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: What are the dates for purchasing replacement properties in the two scenarios submitted

Position: The end of the first taxation year following the taxation year in which the former business property was disposed of.

Reasons: Paragraph 44 (1)(d)

Principales Questions:
Si deux personnes ne peuvent vivre ensemble sous le même toit, puisqu’ils ont chacun la garde des enfants issus de leur précédent mariage mais qu’ils se comportent comme de réels conjoints en passant tout leur temps libre, les fins de semaine, leurs périodes de vacances et le temps des fêtes ensemble, est-ce qu’on peut considérer que ces deux personnes sont des conjoints au sens du paragraphe 252(4) de la Loi ?

Position Adoptée:
Selon les informations présentées, probablement que non.

Principal Issues: Are certain payments received for providing care for a needy person subject to tax?

Position: Insufficient information and completed or ongoing transaction.

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

Position Adoptée:

Principal Issues: Whether a Hungarian Korlatolt Feleossegu Tarsasag ("Kft") is a corporation for the purposes of the Income Tax Act.

Position: Yes it is.

Reasons: The Kft has legal personality and existence apart from its members.

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: (1) Est-ce qu'il faut tenir compte du contrat de société en commandite pour déterminer le contrôle de droit?

Position: Oui

Reasons: La Cour suprême ne s'est pas prononcé de façon définitive dans la cause Duha concernant les contrats externes autres que les conventions de fiducie et les conventions unanimes entre actionnaires. Le Ministère a déjà pris la position (5-971006 et 5-960746) qu'il faut tenir compte du contrat de société.

Principal Issues:
1. What is the amount of a loan that a corporation may provide to its shareholders and when do the shareholders have to repay the loan?
2. Can a Canadian Controlled Private Corporation issue a RRSP slip as a result of the issuance of shares to a RRSP?
3. Can a corporation finance an individual’s RRSP contributions?
4. What are the conditions required under the Act that a corporation has to meet in order to be considered a Venture Capital Corporation for purposes of RRSP?
5. What are the requirements under the Act concerning RRSP investments in mortgages?

Position:
1. Question of fact.
2. No.
3. Question of fact.
4. Reg 6700
5. Reg 4900(1)(j) & 4900(4).

Reasons:
1-3 See IT-119R4
5 See IT- 320R2

Principal Issues: Can a mortgage bond issued by a school be a qualified investment for a RRSP?

Position: Question of fact.

Reasons: Mortgage bond must qualify under 4900(4) or 4900(1)(j) of the Regulations.

Principal Issues:

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

Principal Issues:

Taxpayer’s mother, who was visiting from XXXXXXXXXX stayed in Canada with her from XXXXXXXXXX . Taxpayer’s mother has not lived in Canada before this time. From XXXXXXXXXX , the mother looked after the taxpayer’s son and was paid a total of $XXXXXXXXXX for child care services for 1998. The taxpayer’s mother returned to XXXXXXXXXX at the end of XXXXXXXXXX .
1. Is the taxpayer’s mother a resident or deemed resident of Canada?
2. Is the taxpayer’s mother an employee of the taxpayer or self employed?

Position:

1. Question of fact. 2. Question of fact.

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