Income Tax Severed Letters - 1996-08-23

Principal Issues:

Income tax treatment of periodic payments made out of a U.S. trust to a Canadian resident beneficiary.

Position:

No specific comments - very general comments only.

Reasons:

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.

							962449
XXXXXXXXXX								B. Kerr

Attention: XXXXXXXXXX

August 9, 1996

Dear Sir/Madam:

Re: Charitable Organization Investment in a Business Corporation

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.

		962180
XXXXXXXXXX	B. Kerr

Attention: XXXXXXXXXX

August 7, 1996

Dear Sirs:

Re; Food and Beverages at Golf Clubs

Principal Issues:

Whether a distribution from a personal trust not resident in Canada of the proceeds from the sale of a capital asset would be a "distribution of capital" for purposes of subparagraph 104(13)(c)(ii)?

Position:

Such a determination would have to be made based upon all of the facts relevant with regard to a distribution made in a particular situation.

Reasons:

Principal Issues:

Would a delay in obtaining the information from an MFT (ie: calculation of income not normally made until after the year-end) cause the Department to conclude that the trustees of a trust could never make an allocation of the trust's income to its beneficiaries for a year and deduct the amount so allocated under subsection 104(6) of the Act. This would be due to the fact that at the end of the trust's taxation year the specific amount of the trust's income for that year may not be known at that time and any "amount" so allocated may not meet the definition of "amount payable" in subsection 104(24) of the Act.

Position:

Depends on facts but generally, where the terms of a trust provides the beneficiary(s) with the legal right to enforce payment in that year of an amount made payable to them that would otherwise be income of the trust for that year, the fact that the specific amount of income of the trust may not be known at year-end because of a delay in obtaining the information required to determine the trust's income will not, by itself, cause us to conclude that a beneficiary of such a trust could never have an enforceable right to demand payment of that amount in that year.

Reasons: See above

Principal Issues:

1.For the purpose of determining the 30% rule of a small business limited partnership, would the General Partner's unit(s) be included as part of the calculation?
2.Where, for purposes of registering a small business investment limited partnership under the applicable Partnership Act, one "nominal" limited partnership unit is issued, will the 30% rule in paragraph 5102(1)(e) of the Regulations be contravened?

Position:

1.None of the partnership unit(s) owned by the General Partner would be used in the calculation.
2.Yes

Reasons:

Principal Issues:

1.Where a resident of Canada acquires a property in satisfaction of an interest in a non-resident estate, is the cost base of the property determined by the rules in paragraph 69(1)(c) or paragraph 107(2)(b)?
2.If the non-resident estate is not subject to tax in Canada, would paragraph 69(1)(c) apply to determine the cost base of property acquired by a Canadian resident in satisfaction of that person's interest in the non-resident estate?

Position:

1.Paragraph 107(2)(b).
2.No. Paragraph 107(2)(b) applies.

Reasons:

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.

		961795
XXXXXXXXXX		M. Eisner

Attention: XXXXXXXXXX

July 26, 1996

Dear Sirs:

Re: Paid-Up Life Insurance

This is in reply to your letter of May 15, 1996, concerning the above-noted subject.

Principal Issues:

The administration of Spousal RRSP.

Position:

A discussion on the administration of spousal RRSP's by the plan administrartor.

Reasons:

Principal Issues:

Whether Form T4A must be issued by a charity where the annuity payments made by the charity to the individual are not taxable.

Position:

Form T4A does not have be issued.

Reasons:

Principal Issues:

Timing of income to a cash basis farmer with respect to postdated cheque received for payment of grain. The cheque includes an interest factor based on time (date grain was delivered to the date of the cheque 2 or 3 years later) and current investment rates.

Position:

Subsection 76(4) provides for a deferral to the following year "where a cash purchase ticket or other form of settlement prescribed pursuant to the Canada Grain Act or by the Minister is issued to a taxpayer in respect of grain delivered in a taxation year of a taxpayer to a primary elevator or process elevator and the ticket or other form of settlement entitles the holder thereof to payment by the operator of the elevator of the purchase price, without interest, ..." While a Deferred Cash Purchase Ticket for Grain is essentially a cheque, (though it has been described as a negotiable instrument, with additional prescribed information) in our view, a bare post-dated cheque that is not as described above would not qualify, even without interest, for deferral under subsection 76(4) and certainly a post-dated cheque, with interest, would not. Hence, no deferral under subsection 76(4). The amounts would be income under 76(1) when post-dated cheque is received in full settlement of the debt that was payable at the time the grain was delivered. This position is set out in paragraph 6 of IT-433R.

Reasons:

Principal Issues:

Principal Issues:

Capital gain reported on the disposition of land. Proceeds consisted of cash and taking back a mortgage. The mortgage was settled for $XXXXXXXXXX less than the balance owing. Taxpayer asked if the two transactions can be combined as the net-capital loss on the mortgage may never get to be applied.

Position:

Two separate transactions on account of capital. The capital gain on the disposition of the land stands and the capital loss on the mortgage can only be applied as permitted by the loss application rules.

Reasons: