Income Tax Severed Letters - 1999-07-23

Miscellaneous

17 February 1999 03486M8 - WHETHER SERVER IS PERMANENT ESTABLISHMENT

Unedited CRA Tags
253 Treaty

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,

12 January 1999 06338M8 - CONVERSION TO EURO

Unedited CRA Tags
54

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 Sirs:

Ruling

1999 Ruling 9909933 - INTEREST DEDUCTIBILITY

Unedited CRA Tags
20(1)(c)

Principal Issues: change in facts

Position: ok

Reasons: does not affect ruling

1999 Ruling 9826313 - INTEREST DEDUCTIBILITY

Unedited CRA Tags
20(1)(c)

Principal Issues: Transfer of interest expense to new operating company.

Position: OK

Reasons: Previous Rulings

1999 Ruling 9904323 - INTEREST DEDUCTIBILITY

Unedited CRA Tags
20(1)(c)

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
XXXXXXXXXX 990432
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1999

Dear Sirs:

Re: XXXXXXXXXX

1998 Ruling 9828393 - RELATED GROUP LOSS UTILIZATION SCHEME

Unedited CRA Tags
20(1)(c)

Principal Issues: Related group loss utilization scheme

Position: No unusual issues.

Reasons: No unusual issues

Technical Interpretation - External

19 April 2000 External T.I. 0010095 - : Income earned or realized - capital loss

Unedited CRA Tags
: 55(5), 55(5)(b)

Principal Issues:

Does a capital loss reduce a public corporation's «safe income on hand» for the purpose of ss 55(2) when no capital gain was realized by the corporation before the safe-income determination time ?

Position:

Yes

Reasons:

21 July 1999 External T.I. 9918425 - LARGE CORPORATIONS TAX

Unedited CRA Tags
181.2(3)

Principal Issues:

Whether a debit note issued to a corporation must be included in computing the corporation’s capital under subsection 181.2(3).

Position:

Provided general comments only.

Reasons:

20 July 1999 External T.I. 9919585 - TAX EXEMPTION FOR UNIONS

Unedited CRA Tags
149(1)(k)

Principal Issues: tax exemption for unions

Position: wording of 149(1)(k)

Reasons: N/A

20 July 1999 External T.I. 9909835 - DEEMED DIVIDENDS ON DEMUTUALIZATION

Unedited CRA Tags
139.1(4)(f) Article XXI(2) U.S. treaty

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 	Tim Kuss
		990983
Attention: XXXXXXXXXX 

July 20, 1999

Dear Sirs:

Re: Article XXI(2) of the Canada - U.S. Income Tax Convention
Request for Technical interpretation

19 July 1999 External T.I. 9913605 - GENERAL PERSONAL TAX QUESTIONS

Unedited CRA Tags
118 153 56(1)(a)

Principal Issues: Whether individual 1) can transfer pension to spouse or children, 2) is required to make installment payments, and 3) can claim any amount for his adult son who lives with him.

Position: Pension cannot be transferred; referred him to installment guide; son can only be claimed if infirm, and he may be entitled to portion of tuition and education amount

Reasons: General information available in guides

15 July 1999 External T.I. 9819025 F - SOCIETES ASSOCIEES

Unedited CRA Tags
256

Principal Issues: Est-ce que les sociétés sont associées dans la situation donnée?

Position: Oui

Reasons: Application des dispositions à 256(1.2)

15 July 1999 External T.I. 9916645 - CLERGY RESIDENCE DED FOR MARRIED CLERGY

Unedited CRA Tags
8(1)(c)

Principal Issues:
The amount that can be claimed as the clergyman’s residence deduction by a clergy couple.

15 July 1999 External T.I. 9823075 - QUALIFIED INVESTMENT, SEGREGATED FUND

Unedited CRA Tags
146(1)

Principal Issues: Can a segregated fund contract be a qualified investment? Will an insurance contract that is an annuity be a qualified investment where the annuitant’s spouse is the named beneficiary under the contract?

Position: Question of fact. Yes.

Reasons: Certain investment contracts will qualify as qualified investments. Where the wife is the beneficiary under the contract and the annuity contract would otherwise qualify, we would accept the investment since the rrsp trust has all the rights to annuity payments under the contract while the annuitant is alive and the wife only has rights, that she would have through the estate, after the annuitant’s death.

15 July 1999 External T.I. 9911175 F - EMPLOYÉ - ACTIONNAIRE UNIQUE -207.6(2)

Unedited CRA Tags
207.6(2)

Position Adoptée:
Le fait que l’employé soit l’actionnaire unique de la société n’est pas suffisant en soi pour prétendre que le paragraphe 207.6(2) de la Loi est inapplicable.

14 July 1999 External T.I. 9914405 - XXXXXXXXXX . - FOREIGN UNIVERSITY

Unedited CRA Tags
118.5(1) 118.6(1)

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 991440
C. Tremblay
Attention: XXXXXXXXXX

July 14, 1999

Dear XXXXXXXXXX:

14 July 1999 External T.I. 9915365 - DISABILITY INSURANCE BENEFITS

Unedited CRA Tags
6(1)(f)

Principal Issues: Tax treatment of disability insurance plan payments.

Position: Included in income if the employer has made a contribution.

Reasons: Paragraph 6(1)(f).

14 July 1999 External T.I. 9917125 - PRE-DETERMINED DAILY AMOUNTS

Unedited CRA Tags
118.1(2)(h)

Principal Issues: Whether pre-determined daily amounts qualify as medical expenses under paragraph 118.2(2)(h)?

Position: No.

Reasons: An expense must be incurred.

14 July 1999 External T.I. 9913745 - FLEXIBLE BENEFIT PLANS

Unedited CRA Tags
5(1) 6(1)(a)

Principal Issues: An employer provides a flexible benefit program (the “Program”) to its employees which involves a health services plan. The Program’s plan year is the calendar year. We are asked whether, in light of paragraphs 3 and 4 of IT-529, the choice can be made 11 months into the plan year, where the employee’s share of the cost of flex benefits can be allocated out of a bonus which is paid in March following the plan year.

Position: This is not acceptable. The employee would be taxed on the amount of the flex benefits as regular employment income.

Reasons: The position is consistent with paragraph 6 of IT-529.

13 July 1999 External T.I. 9916175 - GRANDFATHERING PROVISIONS - STOP-LOSS RULES

Unedited CRA Tags
112(3)

Principal Issues:
1. Whether certain changes made to a life insurance policy after April 26, 1995 will affect the application of the grandfathering provisions to the stop-loss rules in subsection 112(3).

2. Whether a change in the ownership and the beneficiary of a life insurance policy after April 26, 1995 will affect the application of the grandfathering provisions.

3. Whether a rollover under section 85 has any impact on the application of the grandfathering provisions.

Position:
1. Not necessarily.

2. No, provided that the conditions set out in paragraph 131(1)(b) of S.C. 1998, c.19 relating to the life insurance policy are otherwise met.

3. No.

Reasons:
1. Where the conditions set out in paragraph 131(1)(b) of S.C. 1998, c. 19 relating to the life insurance policy existed on April 26, 1995, it is our view that any further modications or alterations or cancellation of the policy would not, in and of themselves, result in the loss of grandfathering.

13 July 1999 External T.I. 9901535 F - PERTE EN CAPITAL - REPUTE NULLE

Unedited CRA Tags
40(2)(g)(ii) 50(1)

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 		990153
C. Tremblay
À l’attention de XXXXXXXXXX 

Le 13 juillet 1999

Objet : Alinéa 40(2)g) de la Loi de l’impôt sur le revenu (la “ Loi ”)

Monsieur,

12 July 1999 External T.I. 9915895 - WHETHER CONTRIBUTION TO A TRUST IS A GIFT

Unedited CRA Tags
118.1

Principal Issues:
Whether a contribution to a heritage trust qualifies as a charitable gift.

Position:
No, the contribution does not meet the requirements for a gift.

Reasons:
The contribution appears to be a contribution of capital to the trust which may be returned to the contributor on the termination of the trust.

12 July 1999 External T.I. 9918015 - PAYMENT OF A DECEASED SLH'S LOAN

Unedited CRA Tags
15(2) 20(1)(j)

Principal Issues:
An individual owned 100% of the shares of a CCPC until his death and, in prior years, had included amounts in income under subsection 15(2). The individual’s spouse, as sole beneficiary of the individual’s estate, receives the shares and is considering repaying the outstanding shareholder loans and wishes to know whether she will be entitled to a deduction under paragraph 20(1)(j).

9 July 1999 External T.I. 9916575 - AMENDMENT /REVOCATION OF 48.1 ELECTION

Unedited CRA Tags
48.1 220(3.2)

Principal Issues:
Whether a subsection 48.1(1) election can be amended or revoked.

8 July 1999 External T.I. 9909175 - EBP, EMPLOYER RECEIPT, CAPITAL GAIN

Unedited CRA Tags
12(1)(n.1)

Principal Issues: Is there a flaw in the application of 12(1)(n.1) where an EBP elects under 104(21) to treat an amount as a taxable capital gain?

Position: Not in our view.

Reasons: The intent was not to allow an EBP to pay an amount to the contributing employer in the form of a capital gain. 12(1)(n.1) is designed to include such amounts in the employer’s income as regular income and not as a capital gain.

7 July 1999 External T.I. 9916185 - REPLACEMENT PROPERTY

Unedited CRA Tags
44

Principal Issues: Whether the replacement property rules allow a taxpayer to replace one building, which contained a kiln, a cafeteria, and a garage, destroyed by fire with three buildings housing each of the different functions separately.

Position: Possibly, but a question of fact in each situation.

Reasons: As indicated in paragraph 10, it is our position that in some situations it may be necessary to acquire more than one property to replace another. However, if, in particular circumstances, the purpose of such an arrangement is business expansion, then our position is that it would not be allowed.

7 July 1999 External T.I. 9905655 - IMMIGRANTS, TAX IN CANADA

Unedited CRA Tags
2

Principal Issues: Is there any information available on the taxation of immigrants to Canada?

Position: Yes.

Reasons: See T4055 titled “Newcomers to Canada”.

7 July 1999 External T.I. 9828165 F - TRANSFERT DE BIENS À UNE SOCIÉTÉ

Unedited CRA Tags
74.4(2)

Principal Issues:
Est-ce que le paragraphe 74.4(2) est applicable aux trois situations présentées?

Position:
Possible

Reasons:
Pas assez de faits. Toutefois pourrait être applicable parce que le dividende sur les actions privilégiées n'est pas cumulatif.

7 July 1999 External T.I. 9915595 - MEDICAL EXPENSES - LEGISLATIVE CHANGE

Unedited CRA Tags
118.2

Principal Issues: Whether there is a proposed legislative change which would result in 3% of the individual’s net income as well as 3% of the net income of his or her spouse being taken into account in determining the individual’s medical expense tax credit.

Position: No

Reasons: No such change has been announced.

7 July 1999 External T.I. 9908065 - BARE TRUST, EMPLOYEE SHARE SAVINGS PLAN

Unedited CRA Tags
248(1)

Principal Issues: Would an employee share purchase plan trust be a bare trust or agency relationship? How would the new trust legislation (December 1998), if enacted impact upon this analysis.

Position: Question of fact. No change.

Reasons: The draft legislation on this issue essentially attempts to codify existing practices, thus an arrangement that is a bare trust should still constitute a bare trust after the legislation is enacted.

7 July 1999 External T.I. 9915855 - EMPLOYEE LONG SERVICE AWARDS

Unedited CRA Tags
6(1)(a)

Principal Issues:
The Canadian International Development Agency is asking for the Department’s position on long service awards for employees such as a gold watch or gold pin.

Position:
General comments given.

Reasons:
See position taken in similar files.

5 July 1999 External T.I. 9907225 - EARLY RETIREMENT, PREVIOUS SERVICE

Unedited CRA Tags
146(16)

Principal Issues: Can employment with previous employer be acquired under existing RPP?

Position: Question of fact

Reasons: The terms of the RPP will dictate whether it is possible.

30 June 1999 External T.I. 9911555 F - CR POUR ACTIONNAIRE-DIRIGEANT

Unedited CRA Tags
248(1) 5 6

Principales Questions: Application des dispositions de la Loi concernant les conventions de retraite à deux situations spécifiques

Position Adoptée: Question de fait

28 June 1999 External T.I. 9910845 - CHILD SUPPORT - "MADE"

Unedited CRA Tags
56.1

Principal Issues:
Where a pre-May 1997 support order is appealed and, in a post-April 1997 order, the appeal court alters the amount to be paid as ordered by the lower court, can the post-April 1997 order be deemed, by the appeal court, to be “made” before May 1997 (i.e., at the same date as the order of the lower court) for income tax purposes (and therefore be subject to the old child support rules)?

28 June 1999 External T.I. 9906755 - REPAYMENT TO RPP FROM RRSP

Unedited CRA Tags
146(16)

Principal Issues: Are amounts repaid to a pension plan which were transferred to an RRSP on withdrawal from the plan deductible in computing the taxpayer’s income? Is the interest deductible where money is borrowed to make an RPP contribution?

Position: Not if transferred back from RRSP. No.

Reasons:. The transfer is governed by subsection 146(16). There is no provision to allow for interest deductibility on such payments.

25 June 1999 External T.I. 9916985 F - DÉPART DES ASSOCIÉS

Unedited CRA Tags
96

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 								Michel Lambert
      5-991698
À l’attention de XXXXXXXXXX 				

Le 25 juin 1999

Mesdames, Messieurs,

Objet : Départ des associés d’une société de personnes

24 June 1999 External T.I. 9911965 - EXPENSES FOR MEALS

Unedited CRA Tags
67.1(2)(e) 6(6)(a)(i)

Principal Issues: Whether amounts paid by an employer for meals consumed by employees sent to a client’s special work site would be excepted from the 50% limitation in subsection 67.1(1) of the Act by virtue of proposed paragraph 67.1(2)(e) of the Act.

Position: No. The limitation would apply.

Reasons: The amounts in question are not included in the income of the employees for reasons other than subparagraph 6(6)(a)(i). See paragraph 8 of IT-518R as well as paragraph 51 of IT-522R.

8 March 1999 External T.I. 9826295 - DEFINITION OF ANNIVERSARY DAY - SS 12(11)

Unedited CRA Tags
12(11)

Principal Issues: Annual taxation of interest on stripped bonds

Position: Interest accrued to anniversary day of contract - clarification of definition of anniversary day

Reasons: In accordance with definition of anniversary day in ss 12(11)

21 January 1999 External T.I. 9831795 - CARRYING ON BUSINESS

Unedited CRA Tags
125

Principal Issues:
Whether services performed in U.S. by employee of resident company constitute carrying on business in Canada for purpose of s. 125.

Position:
No.

Reasons:
Business carried on at place where services rendered.

28 September 1998 External T.I. 9824665 - CPP - DISABLED CONTRIBUTOR'S CHILD BENEFITS

Unedited CRA Tags
56(1)(a)

Principal Issues: The Child Support Team, Department of Justice, has enquired about the tax treatment of payments called “Disabled Contributor’s Child’s Benefits” from the Canada Pension Plan.

Position: DCCBs are taxed as income under clause 56(1)(a)(i)(B) of the Act in the hands of a child of the disabled contributor even though the DCCB may be paid to a person or agency having custody and control of the child.

Reasons: See file # 9624285, 922362, 970474. Also see paragraph 13 of IT-499R.

Technical Interpretation - Internal

16 July 1999 Internal T.I. 9911687 - INDIAN INVESTMENT INCOME

Unedited CRA Tags
81(1)(a)

Principal Issues: In the Recalma decision, in identifying and assessing the various connecting factors which are relevant, the Courts placed considerable emphasis on whether the income generating activity of an on-reserve financial institution, the financial institution is part of the commercial mainstream. If an on-reserve financial institution’s income generating activity arises from loans to Indians and Indian businesses situated on reserve, should an Indian be exempt from taxation on his or her investment income because more than 90% (i.e., “all or substantially all” test) of the on-reserve financial institution’s income is “intimately connected” to the reserve? Should an Indian’s investment income earned in an on-reserve financial institution be taxed in proportion to the income earned by the financial institution off-reserve?

Position: Question of fact that is determined by evaluation of connecting factors.

Reasons: Based on Court’s comments in Recalma decision.

14 July 1999 Internal T.I. 9916027 - MUTUAL FUNDS COMMISSIONS

Unedited CRA Tags
9(1)

Principal Issues: Tax treatment of Mutual Funds Commissions.

Position: Included in income by individual or corporation that earned the commissions.

Reasons: Question of fact.

