Income Tax Severed Letters - 1996-12-13

Principal Issues:

How can RRSP invest in small business.

Position:

Routine reply sent to taxpayer as requested.

Reasons:

Principal Issues:

Whether lump sum payment of sick leave credits in advance of loss of employment can be a retiring allowance.

Position:

Yes.

Reasons:

Principal Issues:

Securities Lending Arrangement and whether these rules apply to a partnership

Position:

The rules in section 260 do not apply to a partnership

Reasons:

Principal Issues:

whether losses of a dissolved corporation are available if the corporation is revived; whether dissolution results in the termination of a taxation year and subsequent revival results in the commencement of a new taxation year- all questions in the context of the OBCA.

Position:

Revival under the OBCA has a retroactive effect, therefore losses are restored and are available for use if control has not been acquired. Any income earned in the period of dissolution would reduce the balance of losses carried forward. If revived, since OBCA is retroactive, the taxation year did not end on dissolution, nor does a new taxation year commence on revival.

Reasons:

Principal Issues:

Payment of a retiring allowance in the year following termination.

Position:

As long as this mode of payment was agreed to by the parties prior to termination it would be in accordance with the Income Tax Act.

Reasons:

Principal Issues:

RRSP & RRIF investment management fees

Position:

Confirming and elaborating on our standard position that investment management fees paid by annuitant are considered payment of a premium to RRSP to RRSP for section 146 and Part X.1 purposes; confirming that payment of such RRIF expenses by annuitant is forbidden by 146.3(2)(f) and would cause income inclusion under 146.3(11).

Reasons:

Principal Issues: tax impliactions of a life lease

Position: no opinion given

Reasons: not enough known. need to see documents

Principal Issues:

Responding to suggestion that IT-113R4 be expanded to cover non-section 7 tax commentary (e.g., calculation of cost amount of option and attribution of income on shares where employee disposes of option to non-arm's length party).

Position:

We will consider it on next revision.

Reasons:

Principal Issues:

Whether employer contributions to EPSP must be allocated to employees or can be off-set completely by interest expense of EPSP trust.

Position:

Confirmed para. 2 of IT-379 position; but this plan as described is probably not an EPSP but rather a section 7 arrangement or EBP.

Reasons:

Principal Issues:

Whether certain amounts are "retiring allowance" or employment income.

Position:

Question of fact - referred to standard position on pay in lieu of notice and payments under Ontario Employment Standards Act.

Reasons:

Principal Issues:

1.Is the policyholder considered to have a disposition of the life insurance policy as a result of the policyholder ceasing to be a Canadian resident ("emigrates")?
2.What are the income tax implications, if any, of changing the cash values under the life insurance policy to a foreign currency, or of the insurer "changing the administration of the life insurance policy" to its foreign branch?

Position:

1.Discussed in general terms since the taxation is dependent on the facts of a particular case (ie: type of policy, values, taxpayer's personal situation etc.). However, deemed disposition should occur for most, if not all life insurance policies, under paragraph 128.1(4)(b) of the Act after October 1, 1996, based on October 2, 1996 press release by Finance.
2. Not clear as to what is meant by a of "change in administration" - unable to comment. Change in currency, depending on situation, may or may not cause a disposition of policy under the Act - this remains a question of fact and law.

Reasons: See above.

Principal Issues:

Mortgages as qualified investment for RRSPs.

Position:

Routine letter provided

Reasons:

Principal Issues: How can RRSP invest in small business.

Position: Routine reply sent to taxpayer as requested.

Reasons: Routine

Principal Issues:

Whether spouse who renounced any interest in matrimonial home owned by husband can withdraw amount under Home Buyers' Plan.

Position:

No.

Reasons:

Principal Issues:

Whether an owner-occupied home sold more than 5 years ago and which is to be acquired by the previous owners under the Home Buyers Program is a qualifying home acquired more than 30 days before the RRSP funds are withdrawn causing the amount not to be an "eligible amount".

Position:

No.

Reasons:

Principal Issues:

Whether "office" in 206(1.1)(d)(i) & (ii) includes a registered office as required under a corporation's constating documents.

Position:

Yes.

Reasons:

Principal Issues:

1)RRSP & RRIF admin fees;
2)RRSP & RRIF investment management fees

Position:

1)Confirming position that administration fees paid inside RRSP or RRIF trust do not constitute benefit or amount received to annuitant;
2)Confirming position that investment management fees paid by annuitant are considered payment of a premium to RRSP but not a gift to RRSP for section 146 and Part X.1 purposes; confirming that payment of such RRIF expenses by annuitant is forbidden by 146.3(2)(f) and would cause income inclusion under 146.3(11).

Reasons: Routine