Income Tax Severed Letters - 1997-11-14

Principales Questions:

Est-ce qu'un employeur qui verse des intérêts sur un paiement rétroactif de salaire et des intérêts post-jugement à l'égard d'une allocation de retraite, doit obligatoirement produire des feuillets T5 en vertu du paragraphe 201(1) du Règlement ?

Position Adoptée:

Principal Issues:

What constitutes "pay in lieu of notice"?

Position:

Question of fact.

Reasons:

Principales Questions:

Une société est preneur et bénéficiaire d'une police d'assurance-invalidité à l'égard de certains employés. Est-ce que les primes versées en vertu de cette police sont déductibles et est-ce que les prestations reçues seraient imposables?

Position Adoptée:

Principal Issues:

1) Can an employee eligible for moving expenses with beneficial ownership of residence avail himself of the position in paragraph 37 IT 470R where there is an actual loss on the disposition of a home?
2) Is a payment by the employer to buy-out a car lease of an employee considered a taxable benefit?

Position:

1) YES, 2) YES

Reasons:

Principal Issues:

is there a need to amend def of cost of capital in Reg 5202?

Position:

Yes

Reasons:

Principal Issues:

Can the "minimum amount" be paid in a form other than cash?

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.

5-970783
XXXXXXXXXX Michel Lambert

Attention: XXXXXXXXXX

October 22, 1997

Dear Sir\ Madam:

Re: Distribution of Capital from a Canadian Trust to a Swiss Beneficiary

Principal Issues:

Is an arrangement in which shares are issued to a trust at a discount an SDA where employees may acquire units in the trust as a consequence of their employment? Could 7(2) apply to such a trust?

Position:

No firm positions were given since the letter deals with a proposed transaction. However, we state that it would seem reasonable to consider that the arrangement might be an SDA or that section 7(2) might apply.

Reasons:

Principal Issues:

Whether or not the prepayment of maintenance for child support can be deducted in whole or in part.

Position:

No

Reasons:

Principal Issues:

A "structured settlement" is involved with the related annuity contract being, among other things, non-commutable. In circumstances where the claimant does not survive the guarantee period, and, under the terms of the settlement, 50% of each of the remaining periodic amounts were to be paid to the claimant's estate and the other 50% of the periodic amounts were to be paid to the casualty insurer, the concern is whether the casualty insurer could commute its entitlement to its share of 50% of the remaining periodic amounts after the Claimant dies.

Position:

It is our general view that the 50% of the remaining periodic amounts due to the casualty insurer could be commuted without jeopardizing the structured settlement arrangement.

Reasons:

Principal Issues:

1. Does the position stated in paragraph 9 of Interpretation Bulletin IT-385R2 apply in computing the amount of taxable income of a non-resident beneficiary of a trust resident in Canada under subparagraph 115(1)(a)(iv) of the Act?

2. Do the principles set out in paragraph 9 of Interpretation Bulletin IT-385R2 apply with respect to the surrender of a capital interest in a trust?

Position:

1. Depending on the facts of a particular situation, the position stated in paragraph 9 of Interpretation Bulletin IT-385R2 could apply to determine, for the purpose of subparagraph 115(1)(a)(iv) of the Act, the amount required by subsection 106(2) to be included in computing a non-resident beneficiary's income as proceeds of the disposition of an income interest.

2. With respect to the surrender of a capital interest in a trust, our opinion is that the principles set out in paragraph 9 of Interpretation Bulletin IT-385R2 are equally applicable to surrenders of capital interests (the reference to subsection 106(2) being replaced with a reference to section 40).

Reasons:

Principal Issues:

Fair market value of shares that are subject to a stop trading order?

Position:

Question of fact.

Reasons:

Principal Issues:

1) Under what circumstances will a payment made by a discretionary trust to third parties for the benefit of a minor beneficiary be considered paid to the child for the purposes of subsections 104(6), (13) and (24)?
2) Will a taxable benefit under subsection 105(1) arise to a parent solely as a consequence of a trust paying the personal and living expenses of that child, including the "necessaries of life"?

Position:

1) Where the requirements of our proposed position have been met, amounts paid by a trust to a person other than a minor beneficiary for the benefit of the minor beneficiary will be considered paid to the beneficiary.
2) No.

Reasons: see 970657

Principal Issues:

Eligibility for the tuition tax credit

Position:

Not eligible

Reasons:

Principal Issues:

Whether fees paid for a right to distribute would be classified as a class 14 asset or an eligible capital property.

Position:

Likely an eligible capital property, but cannot determine conclusively.

Reasons: