Income Tax Severed Letters - 1999-10-01

Principal Issues: Taxation of investment income earned by status Indians.

Position: Income not exempt unless it can be shown that it was generated on reserve.

Reasons: The investment income is the property in question and if it was not generated on reserve it is considered to be earned in the economic mainstream and is not tax exempt.

Principal Issues: Whether the time that a property was not owned by a taxpayer but was used in a farming business in which the taxpayer was actively engaged on a regular and continuous basis can be considered in determining whether the property was before the transfer used principally in the business of farming in which the taxpayer, the taxpayer's spouse or any of the taxpayer's children was actively engaged on a regular and continuous basis.

Position: Yes.

Reasons: Subsection 73(3) does not include a requirement that property be owned by a taxpayer in those years where it is considered to be used principally in the business of farming in which the taxpayer, the taxpayer's spouse or any of the taxpayer's children was actively engaged on a regular and continuous basis.

Principal Issues: Transfer of RRSP from one trustee to another - foreign property transferred first.

Position: Subject to 206(2) penalty if foreign property exceeds limits

Reasons: 206(2) applies in respect of a taxpayer - each trust is a "taxpayer"

Principal Issues: Income Tax Act requirements of 6801(a) DSLP

Position: Explained requirements

Reasons: Some deficiencies in plan

Principal Issues: To determine the beneficial ownership of a property whose title was put in the name of the taxpayer's mother "in trust".

Position: A general discussion on the requirements for a trust and bare trusts.

Reasons: The beneficial ownership of a property is a question of fact.

Principal Issues:
Is a life insurance policy on the life of a shareholder of Opco an asset used in an active business for the purposes of the SBC definition where the policy is pledged as security for a bank loan the proceeds of which are used in the active business?

Position: No.

Reasons:
For the purposes of determining if a corporation is an SBC, subsection 11O.6(15)(f) provides that a policy on the life of a shareholder is to be valued at its cash surrender value. In our view this amount represents an investment, as opposed to a business, asset

Principal Issues: Whether subsection 17(1) (prior to 1999 amendments) applies to a loan owed by a non-resident person where at the time the loan was made the borrower was a resident of Canada

Position: Yes

Reasons: The Department's position is that subsection 17(1) contemplates an annual and continuous test for the purposes of calculating the interest deemed to be received by the lender. Also, the new subsection 17(1) (i.e., after the amendments in 1999) clearly applies to such a situation.

xxxxxxxxxx 982406
S. Leung
Attention: xxxxxxxxxx
September 3, 1999
Dear Sirs:

Re Subsection 17(1) of the Income Tax Act (the "Act")

Principal Issues: Whether tax paid to Qatar is an income or profits tax

Position: Yes

Reasons: Based on the law of Qatar provided by the client, we found nothing to indicate that the tax is not an income or profits tax

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				   5-991901
J. Desparois, M.Fisc.
A l'attention de XXXXXXXXXX
Le  ler septembre 1999
Mesdames, Messieurs,

Objet: Coût en capital d'une production cinématographique ou magnétoscopique canadienne

Principales Questions:

Principal Issues: Taxation of January 2000 cheques issued in December 1999 in case of Y2K systems failure

Position: Taxable in 1999

Reasons: Wording of 56(1)(a)(i); 153(1)(p) and Reg 200(1)

xxxxxxxxxx 991236
S. E. Thomson
Attention: xxxxxxxxxx

Principal Issues: Are there any incentives for investing in small energy projects?

Position: No.

Reasons: Provisions such as CRCE and Class 43.1 are to encourage investment but no specific assistance programs exist.

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.

981369
	xxxxxxxxxx	G. Middleton
(613) 957-2122
May 7, 1999

Dear Sir: