a distribution by a discretionary trust of a taxable capital gain in excess of the trust’s income could be a s. 105(1) benefit
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Principales Questions: In a given situation where a trust has a taxable capital gain of $ 200,000 and a rental loss of $ 100,000, whether the trust can deduct by virtue of paragraph 104(6)(b) the amount of $ 200,000 corresponding to the taxable capital gain paid in the year to a beneficiary?
Position Adoptée: No. The amount that the trust is eligible to claim by virtue of paragraph 104(6)(b) cannot exceed the amount of its income determined for the year. In the given situation, the maximum amount deductible by the trust would be $ 100,000. When a trust paid an amount in excess of the amount deductible by virtue of paragraph 104(6)(b), depending on all the facts surrounding the situation and the terms of the trust deed, the application of subsection 105(1) should be considered.
Raisons: Firstly, a trust's income for a taxation year is determined under section 3. The maximum amount that may be deducted under paragraph 104(6)(b) is the trust’s income determined under Part I, before the deductions under paragraphs 104(6) and (12). Subsection 105(1) includes in a taxpayer's income the value of all benefits from or under a trust. The provision extends to benefits received by any taxpayer under the trust other than, among others, an amount otherwise included in the beneficiary’s income or an amount paid as a capital distribution by virtue of the trust deed.
s. 87(2)(s) inapplicable to triangular amalgamation
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Principales Questions: In the situation where a person or a partnership redeems, acquires or cancels a shareholder's tax deferred cooperative share during a triangular amalgamation by virtue of subsection 87(9): (1) would the withholding tax in subsection 135.1(7) be required? (2) would the taxpayer have to include by virtue of subsection 135.1(2), the proceeds of disposition of a tax deferred cooperative share disposed by him?
Position Adoptée: (1) Yes (2) Yes
Raisons: The mention of the new corporation in paragraph 87(2)(s) refers only to the corporation resulting from the merger. Consequently, paragraph 87(2)(s) is inapplicable with a triangular amalgamation where the shareholders of the predecessors corporations receive shares of the parent corporation. Therefore, subsection 135.1(10) is not applicable for the purpose of subsections 135.1(2) and 135.1(7).
constructive receipt does not accelerate T4 reporting obligations
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Principal Issues: Taxpayer questioning consistency of Guide T4001 and Guide T4011; T4001 says prepare T4 for the year payment is made & T4011 says include amounts in employment income in year of death, even if received after.
Position: General comments given.
Reasons: The two guides are not inconsistent – general comments made.
Art. IV(6) of Cda-US Treaty can be satisfied where Canadian branch profits are earned at bottom of stacked LLCs held by qualifying persons
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Principal Issues: Whether Articles IV(6) and X(6) of the Treaty apply to provide treaty benefits on Canadian branch income derived by a U.S. resident corporation through multiple fiscally transparent limited liability companies.
Position: Generally yes.
Reasons: The conditions of Article IV(6) are met, including the condition that the treatment of the Canadian branch income for U.S. income tax purposes is the same as its treatment would have been had the U.S. resident corporation derived the income directly.
