Income Tax Severed Letters - 1999-10-29

Principal Issues: Whether status Indian employees of the XXXXXXXXXX, located off-reserve, are exempt from income tax.

Position: No.

Reasons:..None of the employment income guidelines have been met and there are not sufficient connecting factors to situate the income to a reserve..

Principal Issues: With respect to a flexible employee benefit program (the "Program") where the plan year commences on January 1, 2000, the employee's cost of the selected benefits are to be paid out of a bonus which the employee expects to receive in February of the year 2000. The employee selects the benefits in November of 1999 when there is a high degree of certainty that the bonus will be paid. We have been asked about the tax consequences of the selection of benefits in November of 1999 in relation to the funding of the benefits out of the bonus.

Position: We have provided some general comments and suggested that the submission of an advance income tax ruling be considered.

Reasons: It appears necessary to review the relevant facts and documentation before a final determination could be made.

Principal Issues: Pursuant to a pre-May 1997 written agreement, the taxpayer is required to pay the recipient, who is the natural parent of his child, $XXXXXXXXXX per month. The taxpayer and the recipient were never spouses of each other. The taxpayer paid $XXXXXXXXXX per week to the recipient. What is the tax treatment of child support amounts paid?

Position: Former paragraph 60(c) of the Act provided for a deduction in respect of an amount paid by a taxpayer in the year as an allowance payable on a periodic basis for the maintenance of the recipient, children of the recipient, or both, if the payer was living separate and apart from the recipient at the time the payment was made and throughout the remainder of the year, the taxpayer is the natural parent of the child, and the amount is received under an order made by a competent tribunal under the laws of a province. As a written agreement does not constitute an order made by a competent tribunal under the laws of a province, the child support payments are not deductible. For 1997 and subsequent years, the deduction formerly made in paragraph 60(c) of the Act is now made under paragraph 60(b) of the Act. However, for purposes of paragraph 60(b) of the Act, paragraph (b) of the definition of "support amount" in subsection 56.1(4) of the Act still requires that "the payer is a natural parent of the recipient and the amount is receivable under an order made by a competent tribunal in accordance with the laws of a province".

Reasons: See E7M14855, 9516445, E74598

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 992153
C. Tremblay

September 27, 1999

Dear XXXXXXXXXX:

Re: XXXXXXXXXX and the Tuition Tax Credit

Principal Issues: Effect of new legislation on taxation of mortgage interest subsidy payments; effect of Siwik and Hoefele decisions on such payments; taxation of payments to employees to compensate for higher housing costs.

Position: New legislation applies to tax payments under 80.4 if loan received after February 23, 1998, and relocation occurred after September, 1998. If relocation occurred before October, 1998, it is effective in 2001. Loans received prior to February 24, 1998 may be governed by Siwik and Hoefele decisions. Payments made directly to employees with no mortgage are taxable.

Reasons: Prior opinions, and case law

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.

PRINCIPALE QUESTION:

Principal Issues: Does the post-amble to subsection 212(1)(b) of the Act apply to non-cumulative fixed interest payments that are generally payable on a periodic basis, but not payable in respect of periods in which the borrowing company fails to pay a dividend?

Position: It depends upon the particulars of the debt. Generally the post-amble would not apply, unless the facts indicate that the payments are disguised profits.

Reasons: The payments do not appear to have the character of participating debt.

Principales Questions:
Est-ce qu'un bénéficiaire d'une fiducie peut déduire des honoraires payés pour la garde des titres et l'administration des différents placements?

Principal Issues:
Whether Plan meets requirements of paragraph 6801(a) of the Regulations.

Position: No

Reasons:
It should be administered or amended to include:

Principal Issues: Whether the cost of a toilet and a shower ($7,000) qualify with respect to the medical expense credit (paragraph 118.2(2)(l.2) of the Act) where the individual (age of XXXXXXXXXX) has the use of only one arm and a serious balance problem. This medical condition resulted from a vehicle accident many years ago.

Position: Yes, to the extent that the costs are reasonable and do not relate to something other than the individual's medical condition.

Reasons: The facts provided to us indicate that the individual has a severe and prolonged mobility impairment and the costs result in the individual being more functional within the dwelling.