Income Tax Severed Letters - 1999-02-19

Principal Issues: Will we provide his RRSP carrier with the authority to write-off a mortgage within an RRSP?

Position: No

Reasons: There is no provision allowing for the write-off of the mortgage.

Principal Issues: Whether or not the addition of a “sitting area” in a bedroom could qualify as a medical expense under 118.2(2)(l.2) of the Act?
Would the cost of removing a deck and replacing such a deck qualify as a medical expense?

Position: No.
The removal cost could qualify while the replacement would not qualify.

Reasons: The addition of a “sitting area” within a bedroom does not make the bedroom more mobile or functional.
The removal cost was necessary in order to expand the living room. However, the new deck does not make the patient mobile or functional within the dwelling.

Principal Issues: Are reserves required to be set-up by provincial legislation deductible?

Position: No.

Reasons: Unless specifically excepted, a reserve is not deductible. See paragraph 7 of IT-215R concerning imposed reserves.

Principal Issues:
Are transfers of property from RRSPs to RRIFs at their fair market value?

Position: Yes.

Reasons:
Subsection 206(4) is clear. We have brought problem to the attention of the Department of Finance.

Principal Issues: Whether an amount paid to an employee by an employer under a grievance settlement Board is not a retiring allowance.

Position: General information provided.

Reasons: Amount received as damages arises from a loss of office or employment may be a retiring allowance unless the amount, or any portion thereof, is determined in accordance with human rights legislation which is a question of fact.

Principal Issues:
(1) Est-ce qu'une société publique est une «société assujettie» pour les fins de l'impôt de la Partie IV si elle est contrôlée par un particulier par l'intermédiaire de deux sociétés de portefeuille?
(2) Est-ce que l'alinéa 186(1)d) permet l'utilisation de pertes si ces pertes sont assujetties aux restrictions prévues au paragraphe 111(5)?

Position:
(1) Oui
(2) Non

Reasons:
(1) Le particulier a le contrôle ultime de la société publique.
(2) Restrictions au paragraphe 111(5) s'appliquent pour les fins de 186(1)d). La présomption prévue à l'alinéa 186(1)d) pas assez spécifique.

Principal Issues: 1. Use of offshore drilling vessels in Canada by a non-resident corporation and the computation of tax under Part I.3 of the Act. Is the full carrying value included in the base without pro-ration?
2.Is Canadian GAAP required?

Position: General comments but yes to 1 and a qualified no for 2 based on facts.

Reasons: The law.

Principal Issues: Whether cost amount of annuity contracts under pension plans of a pension trust is to be considered in the calculation of tax payable in 206(2)?

Position: Yes.

Reasons: Wording of the Act.

Principal Issues: Taxation of Foreign Service Directive - Maternity Leave

Position: Non-taxable.

Reasons: The maternity leave is based on other non-taxable foreign services allowances. (We looked at versions of the other allowances in 1996.) These allowances are not taxable pursuant to subparagraph 6(1)(b)(iii).

Principal Issues:
1. Can equity shares of the capital stock of a corporation held by a DPSP be issued by the corporation as a contributor to the DPSP?
2. Are equity shares held by a quasi-pooled fund trust restricted to those issued by any contributor to any DPSP that hold units of the quasi-pooled fund trust?

Position:
1. We do not know.
2. No.

Reasons: Question of fact and wording of the Act.

Principal Issues:

Eligibility for the paragraph 8(1)(c) deduction.

Principal Issues:

Is the cost of purchasing animal food for cats used to control mice in a barn and guard dogs used to protect farm property deductible in computing the income from the farming business?

Position: Yes.

Reasons:

Principal Issues:

Mr. A owns 100% of A Co. , a CCPC, and A Co. owns 100% of B Co., a non-resident corporation that does not carry on business in Canada. A Co. provides management services and sells the product manufactured by B Co. These activities are carried out from its Canadian office. B Co. pays management fees and commissions to A Co. A Co. has four full-time employees. Mr. A is the President and Chief Executive Officer of B Co. and is responsible for the operation of the business. There are two exceptions to the definition of “personal services business” in subsection 125(7) of the Act. The second exception is that the amount paid or payable to the corporation in the year for the services is received or receivable by it from a corporation with which it was associated in the year. The issue is whether A Co., a CCPC, is “associated” with B Co., a non-resident corporation, for purposes of the rules set out in section 256.

Position:

A Co. and B Co. would be considered to be “associated” pursuant to paragraph 256(1)(a) of the Act.

Reasons:

Principal Issues:
Whether the definition of "capital dividend account" in subsection 89(1) contains an upward adjustment to its allowable capital loss component which is similar to the adjustment made to a corporation's net capital loss in subparagraph 111(1.1)(a)(ii) of the Act.

Position: No.

Reasons:
The existing wording in the definition of "capital dividend account" does not contain such upward adjustment to its allowable capital loss component.

Principal Issues:
Whether the election in subsection 48.1(1) is available in respect of shares held in a partnership.

Principal Issues: Are monthly lease payment for 3 furnaces deductible as business expenses?

Position: Question of fact as to whether lease is a lease or a purchase

Reasons: Rental expenses if lease Agreement is an ordinary lease and furnaces are used for the purpose of earning rental income

Principal Issues: Comments regarding subsection 66(12.61) contained in file # 982568.

Position: Comments clarified.

Reasons: Comments reflected a suggestion for greater certainty only; upon further consideration concluded that taxpayer would not be able to rely on subsection 66(12.61).

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
								983037
Attention: XXXXXXXXXX 

December 4, 1998

Dear Sirs:

Re: Tax Relief for Year 2000 Computer Hardware and Software

Principal Issues: Income tax implications of critical illness product

Position: Unable to comment at this time

Reasons: Require a particular product