Income Tax Severed Letters - 1999-02-05

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

Position: NO

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

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:

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).

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

Position Adoptée:

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.

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:

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.

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.

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.

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.

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

Position:
See letter.

Reasons:
Law.

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