Income Tax Severed Letters - 1999-02-05

Miscellaneous

23 October 1998 Miscellaneous 9827211 - ARTICLE XIII(5) OF THE CANADA-U.S. TAX TREATY

Unedited CRA Tags
Article XIII(5) Article XXIX(4)

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.

30 November 1997 Miscellaneous 9818301 - REPLACEMENT OF ADVANCE RULING 3-981609

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149(1)(c)

Principal Issues: Whether an Indian Band will be considered a public body performing a function of government and thus qualify for exemption under paragraph 149(1)(c) of the Income Tax Act.

Position: Yes, the First Nation is considered a public body performing a function of government in Canada as per paragraph 149(1)(c) of the Act.

Reasons: The first nation has passed by-laws under both sections 81 and 83 of the Indian Act. In addition, the First Nation has negotiated a treaty land settlement and provides and administers an extensive list of public works, social services and infrastructure programs.

Administrative Letter

30 November 1997 Administrative Letter 980982A - PHANTOM STOCK PLAN

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248(1)

Principal Issues: E9733773 - Change in Proposed Transactions

Position: Nothing unusual - Rulings apply as given

Reasons: Change does not affect previous position

Ruling

30 November 1997 Ruling 9715853 - INSURANCE CLAIM - SETTLEMENT

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9 56(1)(d)

Principal Issues:

An individual (the Claimant), in connection with the Claimant’s XXXXXXXXXX business, purchased an insurance policy (the Policy) that provided the Claimant with coverage while the Claimant was totally disabled. Following a dispute with the insurer concerning whether the Claimant was totally disabled during a period of time (it was determined that the Claimant has a terminal illness), the insurer conceded that the Claimant was at all relevant times totally disabled and agreed to make payments pursuant to the Policy until the earlier of the time that the Claimant died or reached the age of 65. The issue is the income tax treatment of the periodic payments in the hands of the Claimant.

30 November 1997 Ruling 9823683 - SUPPLEMENTARY RULING RE: DOC NO. 980008

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85(1)(e)(i)

Principal Issues: With respect to the reference to paragraph 85(1)(e)(i) in the ruling, the taxpayer requested that the UCC to be allocated to each asset for the purposes of the joint election should be the proportion that the fair market value of the asset is of the fair market value of all property of that class, instead of the proportion that the cost of the asset is of the cost of all property of that class.

Position: This change is acceptable.

Reasons: Our position is administrative in nature, and has been accepted practice in other rulings.

30 November 1997 Ruling 9727303 - BUTTERFLY

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55 112

Principal Issues:

This is a gross asset butterfly with a spin-off. No new issues

Position:N/A

Reasons:N/A

30 November 1997 Ruling 9733773 - PHANTOM STOCK

Unedited CRA Tags
6801(d)

Principal Issues:

Whether arrangement is exempted from SDA definition by virtue of 6801(d);

Position:

Yes;

Reasons:

30 November 1997 Ruling 9803323 - INTEREST DEDUCTIBILITY

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20(1)(c)

Principal Issues: Deductibility of interest in targetco which is profitable. Transfer of interest expense to operating subsidiary.

Position: OK

Reasons: Previously given in other rulings. Purpose and use of borrowing is to acquire preferred shares of Newco having a dividend rate > interest rate on borrowing.

30 November 1997 Ruling 9810333 - BUTTERFLY

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55

Principal Issues: minor amendments to the facts and proposed transactions

Position:will not affect the rulings given

Reasons: the representative has provided a detailed explanation in respect of the proposed amendments. They do not result in any tax consequence.

30 November 1997 Ruling 9821803 - AMALGAMATIONS

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87

Principal Issues: Application of Section 87 to an amalgamation of Cooperative Corporations

Position: Section 87 applies; membership interests treated as shares for purposes of applying subsections 87(3) and (4)

Reasons: See Issue Sheet

30 November 1996 Ruling 9716533 - TAKEOVER BID

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88(1)(c.3) 88(1)(c)(vi)

Principal Issues:

Would shares be considered to be "substituted property" for purposes of 88(1)(c.3).

Position:

No, falls into exception in 88(1)(c.3). See issue sheet for full discussion.

Reasons:

Technical Interpretation - External

28 January 1999 External T.I. 9900095 F - RÉGIME DE RETRAITE EXCÉDENTAIRE

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248(1)

Principales Questions:

1. Quelles sont les conséquences fiscales d'un régime de retraite excédentaire (REE)?

2. Le REE aura-t-il un impact sur le calcul de l'allocation de retraite?

Position Adoptée:

27 January 1999 External T.I. 9807175 F - STAGE COOPÉRATIF - CRÉDIT ÉTUDE, FRAIS SCOL

Unedited CRA Tags
118.6 118.5

Principales Questions:
1. Est-ce que des étudiants inscrits à des stages coopératifs ou à des stages de formation pratique ont droit au crédit d’impôt pour études en vertu du paragraphe 118.6(2) de la Loi?
2. Est-ce que les frais d’encadrement fixes payés par les étudiants pour ces stages sont des frais de scolarité admissibles pour les fins de l’application de l’article 118.5 de la Loi?

Position Adoptée:
1. Seulement les étudiants inscrits à des stages de formation pratique ont droit au crédit d’impôt pour études.
2. Aucune. Question de fait.

27 January 1999 External T.I. 9830125 - SEPARATE PERSONS

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111

Principal Issues: Can an individual shareholder deduct the unused corporate losses?

Position: NO

Reasons: No provision in the Income Tax Act to allow it

27 January 1999 External T.I. 9900985 - SPOUSAL TRANSFER OF SHARES

Unedited CRA Tags
73(1)

Principal Issues:
Is there a time limit for the transfer of property pursuant to subsection 73(1) of the Act?
Where shares are the subject to an escrow agreement, when is the transfer made?

Position:
There is no time limit for the transfer of property.
It is a question of fact as to when a property is transferred.

Reasons:
The provision states, in part, “where at any time after 1977 any particular capital property of a taxpayer has been transferred”.
The Department has indicated in paragraph 15 of IT-170R that the timing of disposition of shares in escrow is a question of fact.

27 January 1999 External T.I. 9802745 F - ALLOCATIONS AUTOMOBILE- REMBOURSEMENT

Unedited CRA Tags
6(1)b)

Principales Questions:

1. Est-ce que l’allocation versée en fonction du nombre de kilomètres parcourus serait raisonnable pour les fins de l’application de l’exception prévue au sous-alinéa 6(1)b)(vii.1) de la Loi?

2. Est-ce que l’allocation pour la mise à la disposition de l’automobile serait imposable en vertu de l’alinéa 6(1)b) de la Loi?

3. Est-ce que la partie de l’allocation pour la mise à la disposition de l’automobile qui représente le remboursement de la surprime pour l’assurance affaires pourrait être considérée comme un remboursement de dépenses engagées par les employés dans le cadre de leur emploi, non imposable en vertu de la Loi?

Position Adoptée:

26 January 1999 External T.I. 9819805 F - INDEMNITÉ

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54

Principales Questions:

Somme gracieusement versée par un conseiller en placements à un client pour compenser des pertes subies à la disposition de placements est-elle imposable?

Position Adoptée:

26 January 1999 External T.I. 9816425 - TRUST ELECTING UNDER SECTION 48.1 OF THE ACT48.1

Principal Issues: Whether section 48.1 of the Act can apply to trusts?

Position: Yes.

Reasons: Wording refers to "individual". Consistent with Finance's policy w.r.t. capital gains exemption. No reason in policy terms for beneficiaries of a trust which owns shares of a SBC to be penalized only because they own shares indirectly through the trust. Other elections w.r.t. capital gains (e.g. 110.6 (19) election) allowed to be made by trusts. Flow through of capital gains to beneficiaries allowed under 104(21).

25 January 1999 External T.I. 9816985 - RETIRING ALLOWANCE

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

Principal Issues: Meaning of "retired" for retiring allowance

Position: retirement occurs when employment duties in a business cease

Reasons: IT-337R3, paragraph 3 and ATR-12

21 January 1999 External T.I. 9810945 F - 74.1 - CONCEPT DE TRANSFERT

Unedited CRA Tags
74.1 75(2)

Principales Questions: La position du Ministère exposée dans le document 942711 est-elle toujours en vigueur?

Position Adoptée:

21 January 1999 External T.I. 9813685 - CAPITAL GAINS DESIGNATION

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104(21)

Principal Issues: Whether subsection 104(21) of the Act can apply to a double tier structure of trusts?

Position: Yes.

Reasons: 104(21) applies for the purpose of computing income under section 3 of the Act. Section 3 is of generality and can be read in conjunction with 104(21) and (21.3) so that taxable capital gains of a trust which are deemed to be taxable capital gains of another trust pursuant to 104(21) be viewed as net taxable capital gains of the other trust for the purpose of subsection 104(21) of the Act.

21 January 1999 External T.I. 9831825 - AUTOMOBILE BENEFITS.

Unedited CRA Tags
6(1)(e) 6(1)(k) 6(1)(a)

Principal Issues: Whether an employer calculated correctly the automobile benefit of an employee who uses his employer's car solely for travel between the various work locations and his home.

Position: No comments given. We suggested that the employee discuss the issue with his employer.

Reasons: The enquiry was from an employee whose employer had just recently gotten comments from us re: the same issue. If an employer and an employee disagree as to the amount of automobile benefits received by the employee, the TSO should be contacted to help resolve the difference of opinion.

21 January 1999 External T.I. 9829465 F - DIMINUTION LOYER CONTRE PRET SANS INTERET

Unedited CRA Tags
105(1) 3

Principales Questions: 1- Si une fiducie confère un avantage quelconque à un contribuable, les dispositions du paragraphe 105(1) de la Loi pourraient-elles s’appliquer à ce contribuable malgré le fait qu’il ne soit pas un bénéficiaire ni fiduciaire de la fiducie et ce, même s’il n’est pas lié, directement ou indirectement, à un bénéficiaire ou au fiduciaire de la fiducie?
2- Quelles sont les conséquences fiscales d’une opération qui consiste en une diminution de loyer en échange d’un prêt sans intérêt?

Position Adoptée: 1-oui 2- situation de troc

21 January 1999 External T.I. 9832265 - REPLACEMENT PROPERTY

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

Principal Issues:

1) Is farm property purchased outside Canada eligible as replacement property?

2) If the farmer moves to a foreign country, is he still eligible to have replacement property in Canada /

Position:

1) No

2) No, unless a related person uses the replacement property in the same manner as the former business property

Reasons:

21 January 1999 External T.I. 9823545 - DIVIDENDS - GENERAL

Unedited CRA Tags
55(3)(a)

Principal Issues: Application of paragraph 55(3)(a)

Position: Explained conditions under which paragraph 55(3)(a) applies

Reasons: See text of document

20 January 1999 External T.I. 9900705 - WITHHOLDING - WOUND-UP RPP

Unedited CRA Tags
153(1) 248(1)

Principal Issues: Withholding tax - payments on the winding-up of a pension plan

Position: Withholding of tax is required

Reasons: Paragraph 153(1)(b), "superannuation or pension benefit" def'n in subsection 248(1) and subsection 103(4) of the Regulations

20 January 1999 External T.I. 9827515 - GIFT BY WILL - DONATION RECEIPT

Unedited CRA Tags
118.1(5)

Principal Issues:

Where subsection 118.1(5) applies to a gift of shares by will, should the charity issue a receipt for the value of the shares at the date of death or the value of the shares at the time the charity receives the shares.

Position:

Subsection 118.1(5) generally provides that where an individual by the individual's will makes a gift, the gift is deemed to have been made by the individual immediately before the individual died. It is our view that where subsection 118.1(5) is applicable to a gift in kind, the amount of the gift is the fair market value of the property gifted immediately before the individual's death. Accordingly, the official donation receipt should show the amount of the gift as being the value of the shares immediately before death.

Reasons:

Legislation.

19 January 1999 External T.I. 9900275 - BENEFITS FROM TRAINING TRUST FUNDS

Unedited CRA Tags
6(1)(a)

Principal Issues: Are training benefits received from a training trust fund taxable under paragraph 6(1)(a)?

Position: Question of Fact

Reasons: Benefits would be considered to be received by virtue of employment, therefore must apply the guidelines developped in Technical News #13. If the training falls into category 1 or 2 it will be considered non-taxable. Category 3 training will be considered taxable. Each case must be examined.

18 January 1999 External T.I. 9809555 - PART XII.2 TAX

Unedited CRA Tags
210

Principal Issues: Does Part XII.2 Tax apply to a double tier structure of pooled fund trusts ultimately owned by RPPs?

Position: Yes.

Reasons: paragraph (d) of the definition "designated beneficiary" in section 210 of the Act. Law is clear.

18 January 1999 External T.I. 9825425 F - COMPTE DIVIDENDE EN CAPITAL

Unedited CRA Tags
89(1)(d)(ii)

Principales Questions:

Est-ce que la société débitrice peut inclure dans le CDC le produit d’assurance-vie versé au créancier?

Position Adoptée:

18 January 1999 External T.I. 9833975 F - REGIME D'ACCESSION PROPRIÉTÉ

Unedited CRA Tags
146.01

Principales Questions:
Est-ce qu'une personne peut participer au RAP pour acquérir une maison d'une succession dans laquelle elle est une légataire pour une part?

Position Adoptée:
Oui.

14 January 1999 External T.I. 9828555 - CHANGE TO DIVIDEND RATE

Unedited CRA Tags
15(1)

Principal Issues: Whether a shareholder receives a benefit when shares with a 10% dividend rate are exchanged for shares with a 15% dividend rate.

Position: The shareholder would have received a benefit.

Reasons: It is a question of fact whether a share with a 10% dividend rate would have a fmv that is less than a share with a 15% dividend rate with all other rights being the same.

7 January 1999 External T.I. 9834035 - 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 		983403

January 7, 1999

Dear XXXXXXXXXX:

6 January 1999 External T.I. 9829785 - FOREIGN AFFILIATE-ACTIVE BUSINESS INCOME

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

Principal Issues:
Application of clause 95(2)(a)(ii)(B) in a back to back loan situation.

Position:
See letter.

Reasons:
Law.

23 December 1998 External T.I. 9832995 - BURSARIES & SOCIAL ASSISTANCE

Unedited CRA Tags
56(1)(n) 56(1)(u)

Principal Issues: Taxation of Alberta Skills Development Program

Position: Taxable as social assistance under paragraph 56(1)(u).

Reasons: Type of training being offered is life skills, literacy, basic adult education, not of a type ordinarily funded by a “bursary”.

13 October 1998 External T.I. 9801445 - ALLOCATION OF PARTNERSHIP INCOME

Unedited CRA Tags
96(1.1) 91(1.6) 115 Art.VII Canada-US Treaty 2(3)

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 						F.B. Fontaine, FCCA
							980144
October 13, 1998

Dear Sir:

Re: Allocation of Partnership Income to a Non-resident Retired Partner

30 September 1998 External T.I. 9801675 F - ÉVALUATION D'ACTIONS

Unedited CRA Tags
15(1) 51(2) 86(2)

Principal Issues: (1) Est-ce qu'il y a un avantage conféré à des personnes dams une situation donnée?

Position: Possiblement que non.

Reasons: Réponse générale. Pas possible de se prononcer sans avoir tous les faits.

14 January 1998 External T.I. 9829915 F - PARA. 5 SEC. 29 CANADA-FRANCE TAX TREATY

Unedited CRA Tags
NA

Principal Issues: Demande de mise à jour des régimes de pension reconnus aux fins du paragraphe 5 article 29 de la Convention Canada-France.

Position: Demande transférée à la Division de la Politique législative

Reasons: L'établissement de ces listes ne relève pas de notre autorité.

Technical Interpretation - Internal

28 January 1999 Internal T.I. 9825747 - CLASS 43.1

Unedited CRA Tags
reg. 1102 Class 43.1

Principal Issues: Whether used property qualifies for inclusion in Class 43.1.

Position: Used property may qualify.

Reasons: Class 43.1 allows for used equipment to be included provided they meet the specific requirements contained in subparagraph (b)(iii) of Class 43.1.

14 January 1999 Internal T.I. 9821980 F - IS THERE A BUSINESS FOR THE PURPOSE OF S. 17?

Unedited CRA Tags
17(3)

Principal Issues: Was the money lent used in the subsidiary's business for the purpose of gaining or producing income for the purpose of ss. 17(3) exception, allowing Canco to avoid the application of ss. 17(1)?

Position: No.

Reasons: The money was used to purchase a few short-term deposits and a condo from a related person which, since, leases the condo. The assets owned by the subsidiary were not speculative in nature. Their acquisition and holding did not amount in sufficient attention, labor and risk to constitute a «business».

11 January 1999 Internal T.I. 9820337 F - SOCIÉTÉS ASSOCIÉES

Unedited CRA Tags
256(1.4)

Principal Issues: Est-ce que 256(1.4)a) fait en sorte que deux sociétés dont chacune détient 50% des actions d'OPCO, sont associées à OPCO lorsqu'elles ont le droit de souscrire au même nombre d'actions d'OPCO?

Position: Non

Reasons: Parce que chacune des sociétés est réputée posséder le même nombre d'actions supplémentaires.

Ministerial Letter

12 January 1999 Ministerial Letter 9831918 - 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.

The Honourable Herb Gray, P.C., M.P.
Deputy Prime Minister
Ottawa, Ontario
K1A 0A6			January 12, 1999

Dear Colleague:

31 December 1998 Ministerial Letter 9831408 - NON-PROFIT ORGANIZATIONS

Unedited CRA Tags
149(1)(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.

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your letter of November 20, 1998, concerning XXXXXXXXXX.

18 December 1998 Ministerial Letter 9829618 - FOREIGN PROPERTY - LIMITED PARTNERSHIP

Unedited CRA Tags
206(2) 5000(7) 5102(1)

Principal Issues: Whether units of XXXXXXXXXX Partnership are not foreign property.

Position: Do not know.

Reasons: We would need more information; however, we can provide general rules.

10 December 1998 Ministerial Letter 9826078 F - ALLOCATION DE RETRAITE

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

Principales Questions: Y a-t-il retraite pour les enseignants universitaires qui continuent d’encadrer des étudiants diplômés après leur retraite?

Position Adoptée: Le fait de continuer bénévolement des activités, commencées avant la retraite, n'empêche pas en soi qu'il y ait retraite si c’est le cas.

6 November 1998 Ministerial Letter 9M18618 - MUNICIPAL OWNED CORPORATIONS INDIAN BANDS

Unedited CRA Tags
149(1)(D) 149(1)(D.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.

TAXATION OF INDIAN OWNED CORPORATIONS

31 August 1998 Ministerial Letter 9816468 - COMPUTER SERVER AND PERMANENT ESTABLISHMENT

Unedited CRA Tags
n/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 981646

Dear XXXXXXXXXX,

30 November 1997 Ministerial Letter 980008A - BUTTERFLY

Unedited CRA Tags
55

Principal Issues: This is a single-wing butterfly involving a farm corporation. According to the original ruling request, one of the shareholders would only transfer half of her shares in the farm corporation to a transferee corporation. This would not constitute a permitted exchange under section 55 of the Act because the conditions in subparagraphs (b)(ii) or (iii) of the definition of "permitted exchange" would not be met in respect of the transfer.

Position: The ruling request was modified so that the transfers complied with the definition of "permitted exchange". In other respects, this was a standard butterfly reorganization.

Reasons: