Income Tax Severed Letters - 1997-12-26

Ruling

30 November 1996 Ruling 9716483 - RCA LETTER OF CREDIT

Unedited CRA Tags
207.5 56(1)(x) 20(1)(r)

Principal Issues:

What amount will be considered as a contribution to an RCA where an employer funds the RCA with a letter of credit that will reduce its line of credit, where the line of credit is secured by the assets of the employer?

Position:

The actual contribution to the RCA, i.e. twice the fee payable for the letter of credit, would constitute the contribution to the RCA and not the security attached to the letter of Credit.

Reasons:

30 November 1996 Ruling 9720913 - CORPORATE GROUP LOSS UTIL. SCHEME

Unedited CRA Tags
20(1)(c)

Principal Issues:

No issues, similar to other in-house loss utilization schemes.

Position: n/a

Reasons: n/a

30 November 1996 Ruling 9727693 - BUTTERFLY REORGANIZATION

Unedited CRA Tags
55(3.1)(a)

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							5-972769
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1997

Dear Sirs:

Re:XXXXXXXXXX
Advance Income Tax Ruling

30 November 1996 Ruling 9724563 F - REORGANISATION

Unedited CRA Tags
55(2) 55(3)a)

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							1-972456
XXXXXXXXXX

A l'attention de XXXXXXXXXX

Le XXXXXXXXXX 1997

Monsieur,

Technical Interpretation - External

10 December 1997 External T.I. 9731395 F - ASSURANCE VIE

Unedited CRA Tags
190(1)(d) 248(1)

Principales Questions:

Réassureur sur la vie est-il une compagnie d'assurance- vie?

Position Adoptée:

10 December 1997 External T.I. 9715055 F - BIEN DE REMPLACEMENT - CAMION

Unedited CRA Tags
44(5) 44(1)

Principales Questions:

1. Est-ce que le législateur ajoute une condition pour qu’un bien soit considéré comme un bien de remplacement par l’effet de la modification proposée le 20 juin 1996 à l’alinéa 44(5)a) de la Loi?

2. Est-ce qu’un camion acquis par une entreprise de camionnage est un bien de remplacement d’un ancien camion ayant subi un sinistre?

Position Adoptée:

9 December 1997 External T.I. 9727425 F - AGRÉMENT A TITRE D'INSTITUT DE RECHERCHES

Unedited CRA Tags
37(1)(a)(ii) REG 2900(1)

Principales Questions:

demande d'agrément à titre d'institut de recherches agréé ou d'association agréée.

Position Adoptée:

8 December 1997 External T.I. 9725025 - NET FEDERAL SUPPLEMENTS AND PART I.2 TAX

Unedited CRA Tags
110(1)(f) 60(w) 248(28)

Principal Issues:

A taxpayer is in receipt of Old Age Security ("OAS") benefits and net federal supplements ("NFS"). Whether the offsetting deduction for NFS under paragraph 110(1)(f) is reduced to the extent that NFS are repayable as Part I.2 tax?

Position:

OAS benefits and NFS are included in computing income under clause 56(1)(a)(i)(A). However, NFS are effectively rendered non-taxable by virtue of the paragraph 110(1)(f) deduction. Where a taxpayer is in receipt of OAS benefits and/or NFS, the taxpayer may be subject to the Part I.2 tax. Paragraph 60(w) provides a deduction for the amount of Part I.2 tax payable for the year.

While the legislation does not expressly provide for an allocation of the Part I.2 tax between OAS benefits and NFS, the Department's position is that the Part I.2 tax is applied to OAS benefits before NSF. Therefore, any excess of the Part I.2 tax over OAS benefits is considered to be a repayment of NFS to the extent of NFS included in income. Given that a deduction is available under paragraph 60(w) for the amount of Part I.2 tax payable, it is our view that subsection 248(28) would apply to reduce the paragraph 110(1)(f) deduction by the amount of Part I.2 tax that is considered to be a repayment of NFS.

Reasons:

3 December 1997 External T.I. 9729705 - RPP CONTRIBUTIONS BY ESTATE

Unedited CRA Tags
REG 8502(b)

Principal Issues:

Can the Estate of a deceased member of an RPP make contributions to the RPP.

Position:

No.

Reasons:

3 December 1997 External T.I. 9730555 - RRSP SPOUSAL PLAN

Unedited CRA Tags
146

Principal Issues:

Can an RSP that was incorrectly registered as being a spousal RRSP be corrected?

Position:

No correction is required but registered plans should be advised of the correction to the records..

Reasons:

2 December 1997 External T.I. 9702865 F - PAIEMENT D'UNE INDEMNITE POUR RETRAIT PREVENTIF

Unedited CRA Tags
5(1) 56(1)v) 110(1)f)

Principales Questions:

Est-ce qu'un montant de rémunération versé par l'employeur en vertu de l'article 36 de la Loi sur la santé et la sécurité du travail du Québec est exclu du calcul du revenu?

Position Adoptée:

2 December 1997 External T.I. 9726565 - PROMISSORY NOTE SECURED BY MORTGAGE

Unedited CRA Tags
4900

Principal Issues:

Would a promissory note secured by a mortgage on real property be a qualified investment for an RRSP?

Position:

Question of fact.

Reasons:

28 November 1997 External T.I. 9704875 F - APPLICATION OU NON DU PARAGRAPHE 110.6(8)

Unedited CRA Tags
110.6(8)

Principales Questions:

Est-ce que le Ministère appliquerait le paragraphe 110.6(8) de la Loi pour refuser la déduction pour gains en capital dans la situation soumise?

Position Adoptée:

21 November 1997 External T.I. 9719225 - "YEAR 2000" EXPENDITURES.

Unedited CRA Tags
9 Sch II

Principal Issues:

Whether costs to upgrade or modify software to make it "year 2000" compatible would be considered current or capital expenditures that would be deductible through the capital cost allowance system.

Position:

Question of fact.

Reasons:

21 November 1997 External T.I. 9720435 - 34.2(5)

Unedited CRA Tags
reg 2601 reg 2603

Principal Issues:

Whether the reserve claimed by a member of a partnership under section 34.2 and included in income in following year when the individual was no longer a member of the partnership would be allocated to his province of residence.

Position:

Cannot be definitive, only general comments available; transaction appeared to be completed transaction.

Income earned in a year in a province computed according to rules under Part XXVI of Regulations and would depend on whether taxpayer carried on a business in the year, resided in the province and had a permanent establishment in or outside the province. Where no income earned from a PE outside the province of residence, any reserve added back under 34.2(5) would be allocated to province of residence.

Reasons:

21 November 1997 External T.I. 9721525 F - CDC - ASSURANCE-VIE

Unedited CRA Tags
89(1) 148

Position Adoptée:

20 November 1997 External T.I. 9724105 - MEANING OF THE TIME WHERE AN INVESTMENT IS ACQUIRED

Unedited CRA Tags
146(10) 146.3(7)

Principal Issues:

Whether the time an investment is acquired by a deferred plan refers to the day on which the plan acquires the investment?

Position:

No, however a number of investors can acquire investments at the same time.

Reasons:

19 November 1997 External T.I. 9713085 - CALENDAR YEAR-END RULES

Unedited CRA Tags
34.2(4) 249.1(1)(b)

Principal Issues:

Whether a professional corporation that is a member of a partnership would be entitled to a reserve under 34.2(4) where, among other things, the corporation's taxation year which previously ended on December 30, 1995 was changed to end on December 31, 1995. December 31 has always been the partnership's year end. Would the change of the corporation's taxation year arise because of the application of paragraph 249.1(1)(b).

Position:

It appears that the change of the corporation's year-end would arise because of the application of 249.1(1)(b). Whether it qualified for the reserve would depend on whether it had a qualifying fiscal period, earned income in that period and had December 31, 1995 income.

Reasons:

19 November 1997 External T.I. 9728055 - CONDOMINIUM CORPORATIONS

Unedited CRA Tags
149(1)(l) 149(12)

Principal Issues:

Whether or not a condominium corporation claiming an exemption pursuant to 149(1)(l) will be required to file a NPO return (form T1044)/

Position:

Yes

Reasons:

13 November 1997 External T.I. 9712055 - TUITION CREDITS

Unedited CRA Tags
118.5

Principal Issues:

Tuition fees paid for high school courses.

Position:

Do not qualify for tuition credit.

Reasons:

13 November 1997 External T.I. 9719215 - off-setting child support amounts under Guidelines

Unedited CRA Tags
118(5)

Principal Issues:

whether either spouse can claim equiv-to-married amt when each spouse is notionally required to pay support to the other in respect of all children (each spouse has custody of the 3 children 50% of the time)

Position:

no equiv-to-married amount, see 118(5). Assumes the spouses live separate and apart from one another throughout the year because of the breakdown of their marriage (or either claim a ded'n under section 60 of the Act for a support amount paid to the spouse or former spouse)

Reasons:

3 November 1997 External T.I. 9714465 - GIFTS

Unedited CRA Tags
110.1 38(a.1)

Principal Issues:

Whether or not certain dispositions of property to a registered charity for some consideration can result in a gift.

Position:

No. Except for certain fund raising events set out in paragraph 5 of IT-110R3

Reasons:

3 November 1997 External T.I. 9715325 - PHSP - COVERAGE FOR TWO SPOUSES

Unedited CRA Tags
6(1)(A) 252(3)

Principal Issues:

The tax implications when a medical insurance plan covers a common law spouse and a separated spouse.

Position:

The plan may still qualify as a private health services plan.

Reasons:

2 November 1997 External T.I. 9727595 F - CRÉDIT D'IMPOT FTQ

Unedited CRA Tags
127.4

Position Adoptée:

30 October 1997 External T.I. 9714095 - ACTIVITIES OF A PENSION REALTY COMPANY

Unedited CRA Tags
149(1)(o.2)(ii)

Principal Issues:

Whether the development of undeveloped real estate is an activity permitted in clause 149(1)(o.2)(ii)(A).

Position:

Yes providing the property was not acquired with the intent to improve and develop for sale.

Reasons:

30 October 1997 External T.I. 9716865 - MEDICAL EXPENSE - SPECIALLY-TRAINED ANIMALS

Unedited CRA Tags
118.2(2)(l)

Principal Issues:
Whether an individual must qualify for the disability tax credit to claim the costs of acquiring and maintaining specially-trained animals as medical expenses under paragraph 118.2(2)(l).

Position:
Although there is no requirement under paragraph 118.2(2)(l) that the patient qualify for the disability tax credit, one would expect so.

Reasons:
A person who qualifies under paragraph 118.2(2)(l) by reason of having a severe and prolonged impairment that markedly restricts the use of his or her arms or legs would likely qualify for the disablilty tax credit by reason of this same disability.

28 October 1997 External T.I. 9717535 - REPLACEMENT PROPERTY - EXCESS PROPERTY

Unedited CRA Tags
44

Principal Issues:

Whether the fact that a new property is significantly larger than the property it replaces would affect the status of the property as a replacement property for purposes of section 44 of the Act.

Position:

Yes.

Reasons:

15 October 1997 External T.I. 9724475 - DIVIDEND IN KIND-FOREIGN SPIN-OFFS

Unedited CRA Tags
90

Principal Issues:

What are the tax consequences to a Canadian shareholder as a result of a U.S. spin-off (or divestiture) where stock of subsidiaries is distributed to shareholders?

Position:

Dividend to the Canadian shareholder, equal to the fair market value of the distributed shares at the time they are received.

Reasons:

25 September 1997 External T.I. 9715905 - DIVIDEND IN KIND - U.K. DEMERGER

Unedited CRA Tags
90 12(1)(k)

Principal Issues:

What are the tax consequences to a Canadian shareholder as a result of a U.K. "demerger" where stock of subsidiaries is distributed to shareholders.

Position:

Dividend to the Canadian shareholder, equal to the fair market value of the distributed shares at the time they are received.

Reasons:

22 September 1997 External T.I. 9725075 - THIRD PARTY PAYTS AND RENT FREE USE OF TRUST PROPERTY

Unedited CRA Tags
104(6) 104(13) 104(24) 105(1)

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"?
3) Will there be a benefit under subsection 105(1) for the rent-free use of personal-use property by a minor beneficiary and the minor's parent where that property owned by the trust is acquired for the benefit of the minor beneficiary?

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.
3) The administrative position expressed in Q#31 and #69 of the Revenue Canada Round Table of the 1988 and 1989 Conference Report, respectively, represents our Department's position.

Reasons: see 970657

Technical Interpretation - Internal

2020 Internal T.I. 9707457 F - CESSATION D'UNE ENTREPRISE

Unedited CRA Tags
18(1)a) 13(21)

Principales Questions:

1- y-a-t-il dans présent cas cessation de l'entreprise empêchant ainsi la déductibilité des dépenses encourues par la suite en vertu de 18(1)a)?
2- peut-il y avoir un montant négatif à l'alinéa a) de la composante F de la définition de FNACC au paragraphe 13(21)?

Position Adoptée:

11 December 1997 Internal T.I. 9730067 - RCA LOANS TO CONTRIBUTING EMPLOYERS

Unedited CRA Tags
248(1) 20(1)(r)

Principal Issues:

What is the Department's position on the treatment of an arrangement where the arrangement is structured to meet the definition of an RCA, if funds contributed by an employer are used to secure a loan and the proceeds of the loan are returned to the contributor in the form of another loan.

Position:

If a bona fide RCA exists, there are no restrictions on the types of investments the arrangement can make. Accordingly, where an RCA exists, it can invest in loans to a contributing employer. It is a question of fact whether a bona fide RCA is created in any particular situation.

Reasons:

12 November 1997 Internal T.I. 9713747 F - ENTREPRISE DE PRESTATION DE SERVICES PERSONNELS

Unedited CRA Tags
125(7) 248(1) 125(1)

Principales Questions:

Est-ce que la société exploite une entreprise de prestation de services personnels et ce, même si l'actionnaire déterminé (employé constitué en société) fournit son expertise à une agence de placement qui lui trouve du travail chez un de ses clients.

Position Adoptée:

15 October 1997 Internal T.I. 9724217 F - VENTE D'UNE LISTE DE CLIENTS PAR UN EMPLOYÉ

Unedited CRA Tags
ITAR 14(5) ITAR 54 ITAR 39(1)

Principales Questions:

Quel est le traitement fiscal de la vente d'une liste de clients par un contribuable étant un employé à commissions ?

Position Adoptée:

7 October 1997 Internal T.I. 9718637 - RESIDENCY - LOCALLY ENGAGED EMPLOYEES

Unedited CRA Tags
ART 4 ART 19

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.

			October 7, 1997
	International Tax		International Section
	Ottawa Tax Services Office		David R. Senécal
(613) 957-9796
	Attention:Phil Fortier
	          Team Leader
				971863

Locally Engaged Employees - Canadian Embassy, Stockholm, Sweden

1 October 1997 Internal T.I. 9717376 F - INDEMNITÉ - ACTES CRIMINELS ET ACTES DE CIVISME

Unedited CRA Tags
56(1)v) 81(1)q) REG 232

Principales Questions:

1.Est-ce qu'une indemnité versée par la CSST à titre de remplacement du revenu en vertu de la Loi sur l'indemnisation des victimes d'actes criminels ou de la Loi visant à favoriser le civisme doit être incluse dans le calcul du revenu du contribuable?
2.Est-ce que la CSST doit produire un formulaire T5007 à l'égard d'une indemnité versée en vertu d'une de ces lois?

Position Adoptée:

25 September 1997 Internal T.I. 9720257 - TUITION TAX CREDITS

Unedited CRA Tags
118.5(1)

Principal Issues:

Does the restriction on tuition fees, in subparagraph 118.5(1)(a)(iii.1), apply in respect of the $500 of a scholarship or bursary which is not taxed by virtue of paragraph 56(1)(n)?

Position:

Generally, no restriction.

Reasons:

22 September 1997 Internal T.I. 9722297 - BANKRUPTCY

Unedited CRA Tags
128(2)

Principal Issues: interpretation of the law

Position: application of 96 and 128

Reasons:

Ministerial Letter

23 September 1997 Ministerial Letter 9721868 - DEDUCTIONS FOR INCOME-GENERATING PROPERTIES

Unedited CRA Tags
9

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.

MINISTER/DM'S OFFICE 97-04954M
ADM'S OFFICE
RETURN RULINGS, 15TH FLOOR, ALBION TOWERS
SUBJECT OR CORPORATE CASE FILE
September 23, 1997

XXXXXXXXXX

Dear XXXXXXXXXX