Income Tax Severed Letters - 1996-05-17

Miscellaneous

5 March 1996 Miscellaneous 9528801 - WHETHER COMPRESSED GAS CONSIDERED FUEL.

Unedited CRA Tags
CLASS 34 CLASS 43.1

Principal Issues:

Whether natural gas which is compressed to produce heat would be considered "fuel" for purposes of class 43.1?

Position:

NO.

Reasons:

Ruling

25 April 1996 Ruling 9612953 - rul. request withdrawn whether sale at arm's length

Unedited CRA Tags
69(1)(B)

Principal Issues:

Ruling requested on whether a nephew and his uncle are dealing at arm's length

Position:

Unable to rule. File closed.

Reasons:

Ministerial Correspondence

11 April 1996 Ministerial Correspondence 9605694 - WESTERN GRAIN TRANSITION PAYMENTS

Unedited CRA Tags
12(1)(x) 53(2)(k)

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.

MINISTER/DEPUTY MINISTER'S OFFICE 96-00599M
ADM'S OFFICE
RETURN TO 15TH FLOOR, ALBION TOWER

April 11, 1996

XXXXXXXXXX

Dear XXXXXXXXXX

Technical Interpretation - External

8 May 1996 External T.I. 9613115 - PUC SHIFT ON SECTION 86 SHARE EXCHANGE

Unedited CRA Tags
86(2.1) 84(3)

Principal Issues:

Whether a PUC shift on a section 86 share exchange works; mechanics of the formula, whether a dividend results

Position:

there is no deemed dividend or PUC reduction, no GAAR

Reasons:

7 May 1996 External T.I. 9611015 F - INTERETS ET RENTE

Unedited CRA Tags
20(1)(c)(iv) 12.2 56(1)(d.1)

Principales Questions:

20(1)(c)(iv) applicable si contrat de rente différé acquis avant 1990 devient un contrat de rente prescrit lorsque la rente débute

Position Adoptée:

7 May 1996 External T.I. 9613955 F - GAAR

Unedited CRA Tags
245(2)

Principales Questions:

Application de 245(2)

Position Adoptée:

6 May 1996 External T.I. 9612785 - FUNDS HELD IN A GIC

Unedited CRA Tags
212(1)(b)(vii)

Principal Issues:

Does interest calculated in respect of a GIC deposited at a Canadian bank on behalf of the Canadian corporation and paid on a debenture held by a non-resident qualify for the 212(1)(b)(vii) exemption?

Position:

No

Reasons:

2 May 1996 External T.I. 9607525 - QSBCS -- LOAN TO PARTNERSHIP

Unedited CRA Tags
110.6(1) 248(1)

Principal Issues:

How a loan from a corporate partner to its partnership should be taken into consideration in determining whether the shares of the corporate partner qualify as QSBCS.

Position:

It may be possible to consider the loan to the partnership as a loan made proportionately to each of the partners. On that basis, if any other partner were not a small business corporation connected with the lending corporation, a portion of the loan, representing that other partner's interest in the partnership, would not qualify.

Reasons:

2 May 1996 External T.I. 9611675 - RRSP INVESTMENT IN NON-ARM'S LENGTH MORTGAGE

Unedited CRA Tags
REG 4900(1)(j) 146(2)(c.4)

Principal Issues:

Whether annuitant can be in charge of collecting mortgage payments for the RRSP where annuitant does not deal at arm's length with mortgagor.

Position:

No.

Reasons:

2 May 1996 External T.I. 9610015 - PUBLIC CORPORATION SHARES IN RRSP

Unedited CRA Tags
89(1)(g) 132(6) REG 4900(1)(b)

Principal Issues:

Whether election in postamble of definition of "public corporation" has retroactive effect for purposes of RRSP "qualified investment" rules.

Position:

Yes.

Reasons:

1 May 1996 External T.I. 9614035 - EMPLOYEES OF INTERNATIONAL ORGANIZATIONS (XXXXXXXXXX)

Unedited CRA Tags
110(1)(f) 126(3) 81(1)(a) ART 4 ART 27

Principal Issues:

Whether employees of the XXXXXXXXXX have any special tax status in Canada?

Position:

No.

Reasons:

1 May 1996 External T.I. 9611515 - LCT UNFUNDED PENSION LIABILITIES

Unedited CRA Tags
181.2(3)(b) 181.2(3)(f)

Principal Issues:

Are unfunded pension liabilities included in capital for LCT purposes as a reserve or as other indebtedness when outstanding for more than 365 days and if so, is this a policy decision or requirement of the Act?

Position:

If the liability is a legal obligation, rather than a contingent one, the amount is not a reserve. It would be included in capital (of a non-financial institution) if it remained outstanding more than 365 days.

Reasons:

1 May 1996 External T.I. 9609115 - UNUSED PART I.3 CREDITS

Unedited CRA Tags
125.3(1) 87(2)(j.9)

Principal Issues:

Carry back of Unused Part I.3 Credits flowed through from a subsidiary before on a pre-1992 winding-up to a tax year of the parent that ended prior to the winding-up.

Position:

Yes.

Reasons:

1 May 1996 External T.I. 9601815 - farm support payments

Unedited CRA Tags
12(10.2)

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.

Mr. Gordon R. White

Director
Financial Operations and 960181
Special Projects A.M. Brake
Agriculture Canada
Ottawa, Ontario
K1A 0C5

Attention: April Steel

May 1, 1996

Dear Sirs:

Re: Saskatchewan Safety Net Programs

30 April 1996 External T.I. 9614165 - APPLICATION OF SECTION 80.5 TO NON-RESIDENTS

Unedited CRA Tags
80.5 20(1)(c) 80.4(1) 115(1)(a)(i) 6(9)

Principal Issues:

Resident of Canada was reporting a benefit under 80.4(1) and an offsetting deduction under 20(1)(c) pursuant to section 80.5 of the Act. He subsequently severs his residential ties. Does he loose his future 20(1)(c) deduction?

Position:

Yes.

Reasons:

29 April 1996 External T.I. 9604345 - mandatory inventory adjustement - determination of loss

Unedited CRA Tags
ART 28(1)(c)

Principal Issues:

Whether paragraph 28(1)(c) will apply where an individual receives proceeds from the disposition of eligible capital property which exceed the total of his farming loss and his inventory purchases on hand at the end of the year.

Position:

Paragraph 28(1)(c) will not apply.

Reasons:

26 April 1996 External T.I. 9510395 - CHARACTERIZATION OF PARTICIPATION PAYMENT FOR TREATIES

Unedited CRA Tags
ART 6

Principal Issues:

Characterization of a participation payment on a mortgage for purposes of Canada's Conventions.

Position:

Generally, would be characterized as income from real or immovable property.

Reasons:

25 April 1996 External T.I. 9609415 - 6(1)(A)

Principal Issues:
employee benefit arising from payment of MBA tuition where course was taken at the recommendation of the employer

24 April 1996 External T.I. 9604235 - ALLOCATION OF SAFE INCOME

Unedited CRA Tags
55(5)(b), (c), (d) 85(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.

5-960423
XXXXXXXXXX J. Teixeira
(613) 957-8953

Attention: XXXXXXXXXX

April 24, 1996

Dear Sirs:

24 April 1996 External T.I. 9608545 - INTEREST DEDUCTIBILITY

Unedited CRA Tags
20.2(2) 20(1)(c)

Principal Issues:

Proposed legislation of draft subsection 20.2(2) and what is the definition of borrowed money with respect to the distribution of a dividend.

Position:

This is an actual factual situation and as such gave general comments which are related to his transaction.

Reasons:

24 April 1996 External T.I. 9611755 - FEED FREIGHT ADJUSTMENT

Unedited CRA Tags
12(1)(x) 53(2)(k)

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.

Agriculture Canada
Policy Branch
930 Carling Avenue 961175
Ottawa, Ontario A.M. Brake
K1A 0C5

Attention: Gordon Andrusiak

April 24, 1996

Dear Sirs:

Re: Nova Scotia Feed Freight Adjustment Program

24 April 1996 External T.I. 9601745 - CROWN AGENT - IMMUNITY FROM TAXATION

Unedited CRA Tags
149(1)(d)

Principal Issues:

Whether a corporation that is for all its purposes an agent of the provincial Crown and whose property and income is deemed to be property of the Crown can have taxable income within the meaning of subsection 2(2) of the Act.

Position:

It cannot.

Reasons:

24 April 1996 External T.I. 9602195 - CROWN CORPORATION - REDEEMABLE PREFERRED SHARES

Unedited CRA Tags
149(10) 149(1)(d)

Principal Issues:

1.Whether, where a corporation is granted an option to acquire its own shares and the shares are subsequently sold to a Crown agent or a Crown corporation, subsection 149(10) will apply.

2.Whether, where the 90% or 100%, as the case may be, share ownership test is met, but a corporation has outstanding redeemable and retractable preferred shares, the corporation would be tax-exempt under paragraph 149(1)(d) of the Act.

Position:

1.If 100% in the case of a Crown agent or 90% in the case of a Crown corporation of the corporation's shares are acquired, subsection 149(10) will apply.
No comments in respect of the option to acquire shares.

2.The corporation would not be tax-exempt.

Reasons:

24 April 1996 External T.I. 9531635 - FOREIGN CONTENT IN MUTUAL FUNDS

Unedited CRA Tags
206

Principal Issues:

Foreign content in a mutual fund and what constitutes property

Position:

Gave general comments on what constitutes property and in particular property in a mutual fund for purposes of foreign property as it is a question of fact, and the issue in question has not been looked at extensively in the past

Reasons:

23 April 1996 External T.I. 9517055 - 5907(2.1) ADJUSTMENT - DEFERRED STRIPPING COSTS

Unedited CRA Tags
REG 5907(2.1) 66(15)

Principal Issues:

Foreign affiliate - Are deferred stripping costs related to mining eligible for the adjustment in Regulation 5907(2.1)?

Position:

No.

Reasons:

22 April 1996 External T.I. 9604085 - Separate titles? - Transfer of beneficial ownership.

Unedited CRA Tags
118.1(1)

Principal Issues:

WHETHER IT IS NECESSARY TO CREATE SEPARATE TITLES FOR PORTIONS OF QUARTER SECTIONS WHICH ARE ECOLOGICALLY SENSITIVE LANDS (WHICH WILL BE DONATED TO A REGISTERED CHARITY) IN ORDER THAT THE DONATION WILL QUALIFY AS A GIFT. THE DONATION WILL BE FOLLOWED BY A PURCHASE BY THE CHARITY OF THE REMAINING PORTIONS OF THE QUARTER SECTIONS.

Position:

MUST BE DETERMINED PURSUANT TO THE RELEVANT PROPERTY LAW.

Reasons:

22 April 1996 External T.I. 9533185 F - ALLOCATION DE FIN DE CARRIERE

Unedited CRA Tags
12(1)x) 34.2(4) 146(1)

Position Adoptée:

22 April 1996 External T.I. 9600645 F - ALLOCATION DE FIN DE CARRIERE

Unedited CRA Tags
12(1)x) 56(1)a) 146(1)

Position Adoptée:

22 April 1996 External T.I. 9610945 F - ALLOCATION DE FINS DE CARRIERE

Unedited CRA Tags
12(1)x) 56(1)a) 146(1)

Position Adoptée:

21 April 1996 External T.I. 9601635 - DEEMED TAXABLE CANADIAN PROPERTY

Unedited CRA Tags
87(4)

Principal Issues:
Amalgamation of two private corporations to form a new corporation that is a private corporation. Whether the shares of the new corporation are deemed to be taxable Canadian property pursuant to 87(4)?

Position:
Yes

Reasons:
Wording of the demed rule.

18 April 1996 External T.I. 9606655 - MANDATORY CONVERSION OF SALARY TO FLEX

Unedited CRA Tags
56(2)

Principal Issues:

mandatory conversion of salary to flex credits

Position:

conversion of salary to flex credits creates a taxable event at the time of the conversion

Reasons:

12 April 1996 External T.I. 9520025 - PROVINCIAL OR TERRITORIAL JURISDICTION

Unedited CRA Tags
reg 402(3) reg 402(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.

5-952002
XXXXXXXXXX J. Teixeira
(613) 957-8953

April 12, 1996

Dear Sir:

Re: Provincial or Territorial Jurisdiction
where corporation earned its income

11 April 1996 External T.I. 9610725 - TAXABLE BENEFIT FROM EMPLOYER PROVIDED

Unedited CRA Tags
6(1)(a)

Principal Issues:

taxable benefit arising from child care subsidy

Position:

while there is no benefit if care is provided in-house, a taxable benefit is assessed if the care is provided by a third party or if the care is also offered to the public at large for a fee in excess of that which is charged to the employees

Reasons:

2 April 1996 External T.I. 9601565 - RETIRING ALLOWANCE RE-EMPLOYMENT

Unedited CRA Tags
60(J.1)

Principal Issues:

1.Whether one can be re-employed by the same employer after receiving a retiring allowance?
2.Is it possible to transfer a retiring allowance to one's RRSP when one has already received a retiring allowance from the same employer at a previous time?

Position:

1.Yes
2.Yes

Reasons:

29 March 1996 External T.I. 9604695 - INDIAN - BUSINESS INCOME

Unedited CRA Tags
81(1)(a)

Principal Issues:

To what extent is business income of an Indian exempt if some of the work is performed on reserve and some is performed off reserve?

Position:

In this particular case, income from work carried out on reserve is exempt, while income from work carried out off reserve is taxable.

Reasons:

18 March 1996 External T.I. 9600675 - treaty residence - barbados insurance companies

Unedited CRA Tags
ART IV

Principal Issues:

Do recent changes to the Barbados Exempt Insurance Act enable a captive insurance company, which is a foreign affiliate of a corporation resident in Canada, to be considered, in the context of proposed Income Tax Regulations 5907(11)-(11.2) to be resident in Barbados for purposes of the Canada-Barbados Income Tax Agreement?

Position:

No

Reasons:

5 March 1996 External T.I. 9607815 - INDIAN ORGANIZATION - EMPLOYEES

Unedited CRA Tags
81(1)(a)

Principal Issues:

Whether a XXXXXXXXXX would be an organization described in Guideline 4 of the Indian Act Exemption for Employment Income Guidelines.

Position:

No.

Reasons:

Technical Interpretation - Internal

8 May 1996 Internal T.I. 9608607 - LOAN FOR RENOVATIONS NOT EXEMPT & BONA FIDE REPAYMENTS

Unedited CRA Tags
15(2.4)

Principal Issues:

whether amounts which cannot be reconciled to the purchase of a home and amounts paid for renovations to a home are qualified purposes for excluding the amount of a shareholder's loan from income under 15(2). Also whether the terms of repayment which are admittedly reasonable were made in good faith

Position:

the reconciliation of amounts advanced to the purchase is an audit issue but based on the info provided, it would appear that the non-reconciled amounts and the amount paid for renovations does not qualify for the exemption. since a journal entry transferring the debt from one shareholder account to another is not a repayment, the shareholder has not in fact complied with the required terms of repayment and thus, a reasonable argument could be made that the full amount of the loan should be included in income

Reasons:

2 May 1996 Internal T.I. 9612827 - INTEREST DEDUCTION FOLLOWING CHANGE IN SOURCE

Unedited CRA Tags
20(1)(c) 20.1

Principal Issues:

Does interest on a loan remain deductible when the source changes ?

Position:

Yes

Reasons:

1 May 1996 Internal T.I. 9605006 - PURCHASE OF PAST SERVICE BY SURVIVING SPOUCE

Unedited CRA Tags
REG 8502(B)

Principal Issues:

Would a surviving spouce's contribution to complete a purchase of past service in a defined benefit plan of a deceased be a permissible contribution pursuant to Regulation 8502(b)?

Position:

No

Reasons:

18 April 1996 Internal T.I. 9611637 - WGTPP

Unedited CRA Tags
12(1)(x) 53(2)(k)

Principal Issues:

Treatment of WGTPP payments received by residents and non-residents

Position:

Grinds to ACB of farmland

Reasons:

29 March 1996 Internal T.I. 9421307 - INDIAN - EXEMPTION OF CAPITAL GAIN FROM TAX

Unedited CRA Tags
81(1)(a)

Principal Issues:

How is a capital gain on the disposition of capital property by an Indian taxed if the property was used for part of its life to generate exempt income?

Position:

Prorate the exemption based on the proportion of time the asset was used to generate exempt income.

Reasons:

8 March 1996 Internal T.I. 9530166 - NON-RESIDENT BENEFICIARIES AND SECTION 216

Unedited CRA Tags
216 212(11) 212(1)(c) 108(5)(a)

Principal Issues:

Is trust income of a non-resident beneficiary eligible for the subsection 216(1) election?

Position:

No

Reasons:

7 March 1996 Internal T.I. 9604267 - INDIANS - U.I. BENEFITS RECEIVED BY

Unedited CRA Tags
81

Principal Issues:

How to calculate tax-exempt portion of unemployment insurance benefits received by Indians.

Position:

According to most favourable result using either the last 20 weeks of insurable employment or the number of insurable weeks in the last 52 week period.

Reasons:

22 February 1996 Internal T.I. 9605666 - INDIANS - EMPLOYMENT INCOME

Unedited CRA Tags
81(1)(a)

Principal Issues:

Whether the employees of XXXXXXXXXX College are exempt from tax on their salary income by virtue of either Guideline 2 or 4 of the Indian Act Exemption for Employment Income Guidelines.

Position:

18 January 1996 Internal T.I. 9600446 - INTEREST ON ADDITIONAL CROWN CHARGES

Unedited CRA Tags
18(1)(m) 9 20(1)(v.1) REG 1210

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.

January 18, 1996

Ministerial Letter

2 April 1996 Ministerial Letter 9607918 - REPLACEMENT OF FUNDS TO AN RRSP

Unedited CRA Tags
146

Principal Issues:

Replacement of funds withdrawn from an RRSP due to financial hardship.

Position:

No

Reasons: