Income Tax Severed Letters - 1999-04-30

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.

PRINCIPAL ISSUE:

Whether gifts of paintings to specific charities named in the deceased taxpayer’s will, could be claimed in the deceased income tax return where the trustee has the discretion to decide which painting should be given to each named charity.

Position TAKEN:

Principal Issues: Are various services provided by a doctor medical services?
Is tooth bleaching by a dentist eligible as a medical expense?

Position: The services provided are likely medical services.
Yes

Reasons: We have previously conceded that an amount paid to a medical practitioner for surgery of any kind, whether cosmetic or elective generally qualifies as a medical expense.
Tooth bleaching is a dental service and if the fee for such a service is paid to a dentist, it would qualify as a medical expense

Principal Issues: whether a particular activity is a business

Position: Depends on the facts

Reasons: Examination of the facts will determine if there is a reasonable expectation of profit

Principal Issues:

Whether a corporation owned by an Indian band qualifies for the exemption under paragraph 149(1)(d.5).

Position:

For the corporation to qualify for the exemption under paragraph 149(1)(d.5), the Indian band must qualify as a municipality in Canada and the income of the corporation for a particular period from activities carried on outside the geographical boundaries of the municipality cannot exceed 10% of its income for the period. Since this is a factual determination, we have provided only general comments due to insufficient information.

Reasons:

Principal Issues: Application of civil penalty for misrepresentations of tax matters by third parties.

Position: Unable to comment.

Reasons: Detailed legislation not yet available.

Principal Issues: Treatment under the Act of an income transfer payment made in accordance with Swedish Tax Law by a subsidiary foreign affiliate to its parent foreign affiliate.

Position: In the circumstances set out in the opinion it would be reasonable to view the payment as income from property to the parent foreign affiliate which, pursuant to 95(2)(a)(ii) would be included in its income from active business.

Reasons: The payment is attributable to the shares of the subsidiary foreign affiliate held by the parent foreign affiliate and is deductible in computing income from an active business carried on by the subsidiary affiliate in Sweden.

Principal Issues:
1. How to qualify as a charity under paragraph 6 of article XXI of the Canada-US Treaty
2. Whether all exempt entities under 501(c)(3) of the Code qualify under para. 6 of article XXI

Position:
1. Provide evidence of exemption under 501(c)(3) of the Code.
2. Yes

Reasons:
1. Charities Newsletter of 1996 publicized their administrative position re para.6 of article XXI
2. per Susan Mott of Charities.

Principales Questions:

Est-ce qu’on maintient notre position (F9807525) à l’effet qu’un montant versé par un employeur à ses employés à titre d'aide humanitaire pour une semaine de salaire incomplète en raison de la tempête de verglas en janvier 1998 est un revenu d’emploi imposable en vertu du paragraphe 5(1) et de l’alinéa 6(1)a) de la Loi ?

Position Adoptée:

Position Adoptée:

Principal Issues:
Various general questions relating to conditions that have to be met in order to qualify as a pension corporation in paragraph 149(1)(o.2) of the Act?

Position: The conditions are clear.

Reasons:
No exceptions regarding requirements in Pension Benefits Standards Act, 1985 or a similar law of a province.

Principal Issues:
(1) Whether 128.1(4)(b)applies to salary receivable? (2) Whether 128.1(4)(d) applies to dividend declared but not paid where the ex-dividend date is prior to the time the individual cease to be resident? (3) Whether the taxpayer can carry-back capital loss where corp is wound up after departure?

Position:
(1) Yes (2) Yes (3) Yes

Reasons:
(1) Salary receivable is property (2) Such dividend is property (3) 111(9)

Principal Issues: Is a maple leaf gold coin necessarily a listed personal property?

Position: No

Reasons: It is a question of fact as to whether a coin or any other property is a listed personal property. Gold coins are likely to be commodity purchases.

Principal Issues:
Tax treatment of employment income of a status Indian.

Principal Issues: Reason for deemed disposition concept under 70(5)

Position: FMV transfer and ACB adjustment to transferee

Reasons: Rules of 70(5)

Principal Issues: (a) Paragraph (b) of B within the formula set out in proposed subsection 118.6(2) states that "$60 is multiplied by the number of months in the year ... each of which is a month during which the individual is enrolled at a designated education institution in a specified educational program that provides that each student in the program spend not less than 12 hours in the month in the program." Does a month with respect to the 12 hour test mean a calendar month?
What functions are to be taken into account in determining whether the 12 hour test has been met in a particular month?

Position: (a) yes
(b) The functions would generally include all forms of direct instruction such as lectures, practical training or laboratory work. When the program of a student falls short of providing 12 hours per month of direct instruction, the student's time may be augmented by a reasonable estimate of time outside the classroom or laboratory, normally required and expected of a student during a particular program, for work assignments or other items set out in paragraph 11(a) to (f) of IT-515R2.

Reasons: (a) refer to the comments in 982792.
(b) The Department of Finance has indicated to us that the position is consistent with the intent of the part-time education credit.

Principal Issues: Are legal fees deductible when they are incurred in connection with the issuance of a child support order under the Divorce Act?

Position: Yes

Reasons: See a detailed discussion of this issue in file # 983147

Principal Issues: Could an amount still qualify as a designated benefit where a discretionary trust for the benefit of a financially dependent mentally infirm adult child is the beneficiary of the RRIF on the death of the last annuitant?

Position: No.

Reasons: Subsection 146.3(6.11) refers specifically to a “child or grandchild of the annuitant” so a discretionary trust will not qualify.