Income Tax Severed Letters - 1998-03-06

Miscellaneous

10 February 1998 Miscellaneous E9733698.txt - ONTARIO TEACHERS' ACTION - COMPENSATION

Unedited CRA Tags
3 63(1)

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.

ADM'S OFFICE (2) 97-1690D &
RETURN TO 15TH FLOOR, ALBION TOWER 97-07553M

February 10, 1998

XXXXXXXXXX

Dear XXXXXXXXXX

25 November 1997 Miscellaneous E9730188.txt - ARTICLE XXII - CANADA - U.S. TREATY

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.

ADM’S OFFICE (2)
PENDING
RETURN TO IT RULINGS, 15TH FLOOR, ALBION TOWERS

XXXXXXXXXX

Dear XXXXXXXXXX

Ruling

30 November 1997 Ruling 9729883 - PHANTOM STOCK PLAN

Unedited CRA Tags
REG 6801(d) 6(1)(c) 115(1)

Principal Issues:

Will 6801(d) apply where a director elects to receive all or part of the director’s annual retainer and meeting fees in deferred share units?

Position: Yes.

Reasons: Plan meets conditions in 6801(d).

30 November 1996 Ruling 9707003 - BUTTERFLY REORGANIZATION

Unedited CRA Tags
55(3)(b) 55(3.1)(b) 55(3.2)(b)

Principal Issues: Butterfly - Spinoff

Position: (See issue sheet)

Reasons: (See issue sheet)

Technical Interpretation - External

27 February 1998 External T.I. 9728505 - 7(1.1), VESTING REQUIREMENTS

Unedited CRA Tags
7(1.1)

Principal Issues:

Can an agreement to issue shares exist where the employee has to remain employed for a certain period before vesting can occur?

Position: Yes

Reasons:

25 February 1998 External T.I. 9731265 - US TAX DEFERRED ANNUITIES

Unedited CRA Tags
12.2 126

Principal Issues:

Whether the deemed accrual rules under section 12.2 of the Act can apply to a US tax deferred annuity? If the deemed accrual rules apply and the foeign tax credits are unable to be fully utilized due to the mismatching of income and income taxes between the Canada and the US is there any relief under the Canada-US Income Tax Convention?

Position:

The treatment of a particular foreign based tax deferred product is a question of fact but section 12.2 does in fact apply to a foreign annuity. It is also possible that there is no relief under the Canada-US Income Tax Convention but this too will ultimately depend on whether the tax deferred product is considered to be a pension, employment benefit or some other form of retirement plan.

Reasons:

25 February 1998 External T.I. E9732625 - OVER-CONTRIBUTIONS - NEGATIVE BALANCE

Unedited CRA Tags
204.2(1.1) 257

Principal Issues:

Would the Cumulative excess amount in respect of RRSPs be nil where the undeducted RRSP premiums is nil.

Position:

Yes.

Reasons:

25 February 1998 External T.I. E9731265 - US TAX DEFERRED ANNUITIES

Unedited CRA Tags
12.2 126

Principal Issues:

Whether the deemed accrual rules under section 12.2 of the Act can apply to a US tax deferred annuity? If the deemed accrual rules apply and the foeign tax credits are unable to be fully utilized due to the mismatching of income and income taxes between the Canada and the US is there any relief under the Canada-US Income Tax Convention?

Position:

The treatment of a particular foreign based tax deferred product is a question of fact but section 12.2 does in fact apply to a foreign annuity. It is also possible that there is no relief under the Canada-US Income Tax Convention but this too will ultimately depend on whether the tax deferred product is considered to be a pension, employment benefit or some other form of retirement plan.

Reasons:

25 February 1998 External T.I. 9732625 - OVER-CONTRIBUTIONS - NEGATIVE BALANCE

Unedited CRA Tags
204.2(1.1) 257

Principal Issues:

Would the Cumulative excess amount in respect of RRSPs be nil where the undeducted RRSP premiums is nil.

Position:

Yes.

Reasons:

20 February 1998 External T.I. E9732065 - DUAL RESIDENT - EMIGRATION

Unedited CRA Tags
128.1(4)(b) ARTICLE XIII

Principal Issues:

several issues concerning interaction of paragraph 128.1(4)(b) and tax treaties to a dual resident

Position: general comments provided

Reasons:

20 February 1998 External T.I. 9727875 - REVISED MGMT & INV COUNSEL FEE POSITION

Unedited CRA Tags
146(1)

Principal Issues:

Can management fees related to the property in an RRSP or RRIF be paid by the annuitant and investment counsel fees related to an RRSP or RRIF be paid by the trust without any tax ramifications?

Position:

Yes (reversal of positions taken since late 1996)

Reasons:

20 February 1998 External T.I. 9732065 - DUAL RESIDENT - EMIGRATION

Unedited CRA Tags
128.1(4)(b) ARTICLE XIII

Principal Issues:

several issues concerning interaction of paragraph 128.1(4)(b) and tax treaties to a dual resident

Position: general comments provided

Reasons:

16 February 1998 External T.I. 9727145 - ADJUSTMENTS TO ACB OF EXEMPT PARTNERSHIP INTERESTS

Unedited CRA Tags
53(2)(c)(i) 111(1)(a) 96(2.5)

Principal Issues:

1. When are adjustments made to the partnership acb's to reflect operating losses in a scenario involving exempt interests in the partnership?

2. How can partnership interests lose their exempt interest status?

Position:

1. In computing the ACB of a partner's exempt interest in a partnership at any time, a reduction is required for that partner's share of the partnership's operating loss for fiscal periods ending before that time.

2. Subject to certain exceptions noted 96(2.5) of the Act, an exempt interest in a partnership can lose that status where after February 25, 1986, there has been a substantial contribution of capital to the partnership or a substantial increase in the indebtedness of the partnership.

Reasons:

13 February 1998 External T.I. 9709285 - QUALIFIED FARM PROPERTY

Unedited CRA Tags
110.6(1)

Principal Issues:

Whether the land owned by a taxpayer is considered to be "qualified farm property?"

Position:

Perhaps.

Reasons:

13 February 1998 External T.I. 9715205 - QUALIFIED FARM PROPERTY

Unedited CRA Tags
110.6(1)

Principal Issues:

Whether land owned by a taxpayer is considered to be "qualified farm property"

Position:

Perhaps

Reasons:

12 February 1998 External T.I. 9733075 - INSURED RRSP DEATH OF ANNUITANT

Unedited CRA Tags
146(8.8) 146(8.9)

Principal Issues:

Explanation of law concerning distribution of insured RRSPs on the death of the annuitant.

Position:

The provisions of the Act in this respect have substantially the same rules for all forms of RRSPs

Reasons:

12 February 1998 External T.I. E9800185 - DEPOSITS - INCLUSION INTO INCOME

Unedited CRA Tags
12(1)(a) 9(1) 20(1)(m)

Principal Issues:

Inclusion under 12(1)(a) ITA of deposits received and related reserve under 20(1)(m) ITA.

Position:

Deposits are not income under 12(1)(a) ITA.

Reasons:

12 February 1998 External T.I. E9733075 - INSURED RRSP DEATH OF ANNUITANT

Unedited CRA Tags
146(8.8) 146(8.9)

Principal Issues:

Explanation of law concerning distribution of insured RRSPs on the death of the annuitant.

Position:

The provisions of the Act in this respect have substantially the same rules for all forms of RRSPs

Reasons:

12 February 1998 External T.I. 9800185 - DEPOSITS - INCLUSION INTO INCOME

Unedited CRA Tags
12(1)(a) 9(1) 20(1)(m)

Principal Issues:

Inclusion under 12(1)(a) ITA of deposits received and related reserve under 20(1)(m) ITA.

Position:

Deposits are not income under 12(1)(a) ITA.

Reasons:

10 February 1998 External T.I. 9726105 - CONVERSION PARTNERSHIP INTEREST - SAME PARTNERSHIP

Unedited CRA Tags
97(2) 103

Principal Issues:

1. Would the exchange of classes of interests in a partnership result in a disposition of the exchanged partnership interest?

2. If so, could 97(2) be used to defer any gain by rolling the partnership interest back to the same partnership in exchange for the other class of partnership interest?

Position:

1. No response was given to their questions, since it appeared to be a factual situation involving a partnership and an estate freeze. We cautioned them on the possible application of section 103 of the Act.

Reasons:

10 February 1998 External T.I. 9731685 - CONDOMINUM, NPO'S

Unedited CRA Tags
149(1)l()

Principal Issues:

Whether or not a condominium corporation claiming an exemption pursuant to 149(1)(l) of the Act will be required to file a NPO Return (form T1044)

Position: Yes

Reasons:

10 February 1998 External T.I. E9731685 - CONDOMINUM, NPO'S

Unedited CRA Tags
149(1)l()

Principal Issues:

Whether or not a condominium corporation claiming an exemption pursuant to 149(1)(l) of the Act will be required to file a NPO Return (form T1044)

Position: Yes

Reasons:

6 February 1998 External T.I. E9730355 - TAXABLE BENEFITS TO EMPLOYEES

Unedited CRA Tags
6(1)(a)

Principal Issues:

Taxable benefit relating to providing employees with the opportunity of purchasing company leased vehicles at less than fair market value.

Position:

The difference between the sale price (book value) and the fair market value is a taxable benefit.

Reasons:

6 February 1998 External T.I. 9730355 - TAXABLE BENEFITS TO EMPLOYEES

Unedited CRA Tags
6(1)(a)

Principal Issues:

Taxable benefit relating to providing employees with the opportunity of purchasing company leased vehicles at less than fair market value.

Position:

The difference between the sale price (book value) and the fair market value is a taxable benefit.

Reasons:

4 February 1998 External T.I. 9715275 - FOREIGN INVESTMENT REPORTING REQUIREMENTS

Unedited CRA Tags
233.2 233.3 233.4 233.6 94(1)(d)(i)

Principal Issues:

Whether a particulr non-resident trust is subject to the foreign reporting requirement rules?

Position:

Not sufficient information to decide. Offer general comments on which reporting requirement rules would most likely apply to the trust.

Reasons:

4 February 1998 External T.I. 9728215 - PERSONAL SERVICES BUSINESS

Unedited CRA Tags
125(7)

Principal Issues: Personal services business?

Position: Question of fact -

Reasons: to be determined after the end of the year

2 February 1998 External T.I. 9730835 - Housing for Seniors

Unedited CRA Tags
110.1(1)(A)(III) 118.1(1) 149(1)(i)

Principal Issues:

1- Do federally incorporated corporations only qualify under paragraph 149(1)(i)?
2- Do organizations that do not make a profit qualify?
3- How is "low-cost" defined

Position:

1- no
2- not necessarily
3- basically accommodation at a rent lower than other similar accommodation in the community.

Reasons:

2 February 1998 External T.I. E9731765 - REDEMPTION OF SHARES OF LSVCC HELD IN A SPOUSAL RRSP

Unedited CRA Tags
211.8 127.4

Principal Issues:

1. Will labour-sponsored funds tax credit have to be repaid if LSVCC shares held in a spousal RRSP are exchanged inside the RRSP for non-LSVCC shares?

Position:

1. Depends on the facts. In certain scenarios where the individual retires, no repayment of the tax credit is required (i.e. shares acquired before March 6, 1996 which are held for more than 2 years).

Reasons:

2 February 1998 External T.I. E9729945 - TAXABLE BENEFITS

Unedited CRA Tags
6(1)(a) 6(1)(b)

Principal Issues:

Whether payments made to employees for the rental of their tools should be included in income.

Position:

A rental payment or tool allowance or rental would be taxed under 6(1)(a) or 6(1)(b).

Reasons:

2 February 1998 External T.I. 9729335 - donation to charity

Unedited CRA Tags
118.1 110.1

Principal Issues:

Whether the transfer of property to a registered charity qualifies as a gift where the gift is made as a result of some person agreeing to stop litigation on disputed assets and agreeing to the validity of a particular will.

Position:

The transfer does not qualify as a gift.

Reasons:

2 February 1998 External T.I. 9731765 - REDEMPTION OF SHARES OF LSVCC HELD IN A SPOUSAL RRSP

Unedited CRA Tags
211.8 127.4

Principal Issues:

1. Will labour-sponsored funds tax credit have to be repaid if LSVCC shares held in a spousal RRSP are exchanged inside the RRSP for non-LSVCC shares?

Position:

1. Depends on the facts. In certain scenarios where the individual retires, no repayment of the tax credit is required (i.e. shares acquired before March 6, 1996 which are held for more than 2 years).

Reasons:

2 February 1998 External T.I. 9729945 - TAXABLE BENEFITS

Unedited CRA Tags
6(1)(a) 6(1)(b)

Principal Issues:

Whether payments made to employees for the rental of their tools should be included in income.

Position:

A rental payment or tool allowance or rental would be taxed under 6(1)(a) or 6(1)(b).

Reasons:

2 February 1998 External T.I. E9730835 - Housing for Seniors

Unedited CRA Tags
110.1(1)(A)(III) 118.1(1) 149(1)(i)

Principal Issues:

1- Do federally incorporated corporations only qualify under paragraph 149(1)(i)?
2- Do organizations that do not make a profit qualify?
3- How is "low-cost" defined

Position:

1- no
2- not necessarily
3- basically accommodation at a rent lower than other similar accommodation in the community.

Reasons:

30 January 1998 External T.I. 9801435 - EMPLOYEE STOCK OPTION BENEFIT - WARRANT

Unedited CRA Tags
7(1) 110(1)(d)

Principal Issues:

Whether a warrant is an agreement to sell or issue share for the purpose of section 7 and paragraph 110(1)(d).

Position: Yes

Reasons: Wording of section 7.

29 January 1998 External T.I. 9733325 - EPSP ALLOCATIONS TO FORMER EMPLOYEES

Unedited CRA Tags
144(1)(b)

Principal Issues:

Can an EPSP provide for the allocation of amounts to former employees?

Position: No.

Reasons:

28 January 1998 External T.I. E9730345 - tuition credits

Unedited CRA Tags
118.5

Principal Issues:

General question on tuition credits.

Position:

Copy of IT-516R2 forwarded as general information.

Reasons:

28 January 1998 External T.I. 9730345 - tuition credits

Unedited CRA Tags
118.5

Principal Issues:

General question on tuition credits.

Position:

Copy of IT-516R2 forwarded as general information.

Reasons:

27 January 1998 External T.I. E9732535 - LOSS CONSOLIDATION TRANSACTIONS

Unedited CRA Tags
245(1) 20(1)(c)

Principal Issues: Loss Consolidation Transactions

Position: Affiliated corporate taxpayers

Reasons: Technical news

27 January 1998 External T.I. 9732535 - LOSS CONSOLIDATION TRANSACTIONS

Unedited CRA Tags
245(1) 20(1)(c)

Principal Issues: Loss Consolidation Transactions

Position: Affiliated corporate taxpayers

Reasons: Technical news

26 January 1998 External T.I. 9800605 - GIFTS OF PAINTINGS

Unedited CRA Tags
118.1(3) 46(1)

Principal Issues:

Whether a gift of personal-use property to a registered charity would qualify for the non-refundable tax credit relating to donations.

Position:yes

Reasons:

26 January 1998 External T.I. 9728805 - Living allowance as travel benefit

Unedited CRA Tags
110.7(1)(A)

Principal Issues:

Whether a deduction is available under paragraph 110.7(1)(a) in respect of an "isolation allowance" paid to employees.

Position: No

Reasons:

26 January 1998 External T.I. E9800605 - GIFTS OF PAINTINGS

Unedited CRA Tags
118.1(3) 46(1)

Principal Issues:

Whether a gift of personal-use property to a registered charity would qualify for the non-refundable tax credit relating to donations.

Position:yes

Reasons:

23 January 1998 External T.I. 9733475 - TIMING OF ELECTIONS

Unedited CRA Tags
4900(1)(b) 89(1)

Principal Issues:

Can an election to be a public corporation have effect from an earlier point in time than its time of filing such that shares of the corporation will be qualified investments for an RRSP at that earlier point in time?

Position: No.

Reasons:

23 January 1998 External T.I. E9733475 - TIMING OF ELECTIONS

Unedited CRA Tags
4900(1)(b) 89(1)

Principal Issues:

Can an election to be a public corporation have effect from an earlier point in time than its time of filing such that shares of the corporation will be qualified investments for an RRSP at that earlier point in time?

Position: No.

Reasons:

22 January 1998 External T.I. E9800005 - TRAVEL, ROOM AND BOARD AS TUITION FEES

Unedited CRA Tags
118.5(1) 118.5(3)

Principal Issues:
Whether transportation, room and board expenses can be considered tuition fees under existing and proposed legislation.

Position:
no.

Reasons:
IT-516R2 clearly states that such expenses do not qualify as tuition fees. The proposed introduction of subsection 118.5(3) should not change this position. The proposed legislation was not intended to allow such expenses according to Mr. Robert Dubrule of Finance.

22 January 1998 External T.I. 9800005 - TRAVEL, ROOM AND BOARD AS TUITION FEES

Unedited CRA Tags
118.5(1) 118.5(3)

Principal Issues:
Whether transportation, room and board expenses can be considered tuition fees under existing and proposed legislation.

Position:
no.

Reasons:
IT-516R2 clearly states that such expenses do not qualify as tuition fees. The proposed introduction of subsection 118.5(3) should not change this position. The proposed legislation was not intended to allow such expenses according to Mr. Robert Dubrule of Finance.

21 January 1998 External T.I. 9726745 - CHILD SUPPORT PAYMENTS

Unedited CRA Tags
56.1(3)(b) 60.1(3)(b)

Principal Issues:

Whether payments made prior to 1997 can be used to have an agreement or order deemed to be made in 1996.

Position:

No

Reasons:

20 January 1998 External T.I. E9729915 - SALE OF SHARES TO A CHARITY

Unedited CRA Tags
69(1)(b)(i)

Principal Issues:

Whether or not an individual can sell a capital property to a registered charity for an amount below the fair market value of the property.

Position:

Yes.

Reasons:

20 January 1998 External T.I. 9729915 - SALE OF SHARES TO A CHARITY

Unedited CRA Tags
69(1)(b)(i)

Principal Issues:

Whether or not an individual can sell a capital property to a registered charity for an amount below the fair market value of the property.

Position:

Yes.

Reasons:

Ministerial Letter

10 February 1998 Ministerial Letter 9721458 - CPP DISABILITY BENEFITS

Unedited CRA Tags
6(1)(f) 56(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.

ADM'S OFFICE 97-04772M

PENDING
RETURN TO INCOME TAX RULINGS
AND INTERPRETATIONS DIRECTORATE
15TH FLOOR, ALBION TOWER
February 10, 1998

XXXXXXXXXX

Dear XXXXXXXXXX

10 February 1998 Ministerial Letter 9733698 - ONTARIO TEACHERS' ACTION - COMPENSATION

Unedited CRA Tags
3 63(1)

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.

ADM'S OFFICE (2) 97-1690D &
RETURN TO 15TH FLOOR, ALBION TOWER 97-07553M

February 10, 1998

XXXXXXXXXX

Dear XXXXXXXXXX

3 February 1998 Ministerial Letter 9728788 - MEDICAL TRAVEL WITHIN THE CITY

Unedited CRA Tags
118.2(2)(g)

Principal Issues:

eligibility of inter-urban travel costs for cancer patients as a medical expense

Position:

doesn't qualify

Reasons:

25 November 1997 Ministerial Letter 9730188 - ARTICLE XXII - CANADA - U.S. TREATY

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.

ADM’S OFFICE (2)
PENDING
RETURN TO IT RULINGS, 15TH FLOOR, ALBION TOWERS

XXXXXXXXXX

Dear XXXXXXXXXX