Income Tax Severed Letters - 1997-05-16

Principal Issues:

Loss on shareholder loans

Position:

refer to IT-239R2 and 159R3

Reasons:

Principal Issues:

1.Must an officer of a corporation resign the office before a retiring allowance can be paid?
2. Will the appointment of a related party as an officer in place of the retiring officer be acceptable.

Position:

1. Yes.
2. Yes but this is only one factor.

Reasons:

Principal Issues:

Where a non-registered supplemental pension plan provides employees with the right to elect to receive the commuted value of future lifetime pension benefits in five equal annual instalments, will contructive receipt result when the election is made?

Position:

No

Reasons:

Principal Issues:

What are eligible investments of an RESP

Position:

There are no restrictions on RESP investments. However section 206.1 may have application.

Reasons:

Principal Issues:

Treatment of fees incurred in respect of an RRSP

Position:

1) admin or trustee fees can be paid by either annuitant or rrsp;
2) management fees are an expense of the rrsp;
3) investment counselling fees for advice to the annuitant are an expense of the annuitant;

Reasons:

Position Adoptée:

Principal Issues:

Treatment of fees incurred in respect of an RRSP

Position:

1)Admin or trustee fees can be paid by either annuitant or rrsp;
2)Management fees are an expense of the rrsp;
3:Investment counselling fees for advice to the annuitant are an expense of the annuitant;

Reasons:

Principal Issues:

Individuals receive amounts for caring for foster children. The issue is the nature of the amounts for income tax purposes.

Position:

The amounts are taxable as salary or wages under subsection 5(1) of the Act.

Reasons:

Principal Issues:

Clarification of statements made in document E9511205 regarding deduction of interest when the amount becomes payable in a year subsequent to the year of accrual.

Position:

Deductible in the year of accrual.

Reasons:

Principal Issues:

We were asked to consider an arrangement where funds held in an RRSP would be used to secure a debt obligation.

Position:

We did not comment on specific proposal but identified the law that applies when RRSP property is used to secure debt obligations.

Reasons:

Principal Issues:

Can an RRSP incur legal fees relating to mortgage property that it holds?

Position:

Yes

Reasons:

Principal Issues:

Principales Questions:

1)Est-ce qu'un surplus accumulé dans une fiducie de santé et de bien-être au bénéfice d'employés constituerait un avantage imposable pour ces derniers
i)dès que le statut permanent du surplus est constaté? Si oui rétroactivement à la première année d'imposition où l'accumulation a débuté ou seulement au cours de la première année d'imposition où le surplus de caractère permanent est constaté;
ii)lorsque les montants en excédent sont versés, directement ou indirectement, aux employés ?

2)L'accumulation d'un surplus peut-elle se régler par une bonification des avantages des régimes administrés par la fiducie?

3)Est-ce que la qualification d'une fiducie contaminée à titre de "régime de prestation aux employés", d"'entente d'échelonnement du traitement" ou de "convention de retraite" est faite seulement suite à une analyse détaillée des documents pertinents ? Quels seraient les éléments qui militeraient en faveur d'une qualification donnée plutôt qu'une autre ? Une fiducie contaminée pourrait-elle être convertie en plus d'un des régimes mentionnés précédemment?

Position Adoptée:

Principal Issues:

Principal Issues:

whether tuition tax credit and/or education tax credit is available to students who have received amounts directly from HRDC which are "designed to facilitate the entry or re-entry of workers into the labour force" and where these amounts are not required to be included in income because of the carve out provisions in 56(1)(a)(iv).

Position:

tuition tax credit available only for that portion of fees for which the claimant has not been reimbursed or otherwise assisted under the EI Act (or other program of Her Majesty in right of Canada, or of a prvince, which is designed to facilitate the entry or re-entry of the individual into the labour force and which is also not included in income). Fees paid must otherwise qualify for the credit and the remainder portion must be more than $100. No education tax credit because the def'n of "qualifying educational program" excludes any program in which the student receives "from a person with whom the student is dealing at arm's length, any allowance, benefit, grant or reimbursement for expenes in respect of the program..."

Reasons:

Principal Issues:

Is the Over-the-Counter Bulletin Board a prescribed stock exchange?

Position: No

Reasons:

Principal Issues:

Post-dated cheques

Position:

Post-dated cheques are normally accepted as security for debt without extinguishing the original debt. Income to cash basis farmer when cheque is cashable.

Reasons: