Income Tax Severed Letters - 1998-10-16

Principal Issues: Are subparagraph 8(1)(i)(ii) and 8(1)(i)(iii) expenses deductible against income allocated under an employee profit sharing plan.

Position: Question of fact, provided that all requirements of the subparagraphs and the pre-amble of subsection 8(1) have been met.

Reasons: According to paragraph 6(1)(d) of the Act, a taxpayer must include in income, as income from an office or employment, all amounts allocated to him or her in a year under an EPSP, as provided by section 144 of the Act, except subsection 144(4) of the Act, and all amounts required by subsection 144(7) of the Act to be included in income.

Principal Issues: Whether an engagement beyond two years will be considered temporary for purposes of the tax-free allowance for a special work site.

Position: Generally, an engagement beyond two years will be regarded as long-term.

Reasons: Two years is considered to be a reasonable guideline for employment that purports to be a temporary assignment.

Principal Issues:

1. Will distributors be viewed as having acquired copyright ownership in a film?
2. Will the acquisition of shares in a producer disqualify the producer from the credit?

PositionS:

1 &2. Not in a normal commercial arrangement. Question of fact, based on documents and agreements. We are still developing guidelines for less than obvious situations.

Reasons:

Principal Issues: A request for the withholding requirements on various aspects of wrongful dismissal awards.

Position: Withholding required on all aspects of a wrongful dismissal award except post and pre-judgement interest and legal expense reimbursements.

Reasons: A wrongful dismissal award falls within the definition of “retiring allowance”. Recent review of pre and post judgement interest is complete and the status quo is to be maintained. The reimbursement of mitigation expenses (e.g., expense of former employee to find another job) is related to the loss of employment and seems to be another factor in establishing the total award to be paid by the employer.

Principales Questions:
1. Quel avantage doit être inclus dans le revenu d’un employé d’une entreprise sous-traitante lorsqu’une société défraie le coût d’une police d’assurance vie dont les bénéficiaires sont 2/3 la société et 1/3 les ayants droits ou héritiers des employés?

2. Qui est responsable d’effectuer les retenues d’impôt et de remplir la déclaration de renseignements?

Position Adoptée:
1. La valeur de l’avantage à inclure dans le revenu d’un employé devrait correspondre à la prime que cet employé devrait débourser pour obtenir une couverture égale à la proportion de la police dont ses ayants droits ou ces héritiers sont bénéficiaires moins tout montant payé par l’employé à l’égard de cette police.

Principal Issues:

Principal Issues:
Will the amounts paid by a non-profit organisation to a foster family be excluded from income by virtue of paragraph 81(1)(h) of the Act?

Position:
Probably yes.

Reasons:
Paragraph 81(1)(h) of the Act provides that the amounts may be received directly or indirectly by the foster family. However, we have to ensure that the amounts received by the non-profit organisation from the provincial government are amounts paid on the basis of a means, needs or income test under a program provided for by an Act of Parliament or a law of a province.

Principal Issues: Argentina tax payable on rental of software from a Canadian company.

Position: Article 12 of Canada-Argentina Income Tax Convention dealing with royalties.

Reasons: Article 12 of Canada-Argentina Income Tax Convention

Principal Issues: Can expenses renounced between related corporations be further renounced utilizing 66(12.66)?

Position: No.

Reasons: Requirements of 66(12.66)(b) not met under deeming provisions of 66(12.61)(a).

Principal Issues: Is financial assistance provided for under the New Brunswick Skills Loans and Grants program taxable?

Position: Yes.

Reasons: These payments are taxable under paragraph 56(1)(r) which was introduced in Bill C-28 and received royal assent on June 18, 1998. Paragraph 56(1)(r) of the Act subjects to tax various training-related amounts. Specifically, this paragraph includes in a taxpayer’s income financial assistance received under part II of the Employment Insurance Act, as well as similar financial assistance received from a government or government agency under the terms of an agreement with the Canada Employment Insurance Commission

Principales Questions:

1. Est-ce le montant des salaires impayés d'une société, payés par l'administrateur de la société en raison de sa responsabilité à titre d'administrateur, peut être déductible du revenu d'emploi de l'administrateur?

2. Si non, est-ce que le montant peut être traité à titre de perte en capital ou à titre de perte au titre de placement d'entreprise si les conditions sont rencontrées?

3. Est-ce que la perte pourrait être reconnue si une partie du salaire de l'administrateur était, disons 1 000 $, versée en considération de sa responsabilité solidaire?

4. Est-ce que la perte pourrait être reconnue si la société lui émettait une action de son capital-actions représentant une infime participation?

Position Adoptée:

Principal Issues:

Reporting of foreign partnership income

Position:

Filling out a T5 supplementary is not appropriate; sufficient information need to be provided to the beneficial owners of the partnership interest for them to include their share of the partnership income on their tax returns.

Reasons:

Position Adoptée: