Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
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 Issues:
A. Are XXXXXXXXXX generated by XXXXXXXXXX of XXXXXXXXXX and XXXXXXXXXX under the Plan considered to be income from a source?
B. Are XXXXXXXXXX a taxable benefit where the XXXXXXXXXX is the employer of the XXXXXXXXXX ?
C. Are amounts paid from the XXXXXXXXXX of the XXXXXXXXXX of the XXXXXXXXXX or the XXXXXXXXXX deductible as RRSP premiums?
D. Where an XXXXXXXXXX is purchased for a XXXXXXXXXX who is under 18 years of age , and the XXXXXXXXXX directs that the XXXXXXXXXX be contributed to his/her RRSP, will the XXXXXXXXXX be entitled to a deduction for that contribution?
Position:
A. No
B. No
C. Yes, subject to limitations in subsections 146(5) and 146(5.1)
D. Yes, subject to limitations in 146(5)
Reasons:
A. No source.
B. Evidence that XXXXXXXXXX arise from XXXXXXXXXX in the plan, not from employment. Non-employees can also receive XXXXXXXXXX .
C. XXXXXXXXXX designates XXXXXXXXXX who is entitled to XXXXXXXXXX arising from XXXXXXXXXX directs the XXXXXXXXXX on where to transfer the XXXXXXXXXX amounts so that it may be considered that the XXXXXXXXXX "paid" the amount as required in the definition of "premium" in subsection 146(1).
D. XXXXXXXXXX directs the XXXXXXXXXX on where to transfer the XXXXXXXXXX so that it may be considered that the XXXXXXXXXX "paid" the amount as required in the definition of "premium" in subsection 146(1).
XXXXXXXXXX 2000-001768
Attention: XXXXXXXXXX
XXXXXXXXXX, 2000
Dear XXXXXXXXXX:
Re: XXXXXXXXXX
XXXXXXXXX
This is in reply to your letter of XXXXXXXXXX in which you ask for an advance income tax ruling on behalf of the above entities. We also acknowledge several telephone calls (XXXXXXXXXX), and various correspondence received.
DEFINITIONS
For purposes of this letter, the relevant definitions are the following:
(a) "Act" means the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1. as amended to the date hereof.
(b) XXXXXXXXXX.
(c) XXXXXXXXXX.
(d) "Company" means XXXXXXXXXX.
(e) XXXXXXXXXX.
(f) XXXXXXXXXX.
(g) "Investor" means XXXXXXXXXX or an affiliate.
(h) "LP" means XXXXXXXXXX.
(i) XXXXXXXXXX.
(j) XXXXXXXXXX.
(k) "Qualified Investment" means any investment which would be considered to be a "qualified investment" as that term is defined in subsection 146(1) of the Act.
(l) "Plan" means the XXXXXXXXXX plan as outlined in this ruling.
(m) XXXXXXXXXX.
(n) XXXXXXXXXX.
(o) "RRSP" means a trust governed by a "registered retirement savings plan" as defined in subsection 146(1) of the Act.
(p) XXXXXXXXXX.
(q) XXXXXXXXXX.
To the best of your knowledge and that of the Company, none of the issues involved in this ruling request are:
a) in an earlier return of the Company or a related person,
b) being considered by any tax services office or tax centre in connection with a previously filed tax return of the Company or a related person,
c) the subject matter of any notice of objection filed pursuant to the Act by the Company or a related person, or
d) before the courts.
These issues have been the subject of a ruling previously issued by this directorate on XXXXXXXXXX. The Company did not, at that time, proceed with the transactions contemplated XXXXXXXXXX.
FACTS
Our understanding of the facts and proposed Plan is as follows:
1. The Company is a taxable Canadian corporation and a private corporation (as those terms are defined in subsection 89(1) of the Act) incorporated on XXXXXXXXXX in the Province of XXXXXXXXXX. Its registered office is situated at XXXXXXXXXX. The business number is XXXXXXXXXX. The Company files its tax returns at the XXXXXXXXXX Tax Centre, and is served by the XXXXXXXXXX Tax Services Office.
2. The Company is the general partner in the LP, which was formed on XXXXXXXXXX. The issuance XXXXXXXXXX was disclosed by registering as a tax shelter (XXXXXXXXXX) and the annual filing of partnership information.
3. XXXXXXXXXX.
4. LP has entered into a funding arrangement with Investor.
PROPOSED PLAN
5. Investor will provide approximately $XXXXXXXXXX to permit LP to XXXXXXXXXX on a XXXXXXXXXX basis through XXXXXXXXXX.
6. XXXXXXXXXX.
7. XXXXXXXXXX. All such services will be provided at commercial rates; there will not be any non-arm's-length dealings between the parties.
8. An affiliate of the Investor may also become a XXXXXXXXXX.
9. XXXXXXXXXX will implement and operate the Plan. XXXXXXXXXX will enter into contracts with XXXXXXXXXX whereby the XXXXXXXXXX will agree to pay XXXXXXXXXX to the XXXXXXXXXX in accordance with the XXXXXXXXXX will not charge fees to XXXXXXXXXX for the XXXXXXXXXX, nor will XXXXXXXXXX impose conditions on XXXXXXXXXX that would be more onerous than those imposed on XXXXXXXXXX.
10. XXXXXXXXXX, and may offer XXXXXXXXXX where the XXXXXXXXXX or XXXXXXXXXX purchases various XXXXXXXXXX and no XXXXXXXXXX or enhanced XXXXXXXXXX under the Plan that is XXXXXXXXXX.
11. XXXXXXXXXX will pay an XXXXXXXXXX fee of $XXXXXXXXXX to XXXXXXXXXX and will receive a XXXXXXXXXX.
12. XXXXXXXXXX will pay for their XXXXXXXXXX.
13. XXXXXXXXXX to an XXXXXXXXXX.
14. The XXXXXXXXXX and the XXXXXXXXXX. The XXXXXXXXXX will be the XXXXXXXXXX of the XXXXXXXXXX, and will not be entitled to XXXXXXXXXX.
15. Subject to 16 below, XXXXXXXXXX in the XXXXXXXXXX for a particular XXXXXXXXXX reaches $XXXXXXXXXX, the XXXXXXXXXX will instruct the XXXXXXXXXX to purchase a Qualified Investment XXXXXXXXXX. The XXXXXXXXXX will direct the XXXXXXXXXX contribute the Qualified Investment to an RRSP for himself/herself, to a non-registered account for himself/herself, or to an RRSP for his/her spouse.
16. If the XXXXXXXXXX is under 18 years of age at the time an amount is to be used to purchase a Qualified Investment, XXXXXXXXXX provides that the XXXXXXXXXX will arrange to purchase an XXXXXXXXXX, and the XXXXXXXXXX may choose to contribute the XXXXXXXXXX to an RRSP of which he/she is the annuitant.
17. XXXXXXXXXX may be permitted to contribute XXXXXXXXXX in order to bring the XXXXXXXXXX.
18. There shall be an XXXXXXXXXX equal to XXXXXXXXXX passing through the XXXXXXXXXX during the previous XXXXXXXXXX months. XXXXXXXXXX If a XXXXXXXXXX ceases XXXXXXXXXX to be charged the $XXXXXXXXXX.
PURPOSES OF THE PROPOSED PLAN
The purposes of the proposed Plan are:
i) to provide XXXXXXXXXX an opportunity to receive XXXXXXXXXX and to have those XXXXXXXXXX to generate significant funds for retirement; and
ii) to provide XXXXXXXXXX with an opportunity to XXXXXXXXXX participation in the proposed Plan.
RULINGS GIVEN
Provided that the statement of facts and the description of the proposed Plan are correct and constitute a complete disclosure of all the relevant facts and terms of the proposed Plan, and that the proposed Plan is established in the manner described above, we rule as follows:
A. XXXXXXXXXX will not constitute income from a source for purposes of computing the income of the XXXXXXXXXX pursuant to section 3 of the Act.
B. Where a XXXXXXXXXX will not constitute a taxable benefit received or enjoyed by the XXXXXXXXXX in respect of, in the course of, or by virtue of employment within the meaning of paragraph 6(1)(a) of the Act.
C. Where the XXXXXXXXXX directs the XXXXXXXXXX to XXXXXXXXXX , and the XXXXXXXXXX directs that the Qualified Investment be contributed to an RRSP XXXXXXXXXX , the fair market value of the Qualified Investment will constitute a "premium" to the XXXXXXXXXX as that term is defined in subsection 146(1) of the Act, and will be deductible in computing the XXXXXXXXXX income for a taxation year subject to the limitations in subsection 146(5) or 146(5.1) of the Act.
D. Where the XXXXXXXXXX is XXXXXXXXXX at the time an XXXXXXXXXX under the Plan, and the XXXXXXXXXX directs that the XXXXXXXXXX be contributed to his/her RRSP, the fair market value of the XXXXXXXXXX will constitute a "premium" to the XXXXXXXXXX as that term is defined in subsection 146(1) of the Act, and will be deductible in computing the XXXXXXXXXX income for a taxation year subject to the limitations in subsection 146(5) of the Act.
The above advance income tax rulings are given subject to the limitations and qualifications set forth in Information Circular 70-6R3 dated December 30, 1996, issued by the Canada Customs and Revenue Agency (the "CCRA"), and are binding on the CCRA provided the proposed Plan is implemented on or before XXXXXXXXXX.
Nothing in this ruling should be construed as confirming any income tax consequences relating to:
(i) receipt of a XXXXXXXXXX when the XXXXXXXXXX;
(ii) XXXXXXXXXX where the XXXXXXXXXX is a corporation, partnership, trust or other entity;
(iii) income or gains earned on or from amounts XXXXXXXXXX;
(iv) taxation of the XXXXXXXXXX on income or losses arising from the XXXXXXXXXX held by or on behalf of XXXXXXXXXX who is under 18 years of age.
Yours truly,
Director
Financial Industries Division
Income Tax Rulings Directorate
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