Income Tax Severed Letters - 1996-09-20

Principal Issues: Rollover of retiring allowance to RRSP

Position: General position with respect to return to work

Reasons: Established positions

Principal Issues:

Deduction of patronage dividends to a sole shareholder/customer where the corporation is not a co-operative and a contract is entered into in a particular year.

Position:

General comments only due to specific proposed transaction. A corporation does not have to be a co-operative and contract entered into during a year would not met the throughout the year requirement in paragraph 135(5).

Reasons:

Principal Issues:

Where an automobile dealership acquires inventory from an automobile manufacturer by way of a wholesale conditional sales contract, does the obligation constitute a loan or an advance under paragraph 181.2(3)(c), a note or similar obligation under paragraph 181.2(3)(d) or other indebtedness under paragraph 181.2(3)(f).

Position:

This is a question of fact which can only be determined after a review of the terms of the wholesale conditional sales contract. However, based on the information provided, it appears that paragraph 181.2(3)(c) or (d) would be applicable rather than paragraph 181.2(3)(f) given that the obligation under the contract is more than just an ordinary trade payable.

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.

									962502
XXXXXXXXXX							M.P. Sarazin

Attention: XXXXXXXXXX

August 30, 1996

Dear Sirs:

Re: Amendment of a Stock Option Plan

Principal Issues:

RRSP home buyers' & marriage breakdown.

Position:

Cannot transfer repayment requirements

Reasons:

Principal Issues:

Would a mortgage on a floating home be a qualified investment for RRSP purposes.

Position:

Yes, provided that the floating home is "real property" under the civil law of the province where the property is located.

Reasons:

Principal Issues:

Principal Issues:

Is termination payment a retiring allowance

Position:

Payment per s58 of ESA (Ont) is a retiring allowance

Reasons:

Principales Questions:

Quels sont les indices de prix à la consommation visés par la définition de titre de créance indexé?

Position Adoptée:

Principal Issues:
liability of employer and employee for the tax to be withheld in respect of the taxable benefit relating to the assumption of a share-purchase debt upon the termination of employment

Position:
while employer should withhold & remit if possible (given that the assumption of debt creates a non-cash benefit), employee is still responsible for the tax payable on the employment benefit (note that the benefit from the settlement of debt under 6(15) is taxable under 6(1)(a) and not as a retiring allowance even though the settlement is occasioned by the termination of employment

Reasons:
the balance due which is payable by the employee under 156.1(4) is calculated with reference to the amount actually withheld by the employer so that even though the employer is required to withhold, when the employer does not withhold (or can't because it is a non-cash benefit0, the employee remains liable for the tax.

Principal Issues:

General information concerning RRSP investments in shares of small corporations.

Position:

Comments on paragraphs 4900(6) and 4900(12) of the Regulations.

Reasons: N/A

Principal Issues:

Whether a water cooling system that maintains an optimal temperature range necessary to the operation of a main frame computer and air conditioning equipment can be classified under class 8(b) for capital cost allowance purposes.

Position:

Yes, if does not qualify as a component part of a building.

Reasons:

Principal Issues:

How can RRSP invest in small business.

Position:

Routine reply

Reasons:

Principal Issues:

Meaning of "directly or indirectly" in new subparagraph 95(2)(a)(ii) in back to back loan situation.

Position:

Question of fact - would have to be able to directly trace payments. Note that this interpretation should not adversely restrict the interpretation of paragraph 95(2)(a.3). The phrase "amounts...paid or payable, directly or indirectly" in subparagraph 95(2)(a)(ii) can be given a more restrictive interpretation than the words "income...derived directly or indirectly" in paragraph 95(2)(a.3).

Reasons:

Position Adoptée:

Principales Questions:

Définition d'actionnaire rattaché pour les fins de l'alinéa 4900(12)a) du Règlement.

Position Adoptée:

Principal Issues:

Whether a water cooling system and air conditioning equipment that maintain an optimal temperature range necessary to the operation of a main frame computer can be classified under class 10(f) for capital cost allowance purposes.

Position:

No. They are more likely to be considered a component part of a building.

Reasons: