Income Tax Severed Letters - 1996-03-08

Technical Interpretation - External

7 March 1996 External T.I. 9600155 - DEC 31 95 RESERVE, EARNED INCOME

Unedited CRA Tags
146(1)

Principal Issues:

Will a reserve included in income under proposed subsection 33(5) be included in earned income for RRSP purposes?

Position:

no, unles actively involved in business

Reasons:

7 March 1996 External T.I. 9530795 - 10-YEAR RESERVE - FISCAL PERIOD

Unedited CRA Tags
34.1 34.1 85(1) 249.1

Principal Issues:

Whether the income earned in the stub period of an affected taxpayer that incorporates his sole proprietorship in 1995 can be recognized using the 10-year transitional period reserve as a result of the proposed legislation concerning fiscal periods.

Position:

Depends on the facts of a particular case.
A reserve may be allowed for the 1995 taxation year but not for the 1996 or subsequent taxation years.

Reasons:

5 March 1996 External T.I. 9604225 - LIFE INSURANCE PREMIUMS AS ALIMONY

Unedited CRA Tags
60(b)

Principal Issues:

deductibility of life insurance premiums on the life of payer as alimony or maintenance

Position:

as a third party payment which is not at the discretion of the recipient and is not an ordinary living expense of the recipient, it is not deductible

Reasons:

29 February 1996 External T.I. 9607325 - TRANSFER OF RET ALL - ELIGIBLE AMOUNT

Unedited CRA Tags
60(j.1)

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.

		                      5-960732
XXXXXXXXXX                        M. Shea-DesRosiers

February 29, 1996

Dear Sir:

Re: Transfer of retiring allowance
to a Registered Retiring Savings Plan ("RRSP")

29 February 1996 External T.I. 9604095 - QUALIFIED INVESTMENTS FOR RRSP

Unedited CRA Tags
REG 4900

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.

XXXXXXXXXX 960409

February 29, 1996

Dear Sir:

Re: South African Eskom Bonds and RRSPs

This is in reply to your letter of January 17, 1996, wherein you requested an opinion as to whether the above noted bonds would be qualified investments for a trust governed by an RRSP.

28 February 1996 External T.I. 9601795 - FOREIGN EXCHANGE LOSS

Unedited CRA Tags
80

Principal Issues:

Calculation of forgiven amount for purposes of section 80 when debt is denominated in foreign currency.

Position:

Determine new principal amount; per 80(2)(k) new debt determined in foreign dollars; then convert to Cdn $ at exchange rate in existance at time of original issue. FX gain\loss to borrower.

Reasons:

26 February 1996 External T.I. 9531985 - MORTGAGE IN AN RRSP

Unedited CRA Tags
146(10.1) 207.1(1) REG 4900

Principal Issues:
Whether or not a 2nd mortgage that is in default is still a qualified investment.

Position:
Question of fact on what normal commercial practise is with respect to mortgage. If the mortgage is still secured by real property in Canada then it would still be a qualified investment, if not the RRSP has acquired a non-qualified investment.

23 February 1996 External T.I. 9605185 - TUITION TAX CREDIT FOR INSTITUTION OUTSIDE CANADA

Unedited CRA Tags
118.5(1)(b)

Principal Issues:

whether tuition fee credit may be claimed where educational institute outside Canada has applied for university status, where courses offered are reputably comparable to programs available at universities in Canada and in respect of which a Canada Student Loan has been approved

Position:

no

Reasons:

23 February 1996 External T.I. 9605915 - MEDICAL EXPENSES

Unedited CRA Tags
118.2(2) reg. 5700

Principal Issues:

Whether the cost of a whirlpool qualifies for the purposes of the medical expense tax credit.

Position:

It does not qualify

Reasons:

23 February 1996 External T.I. 9600165 - INTEREST BENEFIT WHEN SHAREHOLDER WITHDRAWS $

Unedited CRA Tags
80.4(2)

Principal Issues: shareholder withdraws cash each month from his company. Withdrawals are intended to be dividends. At y/e, directors declare a dividiend paid to the shareholder equal to the amount of the withdrawals throughout the years. Interest benefit under 80.4(2) assessed?

Position:yes

Reasons:see para 14 of IT-421R2

22 February 1996 External T.I. 9600635

Principal Issues:

What is the impact on the Unused RRSP deduction room balance when an individual becomes a non-resident for a period of two years and then resumes residency

Position:

The balance is available when he returns provided that he had no earned income in the intervening period

Reasons:

22 February 1996 External T.I. 9527685 - WHETHER A CORP. QUALIFIES FOR CHARITABLE REGISTRATION

Unedited CRA Tags
149(1)(d) 149(1)(l) 149(1)((j)

Principal Issues:

22 February 1996 External T.I. 9533075 - BAD DEBT - UNPAID INVOICE

Unedited CRA Tags
39(1)(c) 20(1)(p)(i) 12(1)(b)

Principal Issues:

Whether a non-capital loss or a business investment loss can be claimed in respect of the outstanding amount of an invoice submitted for services rendered.

Position:

Although it does not qualify as a business investment loss, the outstanding amount may be eligible for a deduction as a bad debt.

Reasons:

21 February 1996 External T.I. 9604135 - DISABILITY RELATED EQUIPMENT

Unedited CRA Tags
20(1)(rr)

Principal Issues:

With respect to a business, a taxpayer purchases a device which would be attached to a building or a sign. It is intended that the device transmit business information to customers who have a reading or sight impairment. Such an individual would have his or her own device which would receive the transmitted information. Does the device qualify for deduction under paragraph 20(1)(rr) of the Income Tax Act.

Position:

no

Reasons:

21 February 1996 External T.I. 9532325 - RETIRING ALLOWANCE - PERSON RELATED TO EMPLOYER

Unedited CRA Tags
60(j.1) 251(2)

Principal Issues:

Whether corporation without share capital can be related to federal government.

Position:

1)Yes, if federal crown has ability to appoint majority of members or board of directors;

2)otherwise through crown agent status, acquisition of continuation of corporation's business by government or pension plan recognition.

Reasons:

21 February 1996 External T.I. 9532995 - DEFINITION OF INDEBTEDNESS FOR PURPOSES OF FAPI

Unedited CRA Tags
95(2.1)

Principal Issues:
Definition of "Indebtedness" for purposes of FAPI - subsection 95(2.5) - would interest rate swaps be included in that definition ?

Position:
Only a pure interest rate swap in which the annual or semi-annual payments\receipts are based on a "notional" principal amount.

Reasons:
There may be a quality of indebtedness if there is to be an exchange of currencies involved.

21 February 1996 External T.I. 9528135 - AMOUNTS PAID TO A RETIRING PARTNER

Unedited CRA Tags
98(5) 96(1.1)

Principal Issues:

Whether any portion of an amount paid to a retiring partner by another partner continuing to carry on the partnership business as a proprietor as contemplated by subsection 98(5) can be allocated to goodwill.

Position:

No.

Reasons:

21 February 1996 External T.I. 9528235 - PARTNERSHIP TO SOLE PROPRITORSHIP

Unedited CRA Tags
98(5)

Principal Issues:

Disposal of partnership interest to proprietorship

Position:

Bump not available, recapture preserved

Reasons:

21 February 1996 External T.I. 9528635 - RRSP QUALIFIED INVESTMENT SHARES OF A CORPORATION

Unedited CRA Tags
146(1) 4900(6) 4900(12)

Principal Issues:

Qualified investment by an RRSP in a business corp.

Position:

Routine reply on 4900(6) & (12) including the October 1995 amendments.

Reasons: N/A

21 February 1996 External T.I. 9600595 - MULTIPLE MUNICIPALITIES

Unedited CRA Tags
149(1)(D)

Principal Issues:

20 February 1996 External T.I. 9530615 - DEBT FORGIVENESS - LIMITED PARTNERSHIP

Unedited CRA Tags
80(1) 80(2)(b) 40(2)(g)(ii) 50(1)

Principal Issues:

1.Debt Forgiveness - Partnership. Is section 80 applicable in contemplation of a sale of interest by limited partner?
2.Capital loss to partner?

Position:

1.Section 80(1) applicable - person includes a partnership, forgiven amount may not meet exemption at the time of forgiveness
2.Yes

Reasons:

19 February 1996 External T.I. 9604595 - EMPLOYMENT, EXPATRIOTE EMPLOYEES

Unedited CRA Tags
6

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.

		960459
XXXXXXXXXX	M.P. Sarazin

Attention: XXXXXXXXXX

February 19, 1996

Dear Sirs:

Re: Expatriate Employees

19 February 1996 External T.I. 9531505 - COST AMOUNT OF STRIPPED BOND OR DISCOUNT NOTE

Unedited CRA Tags
REG 7000 12(4) 12(9) 206

Principal Issues:

Cost amount of stripped bond which are held in RRSP

Position:

The cost amount includes the annual accrual of the discount into income.

Reasons:

19 February 1996 External T.I. 9526485 - EMPLOYEES PROFIT SHARING PLANS

Unedited CRA Tags
144(1) 144(10)

Principal Issues:

1)Is a particular formula for an EPSP acceptable.
2)Is an employee having the option to voluntarily opt in and out of the plan an acceptable definition of member for an EPSP.
3) Will the above violate para. 9 of IT 280R.

Position:

1)As long as plan meets requirements of an EPSP and formula stated in para. 6 of IT-280R.
2)This would be an acceptable definition of member provided employer still able to meet minimum contributions as defined in the plan.
3) No as long as employer does not suspend contributions below an acceptable minimum as stated in the EPSP.

Reasons:

16 February 1996 External T.I. 9512725 - PART XIII - PAYMENTS FOR RIGHT TO BROADCAST

Unedited CRA Tags
212(1)(d)

Principal Issues:

Whether a payment made for the right to broadcast a live scripted production staged in the U.S. is taxable under Part XIII of the Act.

Position:

Yes it is taxable.

Reasons:

16 February 1996 External T.I. 9532045 F - TRAITEMENT DES PRIMES ET DES ESCOMPTES

Unedited CRA Tags
REG 7000(1) 12

Principales Questions:
Traitement des primes et des escomptes

Position Adoptée:
Commentaires généraux

15 February 1996 External T.I. 9529295 - TIME LIMIT FOR ISSUING CERTIFICATE.

Unedited CRA Tags
CLASS 34

Principal Issues:

1. Time limit for issuing class 34 certificate?

2. Whether requirements of subparagraph 8(j)(i) or (ii) of Class 34 of Draft Regulations are met in scenario described?

Position:

1. For property acquired after 1993, the certificate must be issued no later then 2 years after acquisition. For property acquired before 1994, the certificate must be issued before the end of 1995.

2. Question of fact.

Reasons:

15 February 1996 External T.I. 9603915 F - UTILISATION DES CRITERES AU BULLETIN IT-233R

Unedited CRA Tags
1100(16)a)(ii)

Principales Questions:

1.Demande de confirmer que l'entreprise décrite ne sera pas assujettie à la restriction du règlement 1100(15) en raison du règlement 1100(16)a)(ii).
2.Est-il toujours valide d'utiliser les critères mentionnés au bulletin d'interprétation IT-233R?

Position Adoptée:

13 February 1996 External T.I. 9602365 - ALIMONY AND MAINTENANCE - 3RD PARTY PAYMENTS

Unedited CRA Tags
60.1(2)

Principal Issues:

Deductibility of payments under subsection 60.1(2) where the payor has an ownership interest in the property for which he or she is obligated to make the payments.

Position:

Ownership interest in the property will not affect the deductibility of the payment.

Reasons:

13 February 1996 External T.I. 9602915 - CAREGIVERS AND EXEMPT INCOME

Unedited CRA Tags
81(1)(h) 5

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.

		960291
XXXXXXXXXX			M. Eisner

Attention: XXXXXXXXXX

February 13, 1996

Dear Sirs:

Re: Payments to Providers of Approved
Homes for Mentally Disabled Adults

13 February 1996 External T.I. 9528555 - MANUFACTURING AND PROCESSING DEDUCTION

Unedited CRA Tags
125.1(1)

Principal Issues:

Manufacturing and Processing Deduction

Position:

Gave general position stated at round table and in the IT bulletin

Reasons:

29 January 1996 External T.I. 9510375 - APPLICATION OF LOSSES BY A NON-RESIDENT

Unedited CRA Tags
111(9) 115(1)(e)

Principal Issues:

Application of losses by a non-resident - subsection 111(9) and paragraph 115(1)(e) of the Act

Position:

While we generally agree with the interpretation used by the writer, we feel that it is too restrictive in one respect. It is our view, that the intention of paragraph 115(1)(e) of the Act is to allow the utilization of losses incurred by a resident of Canada from an office or employment performed in Canada or from a business carried on in Canada to offset income earned by such person from an office or employment performed in Canada or from a business carried on in Canada after that person becomes a non-resident of Canada. Furthermore, a net capital loss, which results from the disposition of taxable Canadian property of a taxpayer when he was a resident of Canada, can be carried forward to offset taxable capital gains on the disposition of taxable Canadian property realized by the taxpayer when he is a non-resident of Canada.

Reasons:

24 November 1995 External T.I. 9530365 - BUSINESS MEALS

Unedited CRA Tags
6(1)(a) 67.1(1)

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.

Tax Executive Institute
December 6, 1995

Question No. XV.

BUSINESS MEALS AND ENTERTAINMENT EXPENSES

18 September 1995 External T.I. 9510365 - SOURCE OF CAPITAL GAIN CANADA-JAPAN TREATY

Unedited CRA Tags
art 13

Principal Issues:

Art 13 Canada-Japan Treaty - Where a gain arises

Position:

Question of fact but in the case of shares it is usually where the contract is signed and not the situs of the underlying assets.

Reasons:

Technical Interpretation - Internal

7 March 1996 Internal T.I. 9533236 - FIXED PERIOD COST-OF-LIVING ADJUSTMENTS

Unedited CRA Tags
8503(2)(a)

Principal Issues:

Would cost-of-living adjustments for a fixed period of time contravene paragraph 8603(2)(a) of the Regulations?

Position:

No

Reasons:

29 February 1996 Internal T.I. 9602356 - MONEY PURCH SURPLUS, PLAN EXPENSES

Unedited CRA Tags
147.3(8)

Principal Issues:

Can surplus in a money purchase plan be used to cover the plan's operating expenses?

Position:

No

Reasons:

22 February 1996 Internal T.I. 9604507 - PART I.3 - CAPITAL LEASES & CONDITIONAL SALES AGREEMENTS

Unedited CRA Tags
181(1) 181(3) 181.2(3) 181.2(4)

Principal Issues:

21 February 1996 Internal T.I. 9532467 - RETIREMENT COMPENSATION ARRANGEMENT/EXEMPT POLICY

Unedited CRA Tags
56(1)(x) 107.2 207.5 207.7 148

Principal Issues:

Tax implications when an RCA is wound up and an exempt policy is transferred from the RCA

Position:

Tax implications to the rca trust and the beneficiary

Reasons:

28 November 1995 Internal T.I. 9530420 - SECURITIES LENDING ARRANGEMENTS

Unedited CRA Tags
260(1) 212(1)(b)(xii) 212(1)(d)(i)

Principal Issues:

Who is securities lender

Position:

Trust

Reasons:

26 September 1995 Internal T.I. 9517407 - wind-up of a trust - final return

Unedited CRA Tags
159(2) 104(13.1) 104(13.2)

Principal Issues:

1. where a trust has chosen a final windup date & filed a final return, will the dept accept a further "final return" based on actual wind-up date? does the issuance of a clearance certificate affect this issue?

2.will the dept accept a late filed 104(13.1) election?

Position:

1.yes.

2.no legislative basis but may be allowed on an administrative basis.

Reasons: