CRA provides its official responses to the 2019 CTF Roundtable

Today, CRA published in final form its responses to the questions posed at the December 2019 Canadian Tax Foundation Roundtable. Although these responses have already been summarized by us, for your convenience the following table lists and links these questions and responses and our summaries of the responses, and provides brief descriptors.

Topic Descriptor
3 December 2019 CTF Roundtable Q. 1, 2019-0824551C6 - Multilateral Instrument (“MLI”) Treaties - Multilateral Instrument - Article 7 - Article 7(1) “TAP” Committee, similar to the GAAR Committee, to address PPT issues
3 December 2019 CTF Roundtable Q. 2, 2019-0824381C6 - Foreign taxes paid Income Tax Act - Section 261 - Subsection 261(2) - Paragraph 261(2)(b) translation of foreign taxes at same FX rate as that used for related income is acceptable
Treaties - Income Tax Conventions - Article 24 US and UK Treaties do not eliminate FTC requirement that the taxes be paid
Income Tax Act - Section 126 - Subsection 126(1) taxpayers can translate under s. 126 foreign taxes at the exchange rate applied to the related income
3 December 2019 CTF Roundtable Q. 3, 2019-0824391C6 - Safe Income Determination Time Income Tax Act - Section 55 - Subsection 55(5) - Paragraph 55(5)(d) - SuParagraph 55(5)(d)(i) the TFSB of FA should be translated into Canadian dollars under s. 55(5)(d) at the safe income determination time
3 December 2019 CTF Roundtable Q. 4, 2019-0824521C6 - 84.1(1)(a) v/s 129(1)(a) Income Tax Act - Section 129 - Subsection 129(1) CRA confirms its recent volte-face that s. 84.1(1)(b) dividends can generate dividend refunds
3 December 2019 CTF Roundtable Q. 5, 2019-0824561C6 - 212.1 Post-mortem Pipeline Transaction Income Tax Act - Section 212.1 - Subsection 212.1(6) - Paragraph 212.1(6)(b) a pipeline transaction where there are non-resident beneficiaries currently generates Pt XIII tax
3 December 2019 CTF Roundtable Q. 6, 2019-0823581C6 - 21 year planning, 107(5), and TCP Income Tax Act - 101-110 - Section 107 - Subsection 107(2) a s. 107(2) rollout of Cdn Realtyco shares (i.e., TCP) to a NR-owned corporate beneficiary is inherently abusive
Income Tax Act - Section 245 - Subsection 245(4) abuse of ss. 107(2) to rollout private Realtyco shares to NR-owned Cdn corporate beneficiary
3 December 2019 CTF Roundtable Q. 7, 2019-0824401C6 - TOSI and Inherited Property Income Tax Act - Section 120.4 - Subsection 120.4(1.1) - Paragraph 120.4(1.1)(b) - Subparagraph 120.4(1.1)(b)(ii) shares distributed out of an inter vivos trust on an active individual’s death were received as a consequence of death for s. 120.4(1.1)(b)(ii) purposes
3 December 2019 CTF Roundtable Q. 8, 2019-0824411C6 - TOSI - Excluded Business Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Amount - Paragraph (e) - Subparagraph (e)(ii) income derived from a prior year’s sale of an excluded business is not excluded
3 December 2019 CTF Roundtable Q. 9, 2019-0824421C6 - Excluded Amount-Non-related Business exception Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Amount - Paragraph (e) - Subparagraph (e)(i) a transitional services agreement with an arm’s length purchaser can engage the TOSI rules
Income Tax Act - Section 120.4 - Subsection 120.4(1) - Related Business - Paragraph (a) - Subparagraph (a)(ii) source individual status retained after arm's length sale if continued active involvement in business
3 December 2019 CTF Roundtable Q. 10, 2019-0824461C6 - Earnout payments to non-residents Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(d) - Subparagraph 212(1)(d)(v) reverse earnout payments generally are not subject to Pt XIII tax
3 December 2019 CTF Roundtable Q. 11, 2019-0824511C6 - Common Reporting Standards Income Tax Act - Section 271 - Subsection 271(1) Canada uploads common reporting standards (CRS) info onto its systems for full-spectrum compliance use
3 December 2019 CTF Roundtable Q. 12, 2019-0824531C6 - Earnout and Cost Recovery Method Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(g) cost-recovery method earnout can be based on the earnings of a lower-tier corporation
3 December 2019 CTF Roundtable Q. 13, 2019-0824491C6 - Triangular Amalgamation Income Tax Act - Section 245 - Subsection 245(4) GAAR may apply to the use of a “Midco” to step up the tax basis of a target investment on a triangular amalgamation
Income Tax Act - Section 87 - Subsection 87(9) - Paragraph 87(9)(a.4) use of a “Midco” on triangular amalgamation “technically” avoids ss. 87(9)(a.4) and (c) limitation
3 December 2019 CTF Roundtable Q. 14, 2019-0824481C6 - Replacement Property Rules Income Tax Act - Section 44 - Subsection 44(5) a replacement property can be acquired before disposing of the former property
Income Tax Act - Section 13 - Subsection 13(4.1) property acquired in advance for expansion purposes can qualify
3 December 2019 CTF Roundtable Q. 15, 2019-0824501C6 - Subsection 104(13.4) and LCBs Income Tax Act - 101-110 - Section 104 - Subsection 104(13.4) - Paragraph 104(13.4)(c) - Subparagraph 104(13.4)(c)(i) there can be no interest ultimately payable to the extent that a life interest trust realizes a capital loss in the stub period following death
3 December 2019 CTF Roundtable Q. 16, 2019-0824471C6 - Eligible Dividend Designation Income Tax Act - Section 89 - Subsection 89(14) where all shareholders of a private corporation are directors, an eligible dividend designation can be done through the dividend declaration