Income Tax Severed Letters - 1997-05-02

Ruling

30 November 1996 Ruling 9700343 - mutual fund ltd partnership and matchable expenditures

Unedited CRA Tags
18.1

Principal Issues:
1. Will the mutual fund limited partnership be subject to extended grandfathering from the application of draft 18.1 of the Act?

2. Will the XXXXXXXXXX changes to increase the distribution fees receivable by the Partnership taint the grandfathering under 1(b) of the XXXXXXXXXX Annex?

Position:
1. Yes.

2. No. They will still be grandfathered under 1(b).

Reasons:

30 November 1996 Ruling 9700473 - STRUCTURED SETTLEMENTS

Unedited CRA Tags
56(1)(d)

Principal Issues:

30 November 1996 Ruling 9702653 - PARTITIONING SHARES HELD BY PARTNERSHIP

Unedited CRA Tags
98(3) 54 248(20) 248(21)

Principal Issues:

(1)Whether an extension can be given since the ruling has expired.

(2)Whether the partnership carries on business

Position:

30 November 1996 Ruling 9704153 - STRUCTURED SETTLEMENT

Unedited CRA Tags
56(1)(d)

Principal Issues:

30 November 1996 Ruling 9640333 - DISTRESS PREFERRED SHARES

Unedited CRA Tags
248

Principal Issues:

Issue of distress preferred shares by a corporation. Was the corporation in financial difficulty due to fact that an arm's length party had guaranteed certain debts or payment would be made?

Position:

In this case yes. The debts ultimately were to be acquired by the guarantor prior to the issue of the distress preferred shares.

Reasons:

30 November 1996 Ruling 9642093 - MUTUAL FUND RULING

Unedited CRA Tags
96(2.2) 96(1) 80(1)

Principal Issues:

Supplementary ruling to increase partnership's revenue and compensate for disproportionate high costs of offering as a result of an unexpected small size of subscription for units in the partnership.

Position:

Supplementary ruling given.

Reasons:

30 November 1995 Ruling 9618143 - WHETHER NR CARRYING ON BUSINESS IN CANADA

Unedited CRA Tags
2(3)

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							961814
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1996

Dear Sirs:

Re: XXXXXXXXXX
Advance Income Tax Ruling

30 November 1995 Ruling 9626393 - XXXXXXXXXX, PHANTOM STOCK PLAN

Unedited CRA Tags
248(1)

Principal Issues:

Can non-resident non-employee director's fees be allocated between countries based on days worked in Canada divided by number of days in the year?

Position:

No, Question of fact.

Reasons:

Technical Interpretation - External

25 April 1997 External T.I. 9709905 - SALE OF P-SHIP INTEREST BY NON-RESIDENT.

Unedited CRA Tags
art. 13(4)

Principal Issues:

Whether paragraph 4 of Article XIII of the Canada - U.S. Income Tax Convention applies to exempt from Canadian tax the taxable capital gain arising on the disposition of a partnership interest by a non-resident that constitutes taxable Canadian property.

Position:

Yes.

Reasons:

24 April 1997 External T.I. 9705385 - PENSION FOR U.K. TREATY PURPOSES

Unedited CRA Tags
ART 17

Principal Issues:

Whether "pension" as used in Article 17 of Canada-U.K. Tax Treaty includes payment under an unmatured RRSP.

Position:

No it is in settlement of all future entitlements.

Reasons:

21 April 1997 External T.I. 9705055 - DAMAGES PAID TO RPP

Unedited CRA Tags
8300 147.2(4) 5(1) 9

Principal Issues:

What are tax consequences re amount proposed to be paid by employer to money purchase RPP (or transferee RRSPs or RRIFs of the money purchase RPP) in respect of damages suffered by the RPP caused by the employer's choice of investment.

Position:

1)No employment income inclusion to employees;
2)not a contribution to RPP, RRSP or RRIF by either employee or employer (which means not deductible and not subject to P.A. limits, RRSP over-contribution tax or prohibition against RRIF contributions);
3) deductible to employer under section 9.

Reasons:

16 April 1997 External T.I. 9705645 - ESOP, IRA, RRSP

Unedited CRA Tags
60(j) 56(1)

Principal Issues:

Can an amount be transferred from a U.S. employee share purchase plan to an IRA then to an RRSP?

Position:

Question of Fact

Reasons:

15 April 1997 External T.I. 9701765 - ANNUITY CONTRACT - PARAGRAPH 20(2.2)(C)

Unedited CRA Tags
20(2.2)(c)

Principal Issues:

Whether a segregated fund contract with an annuity option is an annuity contract for the purposes of paragraph 20(2.2)(c).

Position:

Factual determination to be made based on the terms of the particular contract.

Reasons:

10 April 1997 External T.I. 9704225 - RENTAL PROPERTY

Unedited CRA Tags
REG 1102 REG 1101
transfer to separate class occurs immediately upon rental and following Reg. 1102(14)(d) transfer
non-arm's length transfer followed by rental

Principal Issues:
Where property is acquired by a taxpayer in a non-arms length transaction and is subsequently used to earn rental income will subsection 1102(14) of the Regulations cause that property to be immediately after the transfer property of the same prescribed class as it was to the transferor?

Position:

Yes.

Reasons:

10 April 1997 External T.I. 9706185 - "AS A CONSEQUENCE OF DEATH"

Unedited CRA Tags
146(8.9) 248(9) 248(8)

Principal Issues:

Whether surrender by children of their interest in an RRSP results in spouse receiving part of the RRSP as a "refund of premiums" (i.e. as a consequence of the death of the annuitant).

Position:

Yes.

Reasons:

10 April 1997 External T.I. 9703265 - SUBSTANTIAL CANADIAN PRESENCE

Unedited CRA Tags
206(1.1)(d)(iii)(E)

Principal Issues:

If substantial Canadian presence test is satisfied in year of incorporation, is property retroactively not foreign to date of incorporation or to date the $250,000 test is satisfied.

Position:

To date of incorporation.

Reasons:

10 April 1997 External T.I. 9629425 - EDUCATIONAL ASSISTANCE PAYMENTS

Unedited CRA Tags
146.1(1)

Principal Issues:

Whether certain costs can be paid with "educational assistance payments" as defined in subsection 146.1(1).

Position:

Department has not developed guidelines because there are limits on how much can accrue to provide "educational assistance payments" - if trustee of RESP pays in accordance with the plan as registered, this is acceptable.

Reasons:

26 March 1997 External T.I. 9630645 - MEANING OF "DESTINATION" (REGULATION 402(4))

Unedited CRA Tags
R402(4)

Principal Issues:

Meaning of the "destination of a shipment of merchandise" for purposes of subsection 402(4) of the Regulations.

Position:

It is a question of fact.

Reasons:

24 March 1997 External T.I. 9628405 - TAX ON DESIGNATED INCOME OF CERTAIN TRUSTS

Unedited CRA Tags
PART XII.2 210.2(3)

Principal Issues:

Allocation of Part XII.2 tax to a non-designated beneficiary - whether such allocation must be based on the proportion of the beneficiary's share of "designated income" or is it based on the beneficiary's share of all types of income.

Position:

Based on all income.

Reasons:

19 March 1997 External T.I. 9704935 - TAXATION OF INDIANS

Unedited CRA Tags
81

Principal Issues:

The tax treatment of payments under a RRIF to a status Indian

Position:

The payments will be tax exempt

Reasons:

13 March 1997 External T.I. 9705495 - LIVING ALLOWANCES

Unedited CRA Tags
6(1)(b)

Principal Issues:

The tax implication of allowances and expenses paid by the Privy Council Office.

Position:

General information given on various provisions dealing with allowances and expenses.

Reasons:

19 February 1997 External T.I. 9637525 - INDIAN BAND - INCOME RIGHTS TRANSFERRED TO A TRUST

Unedited CRA Tags
81(1)(a)

Principal Issues:

Whether the assignment to a trust by an Indian band of its right to receive in the future certain revenues otherwise payable to the band would result, pursuant to subsection 56(4) of the Income Tax Act, in the income being included in computing the band's income and not that of the trust.

Position:

Yes.

Reasons:

19 February 1997 External T.I. 9624745 - FISCAL PERIOD - JUDGES

Unedited CRA Tags
249.1 34.2 96

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.

							962474
XXXXXXXXXX								B. Kerr

February 19, 1997

Dear XXXXXXXXXX:

Re: Newly Appointed Judges

Technical Interpretation - Internal

17 April 1997 Internal T.I. 9703377 - CONSUMER BASED LOAN

Unedited CRA Tags
9

Principal Issues:
T\P converted a conventional mortgage into a consumer based loan arrangement ("CBL") with Farm Credit Corporation. Purpose was to give t\p reduced interest rate. However, the closing principal balance in each year, after applying the semi-annual payments of principal and interest, was adjusted to reflect a increase\decrease in the commodity index for the commodity in which the farmer deals. Semi-annual interest payments were calculated on the revised opening principal. However, after 10 years the t\p still owes the same principal balance as was outstanding when the CBL was entered into. Can the payments of principal which were "lost" due to the negative affect of the commodity index be considered interest?

Position:

Not interest. However, may be deductible pursuant to paragraph 20(1)(f).

Reasons:

9 April 1997 Internal T.I. 9700417 - LEGAL FEES

Unedited CRA Tags
8

Principal Issues:

deductibility of legal expenses.

Position:

Taxpayer may be entitled to a portion of legal expenses.

Reasons:

7 April 1997 Internal T.I. 9641126 - RPP SURPLUS EMPLOYER CONTRIBUTIONS

Unedited CRA Tags
REG 8503(15)

Principal Issues:

Whether a surplus amount used in a RPP to fund improved benefits can be considered to be a contribution to the RPP when applying subsection 8503(15) .

Position:

This may be the case where the employer has an absolute right to the RPP surplus. It is a question of fact whether the employer has an absolute right to the surplus.

Reasons:

17 March 1997 Internal T.I. 9631007 - INTERACTION OF 85(1) & 110.6(19)

Unedited CRA Tags
85(1) 110.6(19)

Principal Issues:

The effect a section 85 rollover of eligible capital property will have if the property was previously the subject of a CGD election under subsection 110.6(19).

Position:

The benefits of the CGD election will be lost in many situations where the property is rolled over to a corporation.

Reasons:

17 March 1997 Internal T.I. 9700917 - PENSION FROM THE INTERNATIONAL COURT OF JUSTICE

Unedited CRA Tags
56(1)(a) 81(1)(a)

Principal Issues:

Whether pension income from the International Court of Justice ("ICJ") is taxable in Canada (the ICJ is part of the United Nations).

Position:

Yes.

Reasons:

17 March 1997 Internal T.I. 9634827 - INDIANS - "SPECIAL RESERVES"

Unedited CRA Tags
81(1)(a)

Principal Issues:

17 March 1997 Internal T.I. 9614896 - NET-CAP LOSS - YEAR OF DEATH

Unedited CRA Tags
111(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.

		March 17, 1997
	Individual Returns & Payments	HEADQUARTERS
	Processing Directorate	B. Kerr
	T1 Adjustments Section	957-8953
	Attention: Adrian Raghunandan
		961489

Subsection 111(2)

3 March 1997 Internal T.I. 9641327 - SUBSECTION 20(11) AND TAX TREATIES

Unedited CRA Tags
20(11) art XXIV Canada-U.S. tax treaty

Principal Issues:

Interaction of subsection 20(11) with tax treaties

Position:

Excess tax over what is required in accordance with the treaties is not deductible under subsection 20(11) except for U.S. tax paid by U.S. citizens resident in Canada on interest, dividend or royalties.

Reasons:

18 February 1997 Internal T.I. 9632377 - MANUFACTURING AND PROCESSING

Unedited CRA Tags
125.1

Principal Issues:

Whether the purchase and combining of finished goods XXXXXXXXXX constitutes processing for purposes of section 125.1.

Position:

No.

Reasons:

11 February 1997 Internal T.I. 9633967 - HEALTH WELFARE TRUST -ASO ARRANGEMENT FOR LIFE INSURANCE

Unedited CRA Tags
6(4) 6(1)(a)

Principal Issues:

whether a particular arrangement to provide benefits to employees involves a policy of insurance or an ASO arrangement

-secondary issue involves the use of an ASO arrangement to provide "life insurance" to employees

Position:

14 January 1997 Internal T.I. 9640127 - GUIDELINE 4 - XXXXXXXXXX

Unedited CRA Tags
81(1)(a)

Principal Issues:

14 January 1997 Internal T.I. 9624927 - CAPITAL V. REPAIRS

Unedited CRA Tags
9 18(1)(b)

Principal Issues:

Taxpayer undertook massive upgrading to XXXXXXXXXX old buildings to bring them up to modern day standards.

Position:

Taxpayer's position is that the amounts represent current expenses on account of repairs and maintenance. The expenditures improved the utility of the buildings and extended the life of the asset. This constitutes betterment as set out in the CICA Handbook, 3060.29 and should be capitalized.

Reasons: GAAP

30 December 1996 Internal T.I. 9640907 - EMPL. STANDARD BRANCH RETIRING ALLOWANCE

Unedited CRA Tags
60(j.1) 248(1)

Principal Issues:

Can a pmt made by employment standards branch be considered a retiring allowance?

Position:

Yes

Reasons:

20 December 1996 Internal T.I. 9632427 F - RISTOURNES OU ESCOMPTE DE VOLUME

Unedited CRA Tags
135(1) 135(4)

Principales Questions:

Est-ce que les escomptes de volume payés à des vétérinaires sont des paiements faits selon une répartition proportionnelle à l'apport commercial?

Position Adoptée:

16 December 1996 Internal T.I. 9633247 F - FRAIS DE PRÉPOSÉ, CRÉDIT DÉFICIENCE ET FRAIS MÉDICAUX

Unedited CRA Tags
64 118.3 118.2(2)b.1) 118.2(2)b)

Principales Questions:

Quels déductions et crédits d'impôt le client peut réclamer dans les situations suivantes :

1.Il a payé un montant de 9 000 $ à titre de frais pour des soins à temps plein dans une maison de santé.

2.Il a payé un montant de 12 000 $ à titre de rémunération d'un préposé aux soins à temps plein. Les soins fournis par le préposé permettent au client d'exploiter une entreprise dans un établissement domestique autonome.

Position Adoptée:

13 December 1996 Internal T.I. 9639447 F - XXXXXXXXXX - 37(8)(D)(II)

Unedited CRA Tags
37(8)(d)(ii)

Principales Questions:

Dépenses non admissibles pour les fins du crédit d'impôt à l'investissement - sous-alinéa 37(8)d)(ii) de la Loi - Commentaires additionnels sur le dossier 962622

Position Adoptée:

6 December 1996 Internal T.I. 9628617 F - C.A.R.R.A.

Unedited CRA Tags
56(8)

Principales Questions:

Est-ce que le paragraphe 56(8) de la Loi ou une autre disposition de la Loi permet qu'un montant forfaitaire reçu de la C.A.R.R.A. soit réparti sur les années antérieures au lieu d'être inclus dans le revenu du client dans l'année où il est reçu?

Position Adoptée:

23 October 1996 Internal T.I. 9623397 F - EXPECTATIVE DE PROFIT ET EXISTENCE DU PARTNERSHIP

Unedited CRA Tags
9 28 67 69 31

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.

				Le 23 octobre 1996
      Bureau des services fiscaux de Laval	Administration centrale
	  	Direction des décisions
      A l'attention de 	  et de l'interprétation
        Me Marie-Danielle Gervais	  de l'impôt
		7-962339

XXXXXXXXXX