9 July 1999 Internal T.I. 9915587 - DONATION RECEIPT

Unedited CRA Tags
118.1(1) 39(1)(i.1)

Principal Issues:
Has a gift been made where donor retains or has the right to use a work of art?
Will a gift of a residual interest in a work of art that is a Canadian cultural property qualify as a cultural gift?
Does a work of art have to be "Canadian" to qualify as a Canadian cultural property?

Position:
1. No.
2. No.
3. Only the Canadian Cultural Property Export Review Board can make this determination.

Reasons: See response

7 July 1999 Internal T.I. 9917007 - EMPLOYER PROVIDED CHRISTMAS PARTY

Unedited CRA Tags
6(1)(a)

Principal Issues:

The Department accepts as a non-taxable privilege an employer-provided party or other social event, which is generally available to all employees, if the dollar amount per employee is reasonable in the circumstances. What is meant by “generally available to all employees”?

Position:

It is a question of fact whether an employer-provided party or event is “generally available to all employees” as this determination would depend on the particular situation. We would expect that the majority of employer-provided parties or events would be considered to be “generally available to all employees”. We would consider that an employer-provided party or social event is not generally available to all employees if it appears that the intent is to avoid the taxation of a benefit that would otherwise be taxed as remuneration. For example, if an employer pays for a vacation/personal trip for a few employees and these trips would otherwise be taxed as benefits in the employees’ hands under paragraph 6(1)(a) of the Act, we would not consider such trips to be an employer-provided social event that is generally available to all employees.

Reasons:.

7 July 1999 Internal T.I. 9918077 - WORKERS' COMPENSATION BENEFITS

Unedited CRA Tags
6(1)(A) 6(15)

Principal Issues:

1. What happens to employers advances to employees, on account of workmans' compensation, when the claim is denied and the employer converts the advances to sick leave.
2. What happens when the loans and advances are not repaid.

Position:

1. The sick leave is employment income in the year it is paid, i.e. when the employer offsets the loans with the net sick pay. The best evidence of the payment of the sick pay is the remittance of the tax withheld from the gross amount of the sick pay.
2. When the loan or advance is not repaid the employee will have a taxable benefit under 6(1)(a), when the debt is settled or extinguished, by virtue of the debt forgiveness rules at 6(15).

Reasons:

7 July 1999 Internal T.I. 9910000 - QUICK METHOD OF GST ACCNTG TAX TREATMENT

Unedited CRA Tags
12(1)(x)

Principal Issues: Whether the difference between the amount of GST collected and the amount of GST remitted under the Quick Method is taxable under paragraph 12(1)(x) since it technically still belongs to the Crown.

Position: Yes.

Reasons: The better position is to consider the difference between the amount of GST collected and the amount remitted under the Quick Method to be transferred permanently to the registrant.

6 July 1999 Internal T.I. 9912477 - MEDICAL EXPENSES AND BANKRUPTCY

Unedited CRA Tags
128(2) 118.2

Principal Issues: Pursuant to “B” of the formula set out in subsection 118.2(1) of the Act, an individual in respect of a taxation year is entitled to utilize unclaimed medical expenses paid in any 12 month period ending in the taxation year (the 12 Month Rule). Under subsection 128(2) of the Income Tax Act (the “Act”), an individual who is bankrupt during a calendar year is required to file a pre bankruptcy return and a post bankruptcy return. Is it possible for the 12 Month rule to be applicable with respect to the post bankruptcy return?

Position: Yes

Reasons: Subsection 128(2) of the Act and section 118.95 of the Act set out a number of rules of the Act that relate to a bankrupt individual. However, there is no rule in those provisions that negates the possible application of the 12 Month Rule in respect of a post bankruptcy return.

July 6, 1999

Winnipeg Taxation Centre HEADQUARTERS
Rob Reid M. Eisner
Co-ordinator, T1 Processing (613) 957-2138
991247

Medical Expenses and Bankruptcies

1 April 1999 Internal T.I. 9833077 - COMPOND VS. SIMPLE INTEREST AND PART XIII TAX

Unedited CRA Tags
212(1)

Principal Issues: Whether interest on an obligation is considered to be paid when a new obligation is issued which principal amount inludes accrued interest on the original obligation

Position: no

Reasons: The new note is issued precisely because the interest has not been paid.