Income Tax Severed Letters - 1998-08-07

Ruling

30 November 1997 Ruling 9728223 - REFUND OF PREMIUMS

Unedited CRA Tags
146(1)

Principal Issues:

Whether a transfer of funds from a deceased’s RRSP to a surviving spouse is a refund of premiums?

Position: Yes

Reasons:

30 November 1997 Ruling 9732653 - INTERNATIONAL SHIPPING

Unedited CRA Tags
212(1)(d) 212(13()a)

Principal Issues:

Whether payments pursuant to a time-charter agreement between two non-residents for fully-crewed vessels that will be used, in part, in Canadian waters, will be subject to paragraph 212(1)(d) as a result of its interaction with paragraphs 212(13)(a) or 212(13.2)(a)?

Position:

Generally, no.

Reasons:

Technical Interpretation - External

29 July 1998 External T.I. 9812905 - RESIDUAL INTEREST

Unedited CRA Tags
96(2.1)

Principal Issues: is a right held by retired partner pursuant to 96(2.1) inventory to that partner?

Position: no. not considered inventory

Reasons: Reading of the law.

27 July 1998 External T.I. 9815645 - PHSP PREMIUMS FOR EMPLOYEE-SHAREHOLDERS

Unedited CRA Tags
6

Principal Issues: whether phsp benefit for employee-sh is granted by reason of employment & deductible to corp or by reason of shareholdings & taxable to s/h and no deductible to corp

Position: question of fact but if the hoding of shares is a requirement in order for the corp to pay for coverage, then it is probable that the benefit has been granted by reason of the individual's shareholdings - whether the plan is insured by an insurance co or self-administered is no relevant to this determination - on the issue of whether this position places principal s/h- employees at a disadvantage to self-employed persoons who would be entitled to a business deduction under the 98 budget proposals, it should be noted that the proposed deduction is to be limited to the amounts paid on behalf of the employees of the business

Reasons: 6(1)(a) exempts phsp coverage but 15(1) doesn't

27 July 1998 External T.I. 9813475 - HEALTH SPENDING ACCOUNT WITH 24 MO PLAN YEAR

Unedited CRA Tags
6(1)(a)

Principal Issues: whether a health spending account with a 24 month plan year has sufficient risk to be considered a phsp

Position: provided that expenses incurred before or after the plan year cannot be claimed against credits incurred in the plan year, the plan effectively has a carryforward of 12 months for credits and no carryforward of expenses - in such a case, it will be considered an insured plan

Reasons:

27 July 1998 External T.I. 9807745 - LANGLEY, ABBOTSFORD, NISKU AND YALE AS PART OF METRO

Unedited CRA Tags
8(1)(g)
Summary Under
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(g)

Principal Issues: whether Langley, Abbotsford and Yale form part of metro area of Vancouver and whether Nisku is part of the metro area of Edmonton for purpose of transport employee deduction

Position: Langley & Abbotsford are part of metro Vancouver
Nisku is part of metro Edmonton
Although Yale is not part of metro Vancouver, no deduction under 8(1)(g) for regular runs between Yale and Vancouver

Reasons: finding of fact for whether metro includes a certain municipality -for regularly scheduled trips between Yale and Vancouver, which would normally involve a regular 8 hour day, the deduction under 8(1)(g), while not limited by 8(4) is only available if the employee must routinely pay for meals and lodging because of the distance travelled. Short trips outside of a muncipality or metropolitan area only qualify when the employee normally goes longer distances

21 July 1998 External T.I. 9808565 - NO GRACE YR IN DETERMINING WHETHER INSUFF DIVIDEND

Unedited CRA Tags
110.6(8) 110.6(9)

Principal Issues: whether a grace year exists for 110.6(8) and if so, whether it applies when shares are issued in exchange for other shares (either prescribed or not and as part of a rollover or not)

Position: the definition of aveage annual rate of return does not create a grace year but one would normally expect that the lack of dividends in the part year following the issuance of the shares would not result in an increase in the capital gain on the ultimate disposition of those shares

Reasons: the average annual rate of return be paid each and every year in order for 110.6(8) to have no application whatsoever. normally, the lack of dividends in the first part year should not cause 110.6(8) to apply. However at the 92 CGA conference, we noted that the annual rate of return of the original shares is significant in determining the amount that a knowledgeable and prudent investor would expect from an investment in the exchanged shares. Similarly a knowledgable and prudent investor would not expect to lose a year's worth of dividends just because the shares were exchanged for new shares

21 July 1998 External T.I. 9813575 - DAMAGES FOR LOSS OF STOCK OPTION ON TERM OF EMPL

Unedited CRA Tags
56(1)(a)(ii)

Principal Issues:

whether an amount received in settlement of the loss of stock options which expired upon the termination of employment may be treated as a capital gain

Position: no

Reasons:

21 July 1998 External T.I. 9818025 - 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: Question of fact.

17 July 1998 External T.I. 9813445 - TRANSFER OF PROP TO JOINT OWNERSHIP -ESTATE

Unedited CRA Tags
69

Principal Issues: whether an adult child is required to report income from property when title to parents property is transferred to joint tenancy with child in order to reduce probate costs on parents death and a trust deed exists to confirm that beneficial ownership has not been transferred

Position: question of fact as to whether beneficial ownership has changed or not and a trust deed may not be sufficient to support such a finding
-if beneficial ownership is not transferred, child does not need to report the income but on the death of parent, the property will transfer to child and presumably, probate fees will be required
-if beneficial ownership does change, a disposition has occurred of the child's 1/3 interest and the child must report his\her share of the income

Reasons: previous position E9803405

15 July 1998 External T.I. 9813585 - EMPLOYER WITHHOLDING OBL ON A RETIRING ALLOWANCE

Unedited CRA Tags
153(1) 227(1)
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(c)

Principal Issues: whether withholding tax is required from punitive damages, payment of tuition fees for retraining, severence pay, legal fee reimbursement and pre-settlement interest in respect of the above

Position: withholding is required on the retiring allowance which includes punitive damages, severence pay and the payment of tuition - no withholding or reporting requirements with respect to the legal fee reimbursement which is taxable under 56(1)(l.1) or the prejudgment interest in respect of the wrongful dismissal settlement

Reasons: def'n of retiring allowance is broad enough to include punitive damages and payments made on behalf of employee\former employee provided that such payments relate to the loss of employment

14 July 1998 External T.I. 9813265 - AGR LAND RESERVE BC -MORE THAN 1/2 HECTARE LAND

Unedited CRA Tags
40(2)(c) 54

Principal Issues: whether placement in the agricultural land reserve of BC constitutes a land severance restriction which is applicable in determining whether the land in excess of 1/2 hectare is necessary for the use and enjoyment of the prin res

Position: no

Reasons: placement in the ALR does not constitute a land severance restriction - its purpose is to preserve farm land and when land is used in farming, such restrictions do not apply to determine whether the excess land can be considered part of the p/r. Following the Carlile decision, if the Commission governing the ALR makes a determination the effect of which is to impose land severance restrictions on the land, such restrictions may be used in making the determination - however it is a question of fact in each case as to whether such excess is in fact necessary for the use and enjoyment of the p/r

13 July 1998 External T.I. 9813535 - EMPLOYER PAYMENT: DECEASED EMPLOYEES KIDS.

Unedited CRA Tags
6

Principal Issues: proposed payment to children of employees killed on job. damages?

Position: Not likely but may be death benefits or gift.

Reasons: No obligation or law suit; strictly voluntary.

9 July 1998 External T.I. 9817185 - TVC INSURANCE AND INVESTOR RULES

Unedited CRA Tags
125.4(4) 12(1)(x)
Summary Under
Tax Topics - Income Tax Act - Section 125.4 - Subsection 125.4(4)

Principal Issues:
1. Would subsection 125.4(4) of the Act apply to deny a producer’s claim for the Canadian film or video production tax credit solely because of a loan from a Canadian lender to the Canadian producer in respect of a particular production?

2. Would subsection 125.4(4) of the Act apply to deny a producer’s claim for the Canadian film or video production tax credit solely because the producer acquires what is referred to as time variable contingent insurance (“TVC insurance”) from an arm’s length non-resident insurer that is not taxable in Canada? The insurer receives a fee for guaranteeing the producer’s loan with the lender. The insurer guarantees to pay the lender if the producer defaults on the loan. The insurer would then have full recourse to the producer to collect the amount of any payment made by the insurer to the lender.

3. Would TVC insurance be assistance with a resulting grind to the maximum amount of a producer’s Canadian film or video production tax credit?

PositionS:

1.(a) Where a bona fide loan arrangement exists, that fact alone would not preclude the Canadian producer from qualifying for the Canadian film or video production tax credit in respect of that production.

1.(b) Where the facts indicate that the producer has also transferred an equity interest in the production to the Canadian lender, this will result in the producer being ineligible for the credit in respect of that production (unless the lender is a prescribed person, as defined in proposed subsection 1106(7) of the Regulations, or the lender is actively engaged on a regular, continuous and substantial basis in a business carried on through a permanent establishment in Canada that is a Canadian film or video production business). Such a disposition and acquisition of an equity interest would occur where, for example, the lender’s compensation for the loan includes all of the following: (a) participation payments computed as a percentage of profits from the production, (b) no maximum amount to the participation payments, and (c) clearly no connection between the estimated participation payments and a fair market value interest rate.

2.(a) Acquiring TVC insurance from the insurer will not, in and of itself, result in the application of subsection 125.4(4) to deny the Canadian film or video production tax credit to the producer.

2.(b) In a TVC arrangement, where a 3rd party (the “broker”) receives a percentage share in the net profits of the production, as partial consideration for its services of putting the arrangement together, it is a question of fact whether the broker has acquired an equity interest in the production. If so, it will result in a reduction or elimination of the producer’s available Canadian film or video production tax credit.

3. Not in this scenario where (a) the insurer becomes subrogated to all the rights and remedies of the lender in respect of the defaulted loan, and (b) the insurer does not intend to forgive the obligation.

Reasons:

2 July 1998 External T.I. 9728675 - MUTUAL FUND TRUSTS

Unedited CRA Tags
132(6)(b)(i)
Summary Under
Tax Topics - Income Tax Act - Section 132 - Subsection 132(6)
investing includes derivatives and short selling

Principal Issues:

Will the words "investing of its funds in property (other than real property)" in subparagraph 132(6)(b)(i) cease to be met where a mutual fund:
1) makes secured loans of its securities (which may not be viewed as “qualified securities” in section 260 of the Act - i.e listed on prescribed stock exchanges) or enters into repurchase agreements,
2) makes short sales of securities,
3) writes naked call options, and
4) invests in all manner of derivatives (including swaps), whether to take a position or to hedge, and whether they constitute "permitted derivatives" under National Policy # 39 of the Canadian Securities Regulators.

Position: No, the provision will not cease to be met.

Reasons:

2 July 1998 External T.I. 9816435 - EMPLOYER-PAID TRAINING

Unedited CRA Tags
6(1)(a)

Principal Issues: Questions concerning Technical News #13 "Employer-Paid Educational Costs"

Position: General comments made.

Reasons: New guidelines on taxation of employer-paid educational costs issued May 7, 1998 and effective for 1997 and future taxation years.

29 June 1998 External T.I. 9813715 - USE OF SOCIAL INSURANCE NUMBERS

Unedited CRA Tags
239(2.3)

Principal Issues: Misuse of Social Insurance Number

Position: Question of Fact

Reasons: Wheter a subsection 239(2.3) offense has occurred depends on all the facts.

29 June 1998 External T.I. 9816545 - COSTS TO ASSESS NON COMPLIANCE TO YEAR 2000

Unedited CRA Tags
9

Principal Issues:

Whether the cost of Industry Canada’s “year 2000 first step” program to evaluate hardware and software to see if it is "year 2000 compliant” would be considered current or capital expenditures

Position: Question of fact but should normally be current.

Reasons: Similar to position in IT-475 par.s 4 and 5.

24 June 1998 External T.I. 9811605 - QUALIFIED FARM PROPERTY

Unedited CRA Tags
110.6(1) 110.6(2)

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

Position: Perhaps

Reasons: Question of fact.

24 June 1998 External T.I. 9809245 - 2 P/R MAY BE APPLIC TO A SURVIVING SP FOR PRE-81 PERIOD

Unedited CRA Tags
54

Principal Issues: whether the operation of 40(4) permits a widow or widower to shelter the full amt of gain realized on 2 properties in the pre-82 period when the widow acquired full ownership of the 2 properties as a result of the death of a spouse who had held a 50% interest in each of the 2 properties and 79(6) applied to the transfer

Position: yes

Reasons: the p/r designation is available on property that is owned, jointly or otherwise and is occupied by the individual making the designation - since the deceased spouse could have designated one property and the survivor the other, the operation of 40(4) makes in possible when the spouse's interest is transferred to the survivor and 70(6) applies

22 June 1998 External T.I. 9810745 - PRINCIPAL RESIDENCE

Unedited CRA Tags
40(2)(b)

Principal Issues: Which one of two properties can qualify as a principal residence

Position: No position taken, insufficient information provided. Referred taxpayer to IT-120R4 (“Principal Residence”)

Reasons:

18 June 1998 External T.I. 9813005 - STANDBY CHARGE -SHARED LEASE

Unedited CRA Tags
6(2)

Principal Issues: whether lease costs paid by employee to lessor reduce the standby charge

Position: no but the employee is likely entitled to a deduction under 8(1)(h.1) for the employment related share of the lease costs that the employee was required to pay

Reasons: 6(1)(e) reduction in standby charge is only for amts paid to employer or person related to employer

17 June 1998 External T.I. 9813465 - MEDICAL EXPENSE - HOUSE REVOVATION

Unedited CRA Tags
118.2(l.2)

Principal Issues: Whether the cost of a bathroom on the first floor qualifies as a medical expense where the taxpayer cannot climb stairs and the only existing bathroom is on the second floor.

Position: Yes, provided the taxpayer has a severe and prolonged mobility impairment.

Reasons: Paragraph 118.2(2)(l.2) was amended in 1991 to extend the availability of the benefit to persons who are not restricted to wheelchairs, as long as they have a severe and prolonged mobility impairment. The 1991 Budget Supplementary Information gives as example of mobility restriction, the restriction resulting from multiple sclerosis or cerebral palsy. Also, the Tax Court allowed the expenses in situation where taxpayers were not restricted to a wheelchair.

15 June 1998 External T.I. 9706295 - AFFILIATED PERSONS & ESTATE OF DECEASED

Unedited CRA Tags
40(3.6) 164(6) 112(3.2)

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.

970629
XXXXXXXXXX L. Holloway
Trusts Section
Attention: XXXXXXXXXX (613) 957-2104

June 15, 1998

Dear Sirs:

Re: Estate of XXXXXXXXXX

11 June 1998 External T.I. 9812645 - SKIN PRODUCT IS NOT A MEDICAL EXPENSE

Unedited CRA Tags
118.2(2)

Principal Issues: whether the skin care product called XXXXXXXXXX , or the service of providing the treatment, qualifies as a medical expense

Position: no

Reasons: the person who applies the treatment, an aesthetician, is not a medical practitioner and although the product purports to treat skin disease it is not prescribed by a medical practitioner nor is it recorded in a pharmaceutical register

1 May 1998 External T.I. 9810825 - QUALIFIED INVESTMENT, MORTGAGES

Unedited CRA Tags
4900(4)

Principal Issues: Can a non-arm's length mortgage qualify for an RRSP?

Position: yes, if conditions satisfied

Reasons: 4900(1)(j) allows for them.

31 March 1998 External T.I. 9807305 - RETIRING ALLOWANCE - UNUSED SICK LEAVE

Unedited CRA Tags
248(1)

Principal Issues:

Whether employees transferred from XXXXXXXXXX were paid employment benefits or a retirement allowance.

Position:

The payment of unused sick leave credits is not a retirement allowance but constitutes employment benefits.

Reasons:

Technical Interpretation - Internal

15 July 1998 Internal T.I. 9816606 - INTEREST ON RETROACTIVE WORKERS' COMP.

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

Principal Issues: interest on retroactive workers' compensation benefits in B.C.

Position: exempt from tax

Reasons: Consistent with previous position on pre-judgement interest

3 July 1998 Internal T.I. 9801477 - WAIVER - RRSP OVER-CONTRIBUTION

Unedited CRA Tags
207.1(4) 69

Principal Issues:
A taxpayer disposed of Euro “securabonds” to his RRSP and, in consideration thereof, received property the value of which was less than the fair market value of the securabonds, since the valuation provided for the bonds by the financial advisor was incorrect. The taxpayer subsequently received full FMV consideration. Was there an RRSP contribution or other adverse tax result?

Position:
The parties did not consider the transaction as a withdrawal followed by a contribution to the RRSP. The only issue was one of incorrect valuation. Hence, no over-contribution arose and the annuitant was deemed disposing at fair market value. The operation by which the annuitant later received appropriate consideration for the transfer should not be treated as a withdrawal either.

Reasons:
It is acceptable that an annuitant would make a bona fide transaction (disposition or acquisition of property for consideration) with his RRSP and not treat the transaction as a contribution.

3 July 1998 Internal T.I. 9731937 - FISCAL PERIODS - BANKRUPT INDIVIDUAL

Unedited CRA Tags
34.1 34.2

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.

