Income Tax Severed Letters - 1997-08-08

Principal Issues:

Whether subparagraph 7(b) of Article 13 of the Canada -U.K. Income Tax Convention should be applied on a look-through basis for purposes of subparagraph 5(a) of Article 13.

Position:

Yes.

Reasons:

Principal Issues:

Summary of Canadian Taxation of Corporations and Partnerships

Position:

General Comments Provided

Reasons: N/A

Position:

Principal Issues:

Tax Consequences Arising From the Sale/Redemption of Shares of a Canadian Corporation Owned by a U.S. Resident

Position:

Deemed dividend pursuant to s. 84(3) subject to Part XIII tax and U.S. will grant a FTC for the Part XIII tax. Any capital gain on both sale and redemption of shares may be taxable in Canada pursuant to Article XIII of the Canada-U.S. Convention.

Reasons:

Principal Issues:

1) Requirements to be met in order that an amount will be considered payable in the year to the beneficiary of a discretionary trust for the purposes of subsection 104(24).
2) Does the legal incapacity of a minor to personally sue to enforce payment of an amount owing by a trust affect whether an amount is payable to a minor beneficiary?

Position:

1) The trustees must exercise their discretion to apportion the trust's income among the beneficiaries in the trust's taxation year and the beneficiaries must advised of that right in the year.
2) No.

Reasons:

Principal Issues:
1. Do draft 143.2(2) & (6) apply to limit deductibility of farming losses carried on by a limited partnership in any of the following scenarios:
(i) where a taxpayer, who holds a unit in the partnership, has a right to sell his interest in the partnership to a third party for a pre-determined price?
(ii) where the partnership has a priority right to revenues, up to a pre-determined amount, where the amount of such priority is not guaranteed in any way?
(iii) where the partnership is guaranteed a certain level of revenue?
(iv) where the partnership has a right to sell certain property of the partnership to an arm's length third party for a pre-determined price?

Position:
1. Gave qualified opinions (depending on the facts) that draft 143.2(2) & (6) may not apply to limit deductibility of farming losses carried on by a limited partnership in any of the above scenarios.

Reasons:
1. The "at-risk adjustment", defined in 143.2(2), specifically excludes expenditures which are the cost of a partnership interest to which subsection 96(2.2) applies. In the case of (i) & (iii) & (iv) the application of 96(2.2) may preclude an at-risk adjustment. In the case of (ii) there may not be any benefit that would either reduce the at-risk amount calculated pursuant to 96(2.2) or constitute an at-risk adjustment pursuant to 143.2(2).

Principal Issues:

Whether interest exemption provided for by paragraph 3(d) of Article XI of the Canada-U.S. Income Tax Convention would continue to apply if repayment terms and interest rate modified.

Position:

Question of fact. Would depend if the changes were so fundamental as to result in the disposition of the old debt obligation and an acquisition of a new obligation.

Reasons:

Principal Issues:

Whether or not a Russian joint stock company ("JSC") would be considered to be a corporation for purposes of the Act (in particular the definition of foreign affiliate).

Position:

Yes, provided the JSC does not have a limited life and provided the JSC is not transformed into another entity.

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.

									Tim Kuss
XXXXXXXXXX							961340

Attention: XXXXXXXXXX

January 17, 1997

Dear Sirs:

Re: Limited Liability Company - Foreign Accrual Tax

Principal Issues:

rental subsidy paid to employee upon relocation to assume temporary or permanent duties in other city, subsidy to be permanent or temporary

Position:

taxable unless exempt by reason of 6(6)

Reasons:

Principal Issues:

Whether bequest to U.S. charities is creditable under paragraph 1 of Article XXIX B of Canada-U.S. Income Tax Convention

Position:

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.

		962782
XXXXXXXXXX	M. Eisner

December 12, 1996

Dear XXXXXXXXXX:

Re: Moving Expenses

This is in reply to your letter of August 20, 1996 concerning the above noted subject. We also acknowledge our telephone conversations.

Principal Issues:

whether 75(2) applies in various situations involving
1) the payment of a debt with a gift from a beneficiary, 2&3) possible indirect transfers to the trust from the beneficiary &
4) whether an agreement or covenant between the trust & beneficiary can avoid the application of 75(2)

Position:

1) question of fact as to whether the gift by beneficiary is applied against debt so that the trust no longer holds the property
2&3) it is likely that an indirect gift has been made so that 75(2) does apply
4) unable to offer meaningful comment without full details, including the covenant or agreement to vary the terms of the trust

Reasons:

Principal Issues:

1.Whether, where a remainder interest in ecologically sensitive land is gifted by a corporation to a heritage or conservancy organization, section 43.1 of the Act would apply.

2.Whether the corporation would be considered to have conferred a benefit on its shareholders who will have the right to use the property for their lives.

Position:

1.Section 43.1 would not apply.

2.A benefit would be considered to have been conferred on the shareholders if the corporation retains a life interest pur autre vie.

Reasons: