CRA releases the 2020 STEP Roundtable under its severed letter program
10 December 2020 - 12:17am
Email this ContentThe Income Tax Rulings Directorate has released the 2020 STEP Roundtable under its severed letter program. We already have discussed most of the items, but for your convenience, we are providing the table below with our descriptors, and links to the severed letters and our summaries.
| Topic | Descriptor | |
|---|---|---|
| 26 November 2020 STEP Roundtable Q. 1, 2020-0839931C6 - Executor's Year of a GRE | Income Tax Act - 101-110 - Section 104 - Subsection 104(13.3) | scope of application of s. 104(13.3) |
| Income Tax Act - 101-110 - Section 104 - Subsection 104(6) | elaboration of executor's year policy | |
| Income Tax Act - 101-110 - Section 104 - Subsection 104(23) | CRA executor’s year policy is relevant only where the executor’s year extends beyond the GRE’s taxation year | |
| 26 November 2020 STEP Roundtable Q. 2, 2020-0840001C6 - Subsection 104(13.4) and LCBs | Income Tax Act - Section 161 - Subsection 161(1) | s. 104(13.4)(c) extension of balance-due date for terminal stub year of alter ego/joint spousal trust can permit capital loss in subsequent stub year to eliminate terminal year interest |
| Income Tax Act - 101-110 - Section 104 - Subsection 104(13.4) - Paragraph 104(13.4)(c) | a capital loss in the tax year following the death of an alter ego trust’s settlor can eliminate interest on the terminal T3 return’s 104(4)(a) gain | |
| 26 November 2020 STEP Roundtable Q. 3, 2020-0839881C6 - Distribution of taxable capital gain | Income Tax Act - 101-110 - Section 104 - Subsection 104(21) | only the taxable portion of a capital gain need be distributed for s. 104(21) purposes |
| 26 November 2020 STEP Roundtable Q. 4, 2020-0838001C6 - Foreign Tax Credit | Income Tax Act - Section 126 - Subsection 126(1) | UK source of gain re-sourced to Australia for s. 126 purposes under Australia-Canada Treaty sourcing rule |
| Treaties - Income Tax Conventions - Article 24 | a capital gain’s geographic source for Canadian FTC purposes was re-sourced to Australia under the Treaty-source rule | |
| 26 November 2020 STEP Roundtable Q. 5, 2020-0847181C6 - Subsections 40(3.61) and 164(6) | Income Tax Act - Section 164 - Subsection 164(6) - Paragraph 164(6)(a) | s. 164(6)(a) applied before s. 40(3.61) so as to avoid iterative grind of s. 164(6) carryback amount |
| Income Tax Act - Section 40 - Subsection 40(3.61) | ss. 40(3.61) and (3.6), and 164(6), not applied iteratively to eliminate a s. 164(6) loss carryback where the estate also realized a small capital gain | |
| 26 November 2020 STEP Roundtable Q. 6, 2020-0839991C6 - Eligible offset | Income Tax Act - 101-110 - Section 107 - Subsection 107(2) - Paragraph 107(2)(c) | generation of a loss to a capital beneficiary attributable to an eligible offset amount |
| Income Tax Act - 101-110 - Section 107 - Subsection 107(1) - Paragraph 107(1)(a) | illustration of s. 107(1)(a) application to avoid capital gain but not necessarily a capital loss | |
| 26 November 2020 STEP Roundtable Q. 7, 2020-0837611C6 - TOSI and Rental Property | Income Tax Act - Section 120.4 - Subsection 120.4(1) - Split Income | TOSI does not apply to rental properties held by individual co-owners |
| 26 November 2020 STEP Roundtable Q. 8, 2020-0837621C6 - TOSI and Donations | Income Tax Act - Section 120.4 - Subsection 120.4(3) | charitable credits do not reduce an individual’s TOSI |
| 26 November 2020 STEP Roundtable Q. 9, 2020-0837631C6 - TOSI - Excluded Business | Income Tax Act - Section 120.4 - Subsection 120.4(1.1) - Paragraph 120.4(1.1)(a) | hours worked for multiple corporations cannot be aggregated for purposes of the 20-hour test |
| Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Business | a specified individual splitting full-time work amongst multiple corporations might meet the excluded business activity test on less than 4 hours per week per corporation | |
| 26 November 2020 STEP Roundtable Q. 10, 2020-0837641C6 - TOSI - Excluded Business | Income Tax Act - Section 120.4 - Subsection 120.4(1) - Split Income | investing carried on with the proceeds of sale of a business in which the spousal shareholders had been engaged full time generally would generate TOSI on resulting dividends |
| Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Business | questioned availability of excluded business exception where investing activity | |
| 26 November 2020 STEP Roundtable Q. 11, 2020-0839891C6 - Subsection 104(19) | Income Tax Act - 101-110 - Section 104 - Subsection 104(19) | dividend subject to Pt IV tax because payer and corporate beneficiary no longer connected at December 31 effective date of all s. 104(19) designations |
| Income Tax Act - Section 186 - Subsection 186(1) - Paragraph 186(1)(a) | Pt IV tax exemption no longer available because corporate beneficiary was no longer connected at December 31 effective time of s. 104(19) designation | |
| Income Tax Act - Section 249 - Subsection 249(1) - Paragraph 249(1)(c) | individual has a calendar year, even in terminal year | |
| Income Tax Act - 101-110 - Section 104 - Subsection 104(13) | designated dividend included in individual’s terminal return which has a December 31 year end | |
| 26 November 2020 STEP Roundtable Q. 12, 2020-0839981C6 - 21 year planning, 107(5) and TCP | Income Tax Act - Section 245 - Subsection 245(4) | s. 107(2) rollout by Canadian discretionary trust to a NR-owned Canadian corporate beneficiary appears abusive |
| Income Tax Act - 101-110 - Section 107 - Subsection 107(5) | distributions by a Canadian discretionary trust to a NR-owned Canadian corporate beneficiary of TCP not carved-out in s. 107(5) appear abusive | |
| 26 November 2020 STEP Roundtable Q. 13, 2020-0847201C6 - GRE & section 216 election | Income Tax Act - Section 248 - Subsection 248(1) - Graduated Rate Estate | non-resident estate can be GRE and file s. 216 returns |
| Income Tax Act - Section 216 - Subsection 216(1) | a non-resident estate (using GRE graduated rates), then its residuary beneficiaries, could file under s. 216 respecting a Canadian rental property | |
| Income Tax Act - 101-110 - Section 107 - Subsection 107(2) | s. 107(2) applicable to distribution by NR estate of Canadian rental property NR residuary beneficiaries | |
| 26 November 2020 STEP Roundtable Q. 14, 2020-0839961C6 - Adjusted Aggregate Investment Income | Income Tax Act - Section 125 - Subsection 125(5.2) | s. 125(5.2)(c) references a reason of reducing the associated group’s AAII for purposes of the passive income reduction rule in s. 125(5.1)(b) |
| 26 November 2020 STEP Roundtable Q. 15, 2020-0839951C6 - Subsection 164(6) limitations | Income Tax Act - Section 164 - Subsection 164(6) | no CRA discretion to extend the one-year deadline under s. 164(6) for sustaining the post-death capital loss |
| 26 November 2020 STEP Roundtable Q. 16, 2020-0839921C6 - Offshore Tax Informant Update | Income Tax Act - Section 152 - Subsection 152(1) | OTIP stats at end of 2019 |
| 26 November 2020 STEP Roundtable Q. 17, 2020-0837001C6 - Trust Pass-Through of CGE | Income Tax Act - 101-110 - Section 104 - Subsection 104(21.2) | the QSBC share character of capital gains can be flowed out in a 2-tier trust structure |
| Income Tax Act - 101-110 - Section 108 - Subsection 108(1) - Eligible Taxable Capital Gains | "annual gains limit" takes into account lower tier trust's ss. 104(21) and (21.2) designations |