		July 3, 1998
	Individual Returns and Payments	HEADQUARTERS
	  Processing Directorate	B. Kerr
(613) 957-2139
	Attention: Jack Szeszycki
		973193

Application of Sections 34.1 and 34.2 to a Bankrupt

25 June 1998 Internal T.I. 9807367 - LOGGING AND INVESTMENT TAX CREDITS

Unedited CRA Tags
127(1) 127(5)

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.

June 25, 1998

	Ted Fitz-Clarke	Resource Industries Section
	Technical Business Services	Denise Dalphy
	Client Services Division	(613) 957-9231
	Vancouver TSO
	980736

Logging Tax Credits and Investment Tax Credits

22 June 1998 Internal T.I. 9809217 - TUITION CREDIT

Unedited CRA Tags
118.5(1)

Principal Issues:
Entitlement of native students to the tuition credit when the students are in receipt of non-taxable educational assistance.

Position: Perhaps.

Reasons:
If the educational assistance which is received by a Status Indian, and not considered taxable by virtue of paragraph 81(1) of the Act and section 90 of the Indian Act, does not fall into any of the exceptions provided for in subparagraphs 118.5(1)(a)(ii.1) through to (iv), the individual will be entitled to the tuition credit.

18 June 1998 Internal T.I. 9807757 - PRINCIPAL RESIDENCE - 1/2 HECTARE

Unedited CRA Tags
40(2)(b) 54

Principal Issues:

3 June 1998 Internal T.I. 9812556 - SR&ED

Unedited CRA Tags
127(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.

PRINCIPAL ISSUES: Are amounts received from Technology partnerships (industry Canada) by T\P to be considered loan or asssistance?

POSITION: assistance

REASONS: Finance position and wording of document

27 May 1998 Internal T.I. 9731957 - WRONGFUL DISMISSAL DAMAGES

Unedited CRA Tags
248(1) 60(j.1)

Principal Issues:

What portion of the amounts paid in settlement of an employment termination dispute are taxable and how?

Position:

We recommend that the amounts in question be assessed as follows:

a. Loss of salary (XXXXXXXXXX months notice) paid as a settlement for wrongful dismissal be treated as a retiring allowance.

b. Any amount received as pre-judgment interest be treated as a tax free receipt while any amount received as post judgment interest be taxed as interest.

c General damages be treated as a retiring allowance.

d. Party and Party costs be included in income and be set off to the extent of available deductions

Reasons:

19 May 1998 Internal T.I. 9805547 - FORGIVEN AMOUNT

Unedited CRA Tags
80 34.1

Principal Issues:
interaction of section 80 forgiven amount and and new 34.1 "additional income rules".

Position:
income and reserve must be matched in same period.

Reasons:
reading of the Act

15 May 1998 Internal T.I. 9866660 - EXPECTATION OF PROFIT

Unedited CRA Tags
9 18(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.

Reasonable Expectation of Profit

Notes for Rick Biscaro speech in Toronto - May 1998

1. Financing of shares that do not pay dividends

12 May 1998 Internal T.I. 9802177 - REVOCABLE LIVING TRUST

Unedited CRA Tags
54

Principal Issues: Whether paragraph (e) of the definition "disposition" in section 54 applies to a transfer of shares of a Canadian corporation owned by a US resident to a revocable living trust?

Position: No. FMV disposition.

Reasons: The trust has the characteristics of a revocable living trust

6 May 1998 Internal T.I. 9810067 - DEDUCTIBILITY OF LEGAL FEES

Unedited CRA Tags
18(1)(a)

Principal Issues:

Deductibility of legal fees incurred to defend against a lawsuit filed after business sold and taxpayer no longer carrying on business.

Position: Question of fact.

Reasons:

26 March 1998 Internal T.I. 9712277 - INDIAN ACT EXEMPTION - ROYALTY AND BUSINESS

Unedited CRA Tags
81(1)(a)

Principal Issues:

(1) (A) Application of the Indian Act exemption to a Status Indian's business income earned by operating a logging business on an off reserve land, whereas his sole client is a Band located on reserve.
(1) (B) What if the services are contracted to other clients off reserve as well as the Band?
(2) Application of the Indian Act exemption to a Status Indian's business income earned by operating a logging business where his sole client is a private company located on reserve.
(3) Application of the Indian Act exemption to a Status Indian's royalty income for writing books on reserve. Status Indian is resident on reserve.

Position:

(1) (A) Business income is not exempt.
(1) (B) Business income is not exempt.
(2) Business income is not exempt.
(3) Royalty income is not exempt.

Reasons:

20 March 1998 Internal T.I. 9804976 - REG 7000 - TREASURY BILLS

Unedited CRA Tags
REG 7000

Principal Issues:
Whether paragraph 7000(2)(a) of the Regulations could be interpreted in such a manner that the amount taxed as interest on the disposition of a treasury bill would be equal to the difference between the cost of the bill and its proceeds of disposition?

Position:
Cannot be so interpreted.

Reasons:
Wording of provision would not support such an interpretation.

18 March 1998 Internal T.I. 9726507 - CAPITAL GAINS EXEMPTION

Unedited CRA Tags
110.6(19) 110.6(28)

Principal Issues:
Taxpayer overstated the V-day value and fair market value of land in filing the capital gains election pursuant to subsection 110.6(19) of the Act.

(1) would the Department’s revision of these values constitute "amending the election" which is prohibited by subsection 110.6(28) of the Act?
(2) does the revised election constitute a valid election even if it results in a taxable capital gain in excess of the capital gains deduction?

Position: (1) No. (2) Yes.

Reasons:
(1) the Department is not precluded from determining the v-day value or fair market value of property at the end of February 22, 1994.
(2) since the revised v-day values and fair market values result in the election satisfying the requirements of subparagraph 110.6(20)(a)(ii) of the Act, the election is a valid election.

12 March 1998 Internal T.I. 9728147 - PART 1.2 TAX ON OLD AGE SECURITY BENEFITS

Unedited CRA Tags
180.2(4)

Principal Issues: Is withholding required under Part 1.2 where a an OAS benefit payment is made?

Position: YES

Reasons: Total liability for taxes must be taken into account

27 February 1998 Internal T.I. 9729076 - FOREIGN TAX CREDIT FOR U.S. CITIZENS

Unedited CRA Tags
ART XXIV U.S. Treaty

Principal Issues:

Whether double taxation could occur when a U.S. citizen resident in Canada compute U.S. tax credit in accordance with the worksheet provided in U.S. Publication 514 "foreign Tax Credits for Individuals for use in preparing 1996 returns"

Position:

Yes, in some special situations, double taxation would occur

Reasons:

19 February 1998 Internal T.I. 9733337 - INDIAN ACT EXEMPTION - G4

Unedited CRA Tags
81(1)(a)

Principal Issues:

(1) Indian Organization moving its head office from XXXXXXXXXX reserve to a XXXXXXXXXX reserve. Tax implication for its employees. Indian Organization only controlled indirectly by Indian Bands. Can Guideline 4 apply?

Position:

(1) Guideline 4 cannot apply since it contemplates direct control. Comments reiterated on potential application of Guideline 2 to employees working off-reserve but residing on a reserve, provided the central management and control is effectively located on reserve.

Reasons:

Ministerial Letter

15 July 1998 Ministerial Letter 9808118 - INTEREST ON RETROACTIVE WCB PAYMENT

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

Principal Issues: interest on workers compensation payment

Position: exempt from income

Reasons: consistent with previous position on similar issue

4 June 1998 Ministerial Letter 9809318 - RESTORATION COSTS - HERITAGE BLDGS.

Unedited CRA Tags
18(1)(b) 20(1)(a)

Principal Issues: The tax treatment of expenses to preserve and restore heritage property.

Position: Question of fact.

Reasons: The tax treatment of restoration or preservation expenses depends on whether the expenditures are of a current or capital nature. We have established a number of guidelines which are based on previous jurisprudence.

21 April 1998 Ministerial Letter 9804028 - DEDUCTION FOR EMPLOYEES FOR COST OF TOOLS

Unedited CRA Tags
8

Principal Issues:

XXXXXXXXXX has expressed concerns that there is no provision in the Income Tax Act which permits a deduction to employees for the cost of acquiring mechanics’ tools.

Position:

Subparagraph 8(1)(i)(iii) refers to the “cost of supplies consumed” but this does not contemplate the deduction of mechanics’ tools since they cannot be consumed.

The Standing Committee on Finance examined the issue of employment expenses, including the non-deductibility of mechanics’ tools. The Committee received submissions from the Canadian Automobile Repair and Service Institute regarding this issue and presented its report to the House of Commons on June 10, 1992. The Committee concluded that the issue of employment expenses was complex and therefore, no recommendations were made regarding legislative changes.

I spoke to Robert Dubrule at the Department of Finance on February 27, 1998, and he indicated that there are no proposed legislative changes regarding the deduction of mechanics’ tools.

Reasons: A copy of the Committee’s report will be sent to XXXXXXXXXX for his information. As he has already sent a copy of his letter to the Minister of Finance, no further action is required .