Income Tax Severed Letters - 1997-06-13

Principal Issues:

At what point does a deferred bonus plan become an SDA to which the paragraph (k) exception might apply.

Position:

At a time in a particular year that 1) an "amount" is determinable, 2) the employee has a "right" and 3) services have been rendered.

Reasons:

Principal Issues:

The incoming letter raised concerns with Department statements on when an amount will be a refund of premiums with specific reference to the payment of amounts to a grandchild of the annuitant of an RRSP where the grandfather provides some financial support for the child but the child lived with the child's parents and is primarily dependent on them.

Position:

Generally explained each situation must be considered on its own through the local TSO. We also noted that the Department publications were of general application and have also been amended to clarify comments in light of changes to the legislation since they were originally written.

Reasons:

Principal Issues:

Are honorariums taxable and is withholding required?

Position:

Yes, withholding required if over $500

Reasons:

Principal Issues:

qualified farm property; income from land received under a sharecropping arrangement: title to land transferred to joint ownership with spouse in 1993

Position:

1) income from a sharecropping arrangement is not income from the business of farming
2) land transferred to a spouse after 1987 will be subject to the post-june 87 rules of the def'n of qualified farm property if the spouse reports the gain, but if the attribution rules apply, the pre-June 87 rules may apply if the transferor last acquired the property before June 18, 1987

Reasons:

Principal Issues:

1. Would proposed paragraph 15(2.4)(a) apply to a loan made to a shareholder who is not a specified employee at the time the loan is made if the individual subsequently becomes a specified employee by acquiring additional shares:
a) in the same year as the indebtedness arose?
b) in a subsequent year?

2. Does the answer in b) change if the loan is repaid prior to the shareholder becoming a specified employee?

Position:

1. a) and b): Yes, subject to the application of proposed paragraphs 15(2.4)(e) and (f)

2. Same answer. Alternately, the application of subsection 15(2) could perhaps be prevented if proposed subsection 15(2.6) applies.

Reasons:

Principal Issues:

1.Does constructive dismissal constitute loss of employment for the purpose of the definition of retiring allowance in subsection 248(1) of the Act.
2.Taxation of damages received in a wrongful dismissal case.
3.Do payments made pursuant to section 45 of ESA by to employer to the Director in trust, change the nature or character of amounts? Is tax withheld and remitted by the employer or the Director?

Position:

1.If employee resigned and it can be established that there was a constructive dismissal within the meaning of section 58 of the ESA, the Department is of the view that there was a loss of employment.
2.Generally damages in wrongful dismissal cases is a retiring allowance unless relating to unpaid salary or wages or vacation pay. Awards in respect of human rights violation for mental distress are not required to be included in income to the extent they do not relate to the loss of employment.
3.The trust is a statutory trust which is not a real trust. It does not change the nature of amounts received by the Director. Tax should be withheld and remitted by the Director.

Reasons:

Principal Issues:

As a result of a sale of assets (XXXXXXXXXX) by his former employer, an individual and the former employer have recently agreed that the former employer will pay him three instalments in respect of the cancellation. The issue is whether the instalments can be treated as a retiring allowance as defined in subsection 248(1) of the Income Tax Act.

Position:

If the instalments will be received by the individual in respect of the loss of his employment, the instalments can be viewed as being a retiring allowance.

Reasons:

Principal Issues:

We were asked to provide an explanation of how the "cost amount" of property held in an RRSP trust is calculated.

Position:

We provided a general explanation of the calculation.

Reasons:

Principal Issues:

How should "earnings" be defined in defined benefit pension plan.

Position:

May be defined to include all amounts identified as "compensation" in 147.1(1) of the Act or may be defined more restrictively.

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.

		970381
XXXXXXXXXX	M. Eisner

May 9, 1997

Dear XXXXXXXXXX:

Re: Medical Expense and Disability Tax Credit

This is in reply to your letter received by our office on February 11, 1997, concerning the above-noted subject.

Principal Issues:

whether an out-of-court settlement for a complaint filed with the Canadian Human Rights commission is taxable. Settlement is for lost wages, interest on lost wages and "general damages."

Position:

"lost wages" is for 13 week unpaid period while employee waited for long term disability to commence (employee did not have sufficient seniority to receive wages during this period and the reason somehow relates to the unexplained alleged human rights violation). Based on info provided, wages are taxable and subject to ordinary withholding, interest is taxable but no withholding. General damages are not taxable to the extent that human rights issues are involved and the amount is reasonable given what actual tribunals under similar circumstances would pay

Reasons:E9306799, 941852

Principales Questions:

Est-ce qu'une dette sans garantie d'une institution financière au sens de 8604 du Règlement est un passif à long terme selon 181(1)

Position Adoptée:

Principales Questions:

Position Adoptée:

Principal Issues:

Does section 80 apply when a son repays a commercial debt obligation owing to his father from funds gifted from the father?

Position:

Question of fact

Reasons:

Principales Questions:

Interprétation du nouveau paragraphe 211.8(1) de la Loi, dans l'Avis de motion des voies et moyens du 3 mars 1997. Demande de confirmer que si le montant à rembourser à la province concernant le crédit d'impôt sur des actions d'une société à capital de risque ("SCRT") est égal à zéro, le montant en vertu du nouveau paragraphe 211.8(1) serait aussi égal à zéro.

Position Adoptée:

Principal Issues:

Tax consequences of transferring either employee stock option or shares of non-resident corporation acquired under such an option to an RRSP.

Position:

1)Shares or option may be qualified investment;
2) will be foreign property;
3) deduction under 146(5) in amount equal to fmv of option or shares;
4) income inclusion to employee under either 7(1)(a) or (c);
5) deduction for annuitant under 110(1)(d) if conditions satisfied but probably not prescribed shares in this specific fact situation;
6) capital gain to employee but no capital loss on disposition to RRSP;
7) employee's capital gain reduced by section 7 income inclusion on disposition of shares to RRSP;
8) generally no capital gain or loss to RRSP when RRSP disposes of shares;
9) will be double taxation if RRSP continues to hold shares on amount included in employee's income under 7(1)(c) when RRSP is commuted or retirement income commences.

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.

	                                      	970637
XXXXXXXXXX	                                     M.P. Sarazin

Attention: XXXXXXXXXX

March 26, 1997

Dear Sirs:

Re: Home Buyers' Plan and Bankruptcy

Principal Issues:

Does a note surrendered by a beneficiary of the estate which later distributes the note to the debtor considered to be a bequest or inheritance and thus escapes the application of section 80?

Position:

Application of provincial laws. Very dependent on particular facts. Would only escape section 80 if original beneficiary had an interest in the note or surrender in the note considered to be an occurance as a consequence of death and a bequest or inheritance to the eventual debtor recipient.

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.

970793
XXXXXXXXXX M.P. Sarazin

March 25, 1997

Dear XXXXXXXXXX:

Re: RRSP Spousal Plan

Principal Issues: DSLP; a number of general questions.

Position: Standard information provided.

Reasons: General replies generated from past comments on these topics.

Principal Issues:

Are "Special Warrants" qualified investments under 4900(1)(e)?

Position:

Unless shares of corporation qualify as a qualified investment, No

Reasons:

Principales Questions:

Principales Questions:

Est-ce que la totalité du coût des rénovations d'un édifice est déductible dans le calcul du revenu de location de l'édifice?

Position Adoptée:

Principal Issues:

Whether a lump sum equalization payment made pursuant to a separation agreement is deductible at a corporate or individual level

Position:

No

Reasons:

Principal Issues:

whether JEC grandfatheing rules apply where
1)amount of consideration not specified or
2)if open-ended agreement extended

Position:

no, no

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.

	              	970223
XXXXXXXXXX	                        M.P. Sarazin

Attention: XXXXXXXXXX

March 3, 1997

Dear Sirs:

Re: Transfer from RCA to IRA

Position Adoptée:

Principal Issues:
Whether former employers are persons related to the current employer if the former employers and the current employer participate in the same pension plan.

Position:
If any part of the individual's service with a former employer is recognized under the current employer's pension plan, then the former employer and the current employer are "related" pursuant to paragraph 60(j.1)(v).

Reasons:
Wording of paragraph 60(j.1)(v) and previous opinions (950887, 960621, 961502)

Principal Issues:

Whether income received from a trust that is a Real Estate Investment Trust (REIT) would qualify as income from real property and therefore be included in the computation of earned income for RRSP purposes.

Position:

No.

Reasons:

Principales Questions:

1. Est-ce que des personnes ayant un statut particulier auraient droit à la déduction prévue à l'alinéa 8(1)c) de la Loi?

2. Est-ce que plusieurs personnes d'une même confession religieuse pourraient être considérées comme ayant "la charge d'une congrégation" au sein d'une Église locale aux fins de la déduction prévue à l'alinéa 8(1)c) de la Loi?

3. Est-ce que le fait de gagner des revenus en provenance d'autres sources qui ne sont pas reliées au milieu des Églises empêcherait un contribuable d'avoir droit à la déduction prévue à l'alinéa 8(1)c) de la Loi?

Position Adoptée:

Principal Issues:

Traitement fiscal fédéral du crédit pour la construction de navires qui sera octroyé en vertu de la Loi sur les impôts du Québec (ci-après la "LIQ").

Position:

Imposable en vertu de l'alinéa 12(1)(x) de la Loi

Reasons:

Principal Issues:

Whether husband can withdraw eligible amount in one calendar year and wife withdraw eligible amount in subsequent calendar year with respect to joint purchase of a home under the Home Buyers' legislation.

Position:

Yes.

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.

		964226
XXXXXXXXXX	M. Eisner

February 21, 1997

Dear XXXXXXXXXX

Re: Tax Treatment - Disposition of Bonds

This is in reply to your letter of December 21, 1996 concerning the above-noted subject.

Principal Issues:

Home Buyers Plan: meaning of "intend to occupy"

Position:

Must intend to occupy at time of withdrawal. Intent may be frustrated later without consequence

Reasons:

Position Adoptée:

Principal Issues:

Where a corporation's debt is covered by group creditor insurance through the financial institution and the cost of the life insurance is factored into the financing of the debt, at the death of the life insured, can the death proceeds payable to the financial institution be added to the corporation's capital dividend account?

Position:

No.

Reasons:

Principal Issues:

1. a)whether amounts incurred by corporation for services provided by an independent contractor's employees or partners can be included in total of amounts incurred for services under 206(1.1)(d)(iii)(C);
1. b)whether cost of services provided under contract to independent contractor can be included in same total;
2)whether "services" include all activities that normally are considered "services" (except investment activities), e.g., legal & accounting firm services & underwriting services relating to offering of corporation's debt or shares;
3)whether amount billed by professional firm relating to firm's overhead can be included in same total;
4)whether disbursements billed by professional firm can be included in same total.

Position:

1). a)Yes;
1). b)Yes;
2)Yes;
3)Yes as a rule;
4)Question of fact but generally disbursements which are expenses incurred incidental to the services provided can be included; however may be a purchase of goods.

Reasons:

Position Adoptée:

Principal Issues:

Can 7(1) apply to benefits received by an incorporated employee from a corporation to which the person has provided services

Position: yes

Reasons: see 94DTC6193

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.

970332
XXXXXXXXXX M.P. Sarazin

Attention: XXXXXXXXXX

February 10, 1997

Dear Sirs:

Re: Investment Counsel Fees for Advice Provided to Annuitant

Principal Issues:

The ability of an RRSP to invest in shares of a corporation.

Position:

Routine reply.

Reasons:

Principales Questions:

Est-ce que le revenu de location d'avions d'une société est un revenu d'entreprise exploitée activement admissible à la déduction pour petites entreprises?

Position Adoptée:

Principales Questions:

1) Si au cours d'une période de 24 mois, une société et sa filiale en propriété exclusive fait l'objet d'une fusion verticale simplifiée visée par l'article 184 de la Loi sur les sociétés par actions, les actions détenues par l'actionnaire de la société issue de la fusion, rencontrent-elles le test de l'alinéa b) de la définition d'«action admissible de petite entreprise» (AAPE) au paragraphe 110.6(1) de la Loi de l'impôt sur le revenu?

2) Une société (la Société) est incorporée le 12-12 An 01 dans le but d'acquérir les actions d'une autre société. L'actionnaire souscrit à 10 actions ordinaires pour 10$ de la Société. Le 3-01 An 02, la Société acquiert les actions de l'autre société. La position administrative énoncée à la question 17 de la table ronde de l'Association Canadienne d'Études Fiscales tenue en 1990 permettrait-elle de considérer la partie de la période du 12-12 An 01 au 3-01 An 02 comme une période qui n'empêcherait pas les actions de la Société de satisfaire aux conditions décrites à l'alinéa c) de la définition d'AAPE permettant de qualifier les actions à titre d'AAPE?

Position Adoptée:

Position Adoptée:

Principal Issues: principal services business ?

Position: Question of fact

Reasons: contract of services or for services

Principal Issues:

When must a lump sum payment be included in income when it is paid in satisfaction of prior understated benefits.

Position:

In the year it is received

Reasons:

Principales Questions:

Inclusion du produit d'une rente dans le compte de dividendes en capital.

Position Adoptée:

Principal Issues:

Follow-up requesting further clarification of our opinion (962272) dated October 16, 1996 concerning the tax treatment of life insurance proceeds received by a beneficiary as a result of the death of the life insured under an exempt life insurance policy.

Position:

Confirmed our general views as stated in our earlier opinion.

Reasons:

Principales Questions:

Nouvel employeur engage un employé. Dans son contrat d'embauche il est prévu que l'employeur lui remboursera 10 000 $ de perte subie lors de la vente de sa résidence suite au déménagement (pas précisé si perte réelle ou non). Est-ce un avantage imposable pour l'employé qui reçoit le paiement?

Position Adoptée:

Principal Issues: Retiring allowance

Position: Routine

Reasons: Routine

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.

	                          	970136
XXXXXXXXXX		                                 M.P. Sarazin

Attention: XXXXXXXXXX

January 23, 1997

Dear Sirs:

Re: Qualifying Investments for RRSPs

Principal Issues: How can RRSP invest in small business.

Position: Standard reply sent to taxpayer as requested.

Reasons: Routine

Principales Questions:

Est-ce que 146(8.1) applicable si une personne renonce à un legs en faveur du conjoint du rentier décédé.

Position Adoptée:

Principales Questions:

Allocation de retraite

Position Adoptée:

Principales Questions:

L'expédition d'un produit périssable à un entrepôt de réfrigération ainsi que la réfrigération de ce produit constitutent-elles des activités admissibles de fabrication et de transformation lorsque ces activités sont exercées par le contribuable qui fabrique et transforme le produit réfrigéré?

Position Adoptée:

Principal Issues:

How can RRSP invest in small business.

Position:

Standard reply sent to taxpayer as requested.

Reasons:

Principal Issues:

Securities Lending the taxpayer wanted to know the rationale of why we took a position in a previous letter to himself 963814.

Position:

The rules in section 260 do not apply to a partnership

Reasons:

Principales Questions:

Impact pour partie I.3 lorsqu'une société utilise une fiducie de protection d'actifs.

Position Adoptée:

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.

5-963073
XXXXXXXXXX Michel Lambert
(613) 957-8953

A l'attention de XXXXXXXXXX

Le 29 novembre 1996

Mesdames, Messieurs,

Objet: Droit d'utilisation des sièges
XXXXXXXXXX

Principales Questions:

M. A débute un nouvel emploi à Montréal en 19X1 et il met sa résidence de North Bay en vente. De juillet 19X1 à juin 19X2, M.A demeure dans un condominium meublé à Montréal. En juin 19X2, M.A vend sa résidence de North Bay et déménage ses meubles à Montréal pour s'installer dans un condominium non meublé. La conjointe de M.A a demeuré avec lui à Montréal de août 19X1 à janvier 19X2 et à partir de juin 19X2.

De juillet 19X1 à juin 19X2, M.A engage des frais pour se rendre de Montréal à North Bay toutes les deux semaines selon une exigence de son assureur et afin de faire le ménage et d'autres travaux extérieurs.

1. Est-ce que le déménagement de North Bay à Montréal a eu lieu en 19X1 ou 19X2?

2. Est-ce que les frais de déplacement entre North Bay et Montréal sont des frais de déménagement admissibles?

Position Adoptée: