Income Tax Severed Letters - 1998-02-06

Administrative Letter

15 January 1998 Administrative Letter 9801082 - ICE STORM/VERGLAS Q & A, BUSINESS WINDOM/GUICHET AFFAIRE

Unedited CRA Tags
2

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.

Business Window / Guichet d’affaires

GST/HST-TPS/TVH

Q

Will late filing penalty and interest charges be imposed on a client who files his or her GST/HST return/installment late due to the ice storms which began January 6, 1998.

A

Ruling

23 December 1997 Ruling 9725873 - XXXXXXXXXX

Unedited CRA Tags
56(1)(N)(I)

Principal Issues:

whether recipient to be taxed upon receiving XXXXXXXXXX

Position:

refuse to rule as is ongoing award program (annual award since XXXXXXXXXX). Opinion substituted which says award is taxable under 56(1)(n) and not exempted by Regulation 7700

Reasons:

30 November 1996 Ruling 9712893 - REPLACEMENT PROPERTY - BARTER

Unedited CRA Tags
44(1) 44(5) REG 1103

Principal Issues:

Whether the replacement property rules can apply to a Barter Transaction involving many parcels of land.

Position:

Yes, provided each former business property is specifically matched with its replacement property.

Reasons:

30 November 1996 Ruling 9720713 - CARRYING ON BUSINESS IN CANADA

Principal Issues:

Whether the fact that a non-resident corporation has a non-related Canadian company perform certain accounting and clerical services for it under a sub-contract would, in and of itself, cause the non-resident company or its non-resident clients with which it has an administrative services contract to be carrying on business in Canada.

Position:

Non-resident corporations concerned do not carry on business in Canada solely by virtue of the fact that an arm's length Canadian corporation provides non-core services under sub-contract to one of the non-residents who has contracted to perform certain administrative duties for the other non-resident corporations.

Reasons:

30 November 1996 Ruling 9714813 F - REORGANISATION

Unedited CRA Tags
55(3)a) 245(2)

Principales Questions:

1- application de 245(2) dans les circonstances étant donné les positions antérieures à l'égard de situations similaires
2- possibilite de versement d'un dividende en actions avec un c.v. bas

Position Adoptée:

30 November 1996 Ruling 9728653 F - RÉORGANISATION

Unedited CRA Tags
85 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							1-972865
XXXXXXXXXX

A l'attention de XXXXXXXXXX

Le XXXXXXXXXX 1997

Monsieur,

Objet: Demande de décisions anticipées
en matière d'impôt sur le revenu
Modifications aux transactions projetées
XXXXXXXXXX

Technical Interpretation - External

29 January 1998 External T.I. 9801335 F - RPA

Unedited CRA Tags
147.2(4)

Principales Questions:

Est-ce qu'un particulier qui reçoit des prestations d'un RPA et qui verse des cotisations à ce régime suite à une modification afin de reconnaître certains services affectués avant 1990 peut déduire ces cotisations?

Position Adoptée: Oui.

28 January 1998 External T.I. 9732865 - CPP/QPP DEATH BENEFITS

Unedited CRA Tags
56(1)(a.1) 104(13)

Position: Yes

27 January 1998 External T.I. 9733445 - RETIRING ALLOWANCE - 60(J.1)

Unedited CRA Tags
60(j.1) 87(1) 60(j.1)(iv)

Principal Issues:

Whether years of service with a previous employer who was previously related to the current employer can be counted for purposes of determining the eligible amount of a retiring allowance under 60(j.1).

Position:

Provided our position that the points of time to determine related status is time at which retiring allowance is paid by the employer or time at which employee leaves previous employer to work for current employer.

Reasons:

23 January 1998 External T.I. 9721495 - GERMAN CURRENCY REPLACED BY EURO DOLLAR (39(2))

Unedited CRA Tags
39(2)

Principal Issues:

A Canadian corporation has a loan payable to its German parent and the loan is denominated in German currency. When the German currency is replaced by the Euro dollar, will their be a realization of foreign exchange gain or loss at that time?

Position:

Subject to German law, no.

Reasons:

21 January 1998 External T.I. 9731165 - EXCHANGE OF EMPLOYEE STOCK OPTIONS

Unedited CRA Tags
7(1) 52(1)

Principal Issues:

Will any undue taxation arise on the application of section 7 in certain specific situations where options are exchanged.

Position:

Where one option is exchanged for a new option, 7(1)(b) may apply to assess a benefit. Furthermore, the cost of the new option will be equal to the value of the option given up. Accordingly, the cost of the new option will reduce the income inclusion on its exercise or disposition. However, if the values of the two options are not equal at the time of the exchange, this series of transactions may result in the inclusion of benefits that exceeds the value ultimately received. Neither 52(1) nor 53(1)(j) apply and it is not clear that the provisions of 248(28) of the Act will apply to this result. Therefore we have referred the problem to the Department of Finance for their future consideration.

Reasons:

19 January 1998 External T.I. 9726485 - TRANSFER OF CAPITAL LOSSES BETWEEN SPOUSES

Unedited CRA Tags
73(1) 74.5(1) 40(2)(g) 53(1)(f)

Position: Yes.

16 January 1998 External T.I. 9722935 - DISTRIBUTIONS FROM U.S. CORPORATION

Unedited CRA Tags
90(1) 69(5) 84(9)

Principal Issues:

Tax treatment of certain distributions made by a U.S. corporation to a Canadian shareholder.

Position:

Depends on the nature of the distribution.

Reasons:

15 January 1998 External T.I. 9729345 - GIFT OF LIFE INSURANCE POLICY TO 2 CHARITIES

Unedited CRA Tags
118.1(1)

Principal Issues:

1. Should an advance income tax ruling be issued in respect of a completed transaction? A review of the life insurance policy submitted indicates that XXXXXXXXXX entered into a life insurance contract (policy number XXXXXXXXXX) with XXXXXXXXXX. The owner of the policy is XXXXXXXXXX. The coverage was for $XXXXXXXXXX and the annual premium is $XXXXXXXXXX. The effective date of the policy was XXXXXXXXXX.

2. Whether a life insurance policy assigned to two registered charities constitutes a charitable donation.

Position:

1. No. In accordance with paragraph 7 of Information Circular 70-6R3, we are unable to provide an advance income tax ruling since it is in respect of a completed transaction. I telephoned XXXXXXXXXX, on December 19, 1997, and confirmed that the insurance policy had already been purchased by XXXXXXXXXX and assigned to XXXXXXXXXX had a copy of IC70-6R3 and agreed that since the transaction referred to in his letter had already been partially completed, no advance tax ruling could be issued. I indicated that his cheque would be returned to him and we would provide him with general comments; however, these comments would not be binding on the Department. XXXXXXXXXX agreed with this course of action.

2. Factual determination. Generally the answer would be yes as long as the insurance company is advised of the assignment, and the policy is assigned absolutely.

Reasons:

7 January 1998 External T.I. 9730815 - CHILD SUPPORT

Unedited CRA Tags
56.1(4)

Principal Issues:

Lump-sum payment to settle future child support payments after T1157 election is filed.

Position:

Not deductible or taxable.

Reasons:

7 January 1998 External T.I. 9712655 - NORMAL COURSE ISSUER BID

Unedited CRA Tags
84(6)(b)

Principal Issues:

Does paragraph 84(6)(b) apply to preclude the application of subsections 84(2) and (3) on the purchase of shares by a public corporation pursuant to a "normal course issuer bid".

Position: Yes.

Reasons:

5 January 1998 External T.I. 9717525 - NON-PROFIT ORGANIZATION

Unedited CRA Tags
149(1)(l)

Principal Issues:

whether organization formed to undertake advertising, promotional and research activities for franchisees, who are required to pay a specified percentage of their monthly sales as a membership fee, qualify for NPO status under paragraph 149(1)(l) of the Act.

Position: Doubtful

Reasons:

24 December 1997 External T.I. 9726975 - CO-OPERATIVE HOUSING CORP

Unedited CRA Tags
54

Principal Issues:

Whether the shares in a cooperative housing organization can qualify as a principal residence?

Position:

Section 54 of the Act defines "principal residence" of a taxpayer for a taxation year, to include a property that is "... a share of the capital stock of a cooperative housing corporation acquired for the purpose of acquiring the right to inhabit a housing unit owned by the corporation and that is owned, whether jointly with another person or otherwise, in the year by the taxpayer, ..."

Reasons:

22 December 1997 External T.I. 9709775 - DEFINITION OF EXCLUDED PROPERTY

Unedited CRA Tags
95(1) 95(2)(a)(ii)

Principal Issues:

Whether intangible property that is capital property and is used principally in producing deemed active business income under subparagraph 95(2)(a)(ii) would be excluded property.

Position:

Yes.

Reasons:

18 December 1997 External T.I. 9725015 - MEDICAL EXPENSES-HIPPOTHERAPY & THERAPEUTIC riding

Unedited CRA Tags
118.2(2)(l)

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.

J. Gibbons
XXXXXXXXXX 5-972501

December 18, 1997

Dear XXXXXXXXXX

17 December 1997 External T.I. 9717365 - RRSP AND RRIF PROPERTY TRANSFERS

Unedited CRA Tags
146(16) 206(1) 206(4)

Principal Issues:

Can property be transferred from an RRSP to a RRIF or from a RRIF to a RRIF at its cost amount?

Position:

Our current position is that these transfers must be made at the property's fair market value. We are reviewing this position and may change it in certain situations if warranted.

Reasons:

17 December 1997 External T.I. 9727995 - DIVIDEND IN KIND- U.S. SPIN-OFF

Unedited CRA Tags
90

Principal Issues:

What are the tax consequences to a Canadian shareholder as a result of a U.S. "spin-off" where stock of a subsidiary 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:

16 December 1997 External T.I. 9725415 - KOSHER PRODOUCTS

Unedited CRA Tags
118.1

Principal Issues:

Whether the purchase of kosher-approved food products from various retailers constitutes a charitable donation?

Position:

Not a charitable donation.

Reasons:

15 December 1997 External T.I. 9642275 - LIQUIDATION OF A FOREIGN AFFILIATE

Unedited CRA Tags
88(3) 95(2)(e) 95(2)(e.1)

Principal Issues:

Application of 88(3) and 95(2)(e) to a particular
scenario where a foreign affiliate is liquidated.

Position:

Both provisions apply.

Reasons:

15 December 1997 External T.I. 9707715 - LIQUIDATION OF A FOREIGN AFFILIATE

Unedited CRA Tags
95(2)(e.1)

Principal Issues:

Does 95(2)(e.1) apply where there is a rollover for U.S. federal purposes but not U.S. state tax purposes?

Position:

Yes.

Reasons:

15 December 1997 External T.I. 9721195 - REPLACEMENT PROP. - FARMLAND FOR CROWN GRAZING LEASE

Unedited CRA Tags
44 248

Principal Issues:

Whether farmland that replaces other farmland and crown grazing leases would qualify as replacement property.

Position:

Question of fact but farmland may be considered as replacement for other farmland and crown grazing leases.

Reasons:

5 December 1997 External T.I. 9715045 - RESIDENCY

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.

971504
XXXXXXXXXX David R. Senécal

Attention: XXXXXXXXXX

December 5, 1997

Dear Sirs/Mesdames:

Re: Residency of an individual for purposes of the Income Tax Act (the "Act")

3 December 1997 External T.I. 9720065 - CARRYING ON BUSINESS IN CANADA - BANK ACCOUNT

Principal Issues:

Whether the fact that a non-resident corporation opens a bank account in Canada to pay suppliers in Canada and the U.S. constitutes carrying on business?

Position:

Carrying on business in Canada is a question of fact but the mere opening of an account in and of itself will not constitute carrying on business.

Reasons:

3 December 1997 External T.I. 9729205 - OVERSEAS EMPLOYMENT TAX CREDIT

Unedited CRA Tags
122.3

Principal Issues:

Application of subsection 122.3(1.1) in various factual situations

Position:

While intent is to prevent self employed individuals from incorporating in order to claim credit, it is a question of fact in any given case whether or not 122.3(1.1) would apply to deny the credit.

Reasons:

26 November 1997 External T.I. 9726535 - ENDURING POWER OF ATTORNEY

Unedited CRA Tags
251(5)(b)(i) 256(1.4)(a)

Principal Issues:

Enduring Power of Attorney and deemed ownership of shares under 251(5)(b)(i) and 256(1.4)(a)

Position:

Attorney will be deemed to own the shares even if he has the obligation to protect the donor's interest.

Reasons:

13 November 1997 External T.I. 9707235 - GIFTS OF ART

Unedited CRA Tags
118.1(1) 110.1(1)(a)

Principal Issues:

The acquisition of wildlife art (original paintings and prints) followed by the gift of such art by an individual to a registered charity at a value far in excess of the amount paid to purchase the art.

Position:

Declined to comment on values. General comments given.

Reasons:

Technical Interpretation - Internal

3 September 1997 Internal T.I. 9714337 - STOCK OPTION BENEFIT EXERCISED BY A NON-RESIDENT

Unedited CRA Tags
7 ART XV Canada-U.S. Convention

Principal Issues:

Whether a stock option exercised by a non-resident and subsequent gain on disposal of the shares is taxable in Canada

Position:

Taxable under the Act but exempt under Articles XIII and XV of the Canada-U.S. Convention.

Reasons:

Ministerial Letter

15 January 1998 Ministerial Letter 980108A - ICE STORM/VERGLAS- GST REFUND, REMB. TPS - Q & A

Unedited CRA Tags
2

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.

Refund Enquiries/ Demandes de remboursement

ICE STORM - GST CREDIT CHEQUE DELIVERY

Q	GST CREDIT CHEQUES WERE OUT ON JANUARY 9TH AND I HAVE NOT 	RECEIVED MY PAYMENT YET.

FOR AREAS STILL AFFECTED BY THE SEVERE ICE STORM

14 January 1998 Ministerial Letter 9801088 F - COMMUNIQUÉ - TEMPETE DE VERGLAS POUR LES DOUANES

Unedited CRA Tags
2

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.

Communiqué - Tempête de verglas pour les douanes

Revenu Canada vient en aide aux canadiens victimes de la tempête de verglas

29 December 1997 Ministerial Letter 9727188 - 163(1) penalty when income underreported-no taxable

Unedited CRA Tags
163(1)

Principal Issues:

whether a 163(1) penalty is levied if the inclusion of the unreported income does not trigger any tax payable by the taxpayer. Whether 163(1) applies to a return voluntarily filed.

Position:

yes, and yes if filed under section 150 (excluding 150(4) and as opposed to a return filed under ss 70(2), 104(23), para 128(2)(e)).

Reasons: