Income Tax Severed Letters - 1995-12-01

Principal Issues:

1. Does the definition of "specified shareholder" in subsection 18(5) of the Act require a person to own shares of the corporation?

2. Are amounts contributed by a specified shareholder included in clause 18(4)(a)(ii)(B) after a person ceases to be a specified shareholder.

Position:

1. yes. 2. no.

Reasons:

Principal Issues:

whether damages for wrongful dismissal, loss of reputation, aggravated damages, punitive damages and mental distress (lump sum amount of $50,000) are a retiring allowance

Position:

represents a retiring allowance

Reasons:

Principal Issues:

Whether tax deferred roll between foreign pension and RPP is possible?

Position:

Yes, if certain conditions are met.

Reasons:

Principal Issues:

Whether or not the obligations which are referred to in subsection 138(11.92) are net of policy loans.

Position:

Yes

Reasons:

Principal Issues:

Compensation and lending fees deductible? Short sales and securities lending

Position:

Expenses deductible under section 9 - on income account

Reasons:

Principal Issues:

Whether balance sheet amounts on transactions between related parties, as sanctioned by section 3840 of the CICA Handbook, are used for LCT purposes.

Position:

Generally Yes. However, we seem to be missing some facts or an indication of what the taxpayer's specific concerns are, if any. Therefore we have provided very general comments only.

Reasons:

Principal Issues:

Whether foreign taxes paid by a resident of Canada on income received from a limited liability corporation ("LLC") resident in the US which is not a foreign affiliate of the taxpayer qualifies as a "business-income tax" or a "non-business-income tax".

Position:

Subject to the provisions of paragraphs (a), (b) and (c) of the definition of non-business-income tax in subsection 126(7) of the Act, the tax paid in the US will qualify as a non-business-income tax.

Reasons:

Principal Issues:

Whether a capital gains distribution from a U.S. corporation to a Canadian shareholder can be treated as a capital gain as apposed to a dividend.

Position:

No.

Reasons:

Principal Issues:

1)Whether providing services as independent contractor, sole proprietor, partner, or employee of other corporation can be construed as continued employment or office so as to disqualify payment as a "retiring allowance";

2)deductibility by employer of non-arm's length payment of retiring allowance.

Position:

1)Question of fact although confirmed that employment or office with person described in 60(j.1)(iv) is not for that reason alone considered to be employment or office with an affiliate;

2)should not exceed what is a reasonable amount in an arm's length situation.

Reasons:

Principal Issues:

Principal Issues:

Whether interest income earned from passive investments by a foreign affiliate with an accounts receivable factoring operation, the income from which is subject to 95(2)(a)(iii), is also deemed to be income from an active business.

Position:

95(2)(a)(iii) only applies to income derived directly from factoring receivables, therefore the passive income would have to qualify under 95(2)(a)(i) in order to be deemed active business income.

Reasons:

Principal Issues:

Principales Questions:

Une indemnité de repas versée par une société à ses employés syndiqués:

i) lorsqu'ils font des heures supplémentaires; ou

ii) lorsque leur repas est interrompu dans certains circonstances (tel qu'un bris de machine),

est-elle non imposable?

Position Adoptée:

Principal Issues:

Principal Issues:

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.

5-951140
XXXXXXXXXX M. Séguin
(613) 957-8953

A l'attention de XXXXXXXXXX

Le 23 octobre 1995,

Monsieur,

Principal Issues:

whether elected board members of irrigation districts incorporated under the Irrigation Act of Alberta qualify under subsection 81(3), i.e. are an "other similar body" as referred to in 81(3)(b)

Position:

After a review of the Municipal Government Act and the Irrigation Act for Alberta, a board member may be considered "an officer of a municiapl utilities board, commission or corporation or any other similar body". If any remuneration is to be exempted under 81(3) in respect of such member, the member must also meet the "elected by popular vote" criteria as discussed in response

Reasons:

Principal Issues:

Principal Issues: