)(a)(ii) applies. We have not been provided with enough information to determine whether one of these two exceptions apply, however, details of the conditions that must be satisfied for these exceptions to apply are set out in the attached reply.
Principal Issues: Whether a foreign corporation which was continued into the State of Delaware is a resident of the U.S. for the purposes of the Canada-United States Income Tax Convention?
Position: Yes.
Reasons: It meets the requirements set out in paragraph 1 of Article IV of the Convention.
Principales Questions:
Est-ce qu'une dette remise à un employé qui est visée par le paragraphe 6(15) de la Loi est déductible dans le calcul du revenu d'entreprise ou de bien de l'employeur ?
Position Adoptée:
Nous serions généralement disposés à accepter que le montant soit déduit par l'employeur.
Principales Questions:
Est-ce que la vente d'une des divisions d'une entreprise exploitée par une société pourrait rencontrer le test d'avoir vendu la totalité, ou presque, des actifs utilisés dans l'exploitation de l'entreprise pour les fins de l'application de l'article 22 de la Loi ?
Principales Questions:
Quel est le traitement fiscal d'une allocation versée par une société de personnes à un associé pour l'utilisation de son automobile dans le cadre de ses fonctions ?
Position Adoptée:
C'est un prélèvement pour l'associé.
Principal Issues:
An insurer mistakenly advised a policyholder that the gain on maturity of the policy in 2001 would be a taxable capital gain. Based on this information, the policyholder elected to receive a lump sum benefit, rather than an annuity. To rectify the situation, the insurer has proposed in 2002 to backdate its documents to reflect the situation that would have ensued had the policyholder elected to receive an annuity in 2001, and to cancel the T5 issued in 2001. The policyholder has asked whether this would be sufficient to reduce the liability for tax that arose on disposition of the policy in 2001.
Position:
The actions proposed by the insurer do not change the policyholder's liability for tax in 2001.
Reasons:
Transactions completed in prior taxation years cannot be recharacterized by backdating documents. Moreover, we do not believe that there is any authority to cancel an information slip that contains correct information.
Principales Questions:
1. Pour les fins de la définition de placements admissibles dans un REÉR à l'article 204 de la Loi, quel sens faut-il donner au mot espèce?
2. Un dépôt libellé en devises est-il un placement admissible dans un REÉR?
Position Adoptée:
1. Il faut entendre par " espèces " les billets de banque et les pièces de monnaie ayant cours légal dans le pays d'émission.
2. Oui s'il s'agit d'un dépôt décrit à l'alinéa a) de la définition de placement admissible à l'article 204 de la Loi.
Principal Issues: Determination of FEDE balance available to a taxpayer in respect of expenses incurred in certain prior taxation years.
Position: Balance available at the end of a particular taxation year depends upon the amount of such expenses that were deductible in computing the taxpayer's income for a preceding taxation year, as determined from the facts of the situation.
Reasons: Based upon the wording of the relevant provisions of the Act and the nature of the determination.
October 31, 2002
Principal Issues:
Can foreign exchange losses be deducted pursuant to paragraph 20(1)(f) of the Act?
Position: No.
Reasons:
Foreign exchange losses incurred on the settlement of debt denominated in a foreign currency could not be deductible under paragraph 20(1)(f).
Submitted by narmstrong on Sun, 09/24/2023 - 03:09
interest incurred to make interest-free loans to non-resident subsidiary was deductible if an expectation of income from its shares
The taxpayer borrowed money from a bank in order to make interest-free advances to its wholly-owned non-resident subsidiary, which subsequently...
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Principales Questions: Le contribuable peut-il déduire les intérêts sur un emprunt qu'il a contracté dans le but de faire des avances ne portant pas intérêt à une filiale non-résidente?
Principal Issues: Whether the preparation of clinical trials material in the context of a global SR&ED project is deductible under subsections 37(1) or (2).
Position: No.
Reasons: Since CTM preparation has been determined not to be SR&ED, expenditures in respect thereof cannot qualify for a deduction under subsections 37(1) and (2) of the Act. In this regard, it is our view that neither paragraph 37(8)(a) of the Act nor subsection 2900(2) of the Income Tax Regulations can be used to convert such expenditures into amounts deductible under subsections 37(1) or (2).
