Income Tax Severed Letters - 1998-12-25

Administrative Letter

30 November 1996 Administrative Letter 970802A - SAR VESTED RIGHTS

Unedited CRA Tags
248(1)

Principal Issues:

Will we rule that a SAR will not be an SDA after right to cash in vests and participant chooses not to cash in?

Position:

No

Reasons:

Ruling

30 November 1997 Ruling 9732213 F - PAPILLON, 3 FERMIERS NON LIES

Unedited CRA Tags
55(3)b)

Principal Issues: Transaction Papillon typique, partage 50/50

Position: Confirmation de l’application de 55(3)b) de la Loi

Reasons: Respecte les conditions énoncées à 55(3)b), 55(3.1) et (3.2) ainsi que les positions et directives du Ministère

30 November 1997 Ruling 9731063 - DIVISIVE REORGANIZATION - SPLIT-UP

Unedited CRA Tags
55(3)(b)

Principal Issues: divisive reorganization - split-up

Position: no issues

Reasons: no issues

30 November 1997 Ruling 9806143 - QUALIFICATION AS AN NRO

Unedited CRA Tags
133(8) 18(4)

Principal Issues:

Will Newco qualify as an NRO as defined in subsection 133(8)?

Position: Yes.

Reasons: See ATR-43, previous rulings. Note there is existing indebtedness.

30 November 1997 Ruling 9809273 - BUTTERFLY REORGANIZATION

Unedited CRA Tags
55(3)(b)

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
XXXXXXXXXX 980927
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1998

Dear Sirs:

30 November 1997 Ruling 9816323 - REPLACEMENT PROPERTY RULES

Unedited CRA Tags
44(1)(a) 44(5)(a)

Principal Issues: Replacement property rules - see issue sheet

Position: n/a

Reasons: n/a

30 November 1997 Ruling 9819333 - SUPPLEMENTARY TO 3-980098

Unedited CRA Tags
55(3)(b)

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 						1-981933

Attention: XXXXXXXXXX

XXXXXXXXXX, 1998

Dear Sirs:

Re: XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Advance Income Tax Ruling

30 November 1997 Ruling 9730243 - SINGLE-WING BUTTERFLY AND ESTATE FREEZE

Principal Issues: This is a single-wing butterfly combined with an estate freeze involving a CCPC. The assets will be split between the cattle farming operation and the grain farming operation, and the grain assets distributed to a Newco by means of a butterfly transaction. A husband and wife will retain control of both the original farm corporation and the Newco by means of preferred shares, while each of their two sons will hold common shares in one of the two resulting farm corporations to reflect their involvement in either the cattle farming business or in the grain farming business.

Position: This was a standard butterfly reorganization combined with an estate freeze.

Reasons:

30 November 1997 Ruling 9824873 - DAMAGES, RETIRING ALLOWANCE

Unedited CRA Tags
248(1)

Principal Issues: Would damages for wrongful dismissal qualify as a retiring allowance?

Position: Yes.

Reasons: Damages are in respect of a loss of office or employment.

30 November 1997 Ruling 9730413 - REORGANIZATION

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

Principal Issues: no new issues

Position:

Reasons:

30 November 1996 Ruling 9722663 - BUTTERFLY REORGANIZATION

Unedited CRA Tags
55(3)(b) 40(3.6) 164(6)

Principal Issues:

Whether Estate holding note received on the redemption of shares of corporation is affiliated with corporation immediately after redemption.

Position:

No

Reasons:

30 November 1996 Ruling 9724523 - PHANTOM STOCK PLAN

Unedited CRA Tags
REG 6801(d) 70(2)

Principal Issues:

1) Whether arrangement is exempted from SDA definition by virtue of 6801(d);
2) Whether amounts payable after death are "death benefit";
3) Whether amounts payable after death are included in deceased's income or recipient's income by virtue of 70(1) or 70(2).

Position:

1) Yes;
2) No;
3) Amount paid after death and payable because of termination of employment before death or payable because of death are "rights or things" to which 70(2) and 70(3) apply.

Reasons:

30 November 1996 Ruling 9729633 - PHANTOM STOCK PLAN

Unedited CRA Tags
6801(d)

Principal Issues:

Change in fact

Position:

Rulings apply as given

Reasons:

Technical Interpretation - External

16 December 1998 External T.I. 9831815 - CHILD SUPPORT AMOUNTS PAYABLE

Unedited CRA Tags
56.1(4) 56(1)(b) 60(b)

Principal Issues:

Are the support payments subject to the old child support rules given that the court order is dated April 16, 1997, even though the child support amounts payable only commenced on May 1, 1997?

Position:

Child support amounts payable pursuant to a pre-May 1997 court order are subject to the old child support rules even though the child support amounts payable commenced on May 1, 1997.

Reasons:

15 December 1998 External T.I. 9830815 - EMPLOYEE DED? CONTRIBUTION TO A LEGAL FUND

Unedited CRA Tags
8(2) 8(1)(i)

Principal Issues: Whether voluntary contributions to the Mounted Police Members Legal Funds are deductible by employees for tax purposes. N/A

Position: No.

Reasons: Subsection 8(2) restricts employee deductions to those deductions permitted by section. There are no provisions in section 8 which would allow a deduction for this type of payment.

15 December 1998 External T.I. 9832515 - LSVCC SHARES - RRSP FOREIGN PROPERTY LIMIT

Unedited CRA Tags
4900 5100(1)

Principal Issues:

Whether and how could LSVCC shares increase the foreign property limit of a trust governed by an RRSP.

Position:

Based on the current wording of the Act and Regulations, it is our opinion that, generally, an otherwise eligible corporation that is described in both sections 6700 and 6701 of the Regulations (for example a RLSVCC) qualifies as an eligible corporation for the purpose of the small business amount definition in subsection 206(1), even if it is a trader or dealer or a money-lender.

Reasons:

15 December 1998 External T.I. 9824495 - RESP, CESG, NON-RESIDENTS

Unedited CRA Tags
146.1

Principal Issues:

1. Can a non-resident be a subscriber under an RESP?

2. Will contributions to an RESP in respect of non-resident beneficiaries qualify for the new Canada Education Savings Grant?

Position:

1. Yes.

2. No.

Reasons:

15 December 1998 External T.I. 9826505 F - DÉLAISSEMENT BIENS

Unedited CRA Tags
79(3)

Principales Questions:

Traitement des taxes municipales lorsqu’un créancier hypothécaire acquiert le bien donné en garantie.
Est-ce que 79 affecte le montant des dépenses dans le calcul du revenu du débiteur?

Position Adoptée:

14 December 1998 External T.I. 9811305 - FOREIGN MERGER

Unedited CRA Tags
87(8.1)

Principal Issues: Does 87(8.1) apply where one corporation does not exchange its shares?

Position: Yes.

Reasons: Surviving corporation is new corporation.

14 December 1998 External T.I. 9830695 - HOME CARE

Unedited CRA Tags
81(1)(h)

Principal Issues: Are certain payments received for home care exempt from income?

Position: Insufficient information and completed or ongoing transaction.

Reasons: General information concerning the possible application of paragraph 81(1)(h) of the Act.

14 December 1998 External T.I. 9816565 - INFORMING XXXXXXXXXX OF ICE STORM REMISSION

Unedited CRA Tags
6

Principal Issues: ice storm remission

Position: granted

Reasons: similar to Saguenay and Red River flood

9 December 1998 External T.I. 9826805 F - 104(18) - GAIN EN CAPITAL

Unedited CRA Tags
104(18)

Principales Questions: Le paragraphe 104(18) de la Loi peut-il s'appliquer pour réputer payable un gain en capital réalisé par une fiducie?

Position Adoptée: Si au cours d’une année d’imposition une fiducie réalise un gain en capital imposable et qu’en vertu de l’acte de fiducie ce gain en capital n’est pas payable aux bénéficiaires au cours de l’année, nous sommes d’avis que ce gain en capital pourrait être un montant visé par le paragraphe 104(18) de la Loi pourvu que toutes les autres condition prévues à ce paragraphe soient rencontrées.

8 December 1998 External T.I. 9827665 - PRIVATE HEALTH SERVICES PLAN

Unedited CRA Tags
118.2(2)

Principal Issues: Is a "penile implant" an eligible medical expense under a PHSP ?

Position: NO

Reasons: Not prescribed

8 December 1998 External T.I. 9819745 - UNUSED SICK LEAVE CREDITS PAYABLE AS R.A.

Unedited CRA Tags
248(1)

Principal Issues:

1. Whether a payment for unused sick leave credits originating from a supplemental sick leave program could qualify as a retiring allowance. The supplemental sick leave bank is accessible throughout the employee’s career and credits may be exchanged for cash provided an election is made in the prior calendar year.

2. Whether such payment could be used to buy back years of service under a pension plan.

Position:

1. As stated in paragraph 5 of IT-337R3, payments for unused sick leave credits usually qualify as a retiring allowance. If the credits can be traded for cash, however, the SDA provisions might apply and result in an income inclusion in the year they are credited to the employee.

2. A deduction under paragraph 60(j.1) would only be available for the purposes of buying back years of service if the payment of the unused sick leave credits balance could be considered a retiring allowance. However, provided the pension plan allows this, it may be possible to buy back years of service under subsection 147.2(4).

Reasons:

7 December 1998 External T.I. 9831215 - XXXXXXXXXX SPIN-OFF

Unedited CRA Tags
90

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 				J. Stalker
			983121
December 7, 1998

Dear XXXXXXXXXX :

4 December 1998 External T.I. 9831135 - XXXXXXXXXX SPIN-OFF

Unedited CRA Tags
90

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 		983113

December 4, 1998

Dear XXXXXXXXXX :

We are writing in response to your letter of November 19, 1998 concerning the tax consequences to Canadian shareholders as a result of the 1998 spin-off or distribution by XXXXXXXXXX of its subsidiary XXXXXXXXXX

3 December 1998 External T.I. 9822185 - MERIT PAYMENTS - UNIVERITY PROFESSORS

Unedited CRA Tags
5

Principal Issues: Is a bonus payment taxable as employment income if added to expense account or to research account?

Position: Taxable as employment income

Reasons: Source of income is employment

3 December 1998 External T.I. 9829155 - "RETIRED FROM THE WORKFORCE", MEANING

Unedited CRA Tags
211.8

Principal Issues: Will a retired person continue to be considered “retired from the workforce” where he or she does odd handy man projects during the summer?

Position: Question of Fact.

Reasons: The Department has certain established positions in respect of retirement for the purposes of retiring allowances and these positions should be applied equally when determining whether a person has retired from the workforce.

2 December 1998 External T.I. 9822645 - FULL-TIME ATTENDANT

Unedited CRA Tags
118.2(2)

Principal Issues:
1) Does the phrase "full-time attendant" require that there be no less than one full-time attendant 24 hours a day for each patient or can it apply for a group of patients?

2) Can more than one-full time attendant care for a group of patients provided the ratio does not exceed more than one attendant per patient?

Position:
1 and 2 ) Question of fact, case by case basis

Reasons:
1) Patient must qualify for the medical expense, a full-time attendant must provide the care that is required and the full-time attendant must be paid as remuneration .

1 December 1998 External T.I. 9828045 - PART IV TAX

Unedited CRA Tags
129

Principal Issues: provided general comments on Part IV tax

Position:

Reasons:

27 November 1998 External T.I. 9822835 - FOREIGN AFFILIATES - FOREIGN ACCRUAL TAX

Unedited CRA Tags
91(4)
US tax paid by USco on income of LLC not FAT unless income distributed to USco

Principal Issues: Whether US taxes paid by a US C-corp. which is a foreign affiliate, qualify as foreign accrual tax and underlying foreign tax if paid in respect of the income of a US LLC which is also a foreign affiliate.

Position: The taxes may qualify depending upon the circumstances.

Reasons: The definitions of foreign accrual tax and underlying foreign tax are very broad.

26 November 1998 External T.I. 9829745 - APPLICATION OF 84.1

Unedited CRA Tags
84.1 245(2)

Principal Issues: no new issues, general comments provided

Position:

Reasons:

25 November 1998 External T.I. 9810015 - DEEMED SHARES OF AN LLC

Unedited CRA Tags
95

Principal Issues: "Deemed Shares" of an LLC

Position: Viewed as if had 100 issued shares.

Reasons: Admin position in IT-392 reviewed for this letter.

10 November 1998 External T.I. 9827555 - MEDICAL EXPENSES OUTSIDE CANADA

Unedited CRA Tags
118.2(2)

Principal Issues: 1) Are medical expenses incurred outside Canada eligible?

Position: YES

Reasons: 118.2(2), par 13 of IT 519R2

9 November 1998 External T.I. 9824935 - PAYMENT TO XXXXXXXXXX

Unedited CRA Tags
81(1)(b)

Principal Issues: XXXXXXXXXX Agency provides payments to caregivers intended to provide support and living expenses for indivduals with developmental delays. Are the amounts taxable to the caregivers?

Position: Question of fact. It seems however that the amounts paid to the caregivers meet the requirement under 81(1)(h) "for the benefit of another individual"

Reasons: Requirement of 81(1)(h)

3 November 1998 External T.I. 9810115 - FOREIGN TAX CREDIT AND S-CORPORATIONS

Unedited CRA Tags
126(1) 126(7)

Principal Issues:

(1) First scenario: (a) whether the tax paid in respect of a capital gain arising from the disposition of a U.S. real property to the extent it relates to portion of the gain accruing prior to immigration forms part of "non-business-income tax" under paragraph 126(1); and

(b) whether the foreign tax credit that is calculated under subsection 126(1) in respect of the aforesaid U.S. tax can be applied against Canadian tax otherwise payable on all U.S. source non-business income.

(2) Second scenario: (a) whether the tax paid by an individual Canadian resident who is a shareholder of a U.S. S-corporation to the U.S. government in respect of the income of the U.S. S-corporation, is deductible by the individual under subsection 91(4) of the Act;

(b) if paragraph 5 of Article XXIX of the Canada-U.S. Income Tax Convention (1980) (the “Treaty”) is applicable, whether income of the U.S. S-corporation that is deemed to be FAPI of the individual, is foreign source income for the purpose of computing the individual's foreign tax credit under subsection 126(1); and

(c) whether the aforesaid U.S. tax paid by the individual in respect of the income of the U.S. S-corporation forms part of "non-business-income tax" for the purpose of computing the individual’s foreign tax credit under paragraph 126(1).

Position:

(1) . First scenario: Yes to both questions (a) and (b).

(2) . Second scenario: No to question (a), and yes to questions (b) and (c).

Reasons:

27 October 1998 External T.I. 9818915 - RELATED BUSINESS

Unedited CRA Tags
149.1(2)(a)

Principal Issues: Whether a particular business activity for purposes of 149.1(1) and 149.1(2)(a) of the Act is a related business

Position: In order for a business to be a related business, the business activity must continue to bear some relationship to the accomplishment of a given charity's charitable purposes. It would be a question of fact, however in our opinion there is no relationship between the development of real estate and a charity's activities.

Reasons: The Department has taken the view that a business activity must continue to bear some relationship to the accomplishment of a given charity's charitable purposes.

26 October 1998 External T.I. 9814045 - INCOME FROM A U.S. LLC

Unedited CRA Tags
5 9 126

Principal Issues: Whether foreign tax credit is available for U.S. tax paid on income of U.S. LLC as a form of compensation for services rendered to the LLC

Position: No position has been established

Reasons: It is not clear whether compensation for services rendered is in fact a payment of dividend

25 June 1998 External T.I. 9725635 - SHAREHOLDER LOANS

Unedited CRA Tags
15(2)

Principal Issues:
Shareholder loan and 15(2) and the draft legislation

Position:
Related to a fact situation, gave general opinion on draft legislation as in its current form

Reasons:
Question of fact whether loan is received in capacity as shareholder or employee

Conference

9 October 1998 APFF Roundtable Q. 1, 9M18520 - ROUND TABLE 1998 APFF

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.

FEDERAL TAXATION ROUND TABLE
1998 APFF CONGRESS

Question 1

Application of section 43.1 in Quebec

9 October 1998 APFF Roundtable Q. 18, 9820890 F - OPTION D'ACHAT D'ACTIONS

Unedited CRA Tags
7(1)

Principales Questions: 7(1.4) applicable

Position Adoptée: Oui.

1 September 1998 CTF Roundtable, 9822600 - PARTHENON INVESTMENTS

Unedited CRA Tags
111

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.

Recent Cases
Revenue Canada Review
Canadian Tax Foundation Conference
October, 1998

Parthenon Investments Limited v. MNR

Federal Court of Appeal
May 30, 1997

1 September 1998 CTF Roundtable, 9822610 - NEUMAN V. THE QUEEN

Unedited CRA Tags
56(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.

Recent Cases
Revenue Canada Review
Canadian Tax Foundation Conference
October, 1998

Melville Neuman v. The Queen

Supreme Court of Canada
May 21, 1998

1 September 1998 CTF Roundtable, 9822620 - DUHA PRINTERS

Unedited CRA Tags
111

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.

Recent Cases
Revenue Canada Review
Canadian Tax Foundation Conference
October 1998

Duha Printers (Western) Ltd. v. The Queen

Supreme Court of Canada
May 28, 1998

Technical Interpretation - Internal

8 December 1998 Internal T.I. 9830806 - RESTRICTED EXPENSES UNDER 67.1 AND GST

Unedited CRA Tags
67.1 248(16) 12(1)(x) 21(h)(h)

Principal Issues: Should the restriction on the 67.1 expenses be based on the amount paid (including GST) without any offset for the GST input tax credit?

Position: Yes. Also, the GST input tax credit must be included in income or used to reduce the expense after application of the 50% restriction.

Reasons: There is no provision that reduces "the amount actually paid or payable" for the expenses in question.

25 November 1998 Internal T.I. 9828447 - REMOTE WORK LOCATION

Unedited CRA Tags
6(6)(a)(ii)

Principal Issues: Does the fact that an employee in a remote work location has obtained the use of a self-contained domestic establishment from his employer prevent the application of subparagraph 6(6)(a)(ii) of the Act?

Position: Yes.

Reasons: Position set out in paragraph 13 of IT-91R4.

17 November 1998 Internal T.I. 9828656 - TUITION - UNIVERSITY OUTSIDE CANADA

Unedited CRA Tags
118.5(1)(a)

Principal Issues: Whether the XXXXXXXXXX , is considered a post-secondary educational institution in Canada for purposes of subsection 118.5(1)(a).

Position: Yes.

Reasons: See Rulings file # 1-982624 and 3-982624.

23 September 1998 Internal T.I. 9822230 - RESIDENCE UNDER AN INCOME TAX CONVENTION

Unedited CRA Tags
5907(11.2)

Principal Issues: 1) Residence under an income tax convention.

Position: Question of fact.

Reasons: Decision must be made on a case by case basis.

29 April 1998 Internal T.I. 9723947 - EMPLOYEE FUNDED SICK LEAVE PLAN -TRUST?

Unedited CRA Tags
104

Principal Issues: whether a plan to fund short term sick leave with employee contributions needs to be administered by a trust and whether such a plan is an employee benefit plan or a health and welfare trust

Position: In order to implement a plan under which the employer administers the plan funded with employee contributions, such funds would be “held in trust”. If the employer merely sets aside its own funds to continue to pay benefits during a period of absence, no employee funded plan exists. On the issue of whether trust indenture documents are required in order to establish a trust, they are recommended but not required if the facts otherwise establish that a trust exists.
Provided a trust does exist as appears to be required by the collective agreement, such trust would not be a health and welfare trust as described in it-85R2, an employee benefit plan or an employee trust because it is funded solely by employee contributions.

Reasons: comments provided on the 3 certainties of a trust, which would ordinarily be established if a written indenture was created. If the employer administers the Plan as it described in the collective agreement, a trust would be created, but if the employer does not set the employees’ funds in a trust (with the employer or some other person as trustee), then amounts paid by the employer to the employees would be taxed under 5 or 6(1)(f ) when received, even though such payments would not be made in accordance with the collective agreement (unlikely to be the case, in our view) as the employees would receive less salary with no deductions for contributions to the plan and any payments for periods of leave would either be payments out of an employer-funded wage loss replacement plan or would be continuing salary.

30 November 1996 Internal T.I. 970820A - SAR, VESTED RIGHTS

Unedited CRA Tags
248(1)

Principal Issues:

Will we rule that a SAR will not be an SDA after the right to cash in vests and participant chooses not to cash-in?

Position: No

Reasons: Addressed in ATR-45