Income Tax Severed Letters - 2000-03-31

Principales Questions:
1. Est-ce que l'exclusion des intérêts sur obligations et hypothèques que l'on retrouve au paragraphe 402(5) du Règlement s'applique à des intérêts sur d'autres genres de placements ?
2. Est-ce que les gains en capital sur disposition d'actions sont exclus des recettes brutes aux fins du paragraphe 402(3) du Règlement ?

Position Adoptée:
1. Non
2. Oui

Principal Issues:
How does the election in ss. 118.1(7) work?

Position:
Election can be made where there is a donation by an artist of a piece of art from the artists own inventory, where the fair market value of the property exceeds its cost. The donation must be made to a qualified donee.

Reasons:
The wording of the provision Act

Principal Issues: Whether proposed plan qualifies as a PHSP.

Position: General comments only based on limited information provided.

Reasons: IT-339R2 and IT-519R2.

Principal Issues: Whether standby charge should be applied to use of employer-provided vehicle between home and workplace if use forbidden after work hours or on week-ends.

Position: We have maintained the position that travel between home and workplace is of a personal nature and whether or not vehicle is used, once made available to the employee, subject to standby charge.

Reasons: The main purpose of the trips is considered to be personal.

Principal Issues:
Are the benefits under the Employment Insurance Act received by a status Indian, whose previous employment income was as an accounting officer from the XXXXXXXXXX , exempt from income taxation?

Position:
Question of fact - based on whether employment income was exempt under the Indian Act Exemption for Employment Income Guidelines.

Reasons:
EI benefits received by a status Indian are tax exempt if the insured employment income from which the EI benefits arise was tax exempt to the Indian. Guideline 2 or 4 may apply to exempt employment income from the College.

Principales Questions:

I. Est-ce qu'il y a une date de disposition selon l'alinéa 44(2)a)de la L.I.R., dans les situations suivantes :

a) une société reçoit des avances d'une société d'assurances sans avoir convenu d'un montant définitif pour un bien perdu ou volé
b) plusieurs biens dont un immeuble ont été détruits par un incendie. L'indemnité à recevoir pour cet immeuble a été convenu alors qu'aucune entente n'est intervenue à l'égard des autres biens.
c) la société d'assurance désire convenir d'une indemnité globale pour l'ensemble des biens. A l'heure actuelle, aucun règlement ne fut conclu à l'égard de chaque bien individuel.

II. Est-ce que des améliorations locatives peuvent être considérées comme des biens de remplacement à un immeuble ?

Position Adoptée:

Principal Issues: Whether standby charge should be applied to use of employer-provided vehicle between home and workplace if use forbidden after work hours or on week-ends. Vehicles brought home for reasons of security of government vehicles.

Position: We have maintained the position that travel between home and workplace is of a personal nature and whether or not vehicle is used, once made available to the employee, subject to standby charge.

Reasons: The main purpose of the trips is considered to be personal.

Principal Issues: Whether U.S. non-qualified deferred compensation plan will be a salary deferral arrangement

Position: Probably, but will always be a question of fact,

Reasons: The plan must have as one of its main purposes the deferral of tax under the Act.

Principal Issues: Could an exchangeable share (excluded under 206(1)(f)(i)) be a foreign property under 206(1)(d.1) of the definition of foreign property - clarification of position in file 2000-000388?

Position: Question of fact.

Reasons: The determination of whether the shares of a Canadian corporation derive their value from foreign property can only be determined after a review of all of the facts.

Principal Issues: Is compensation received by an individual from the province of Quebec as a result of having acquired Hepatitis C taxable?

Position: Question of fact but generally, no.

Reasons: As indicated in paragraph 2 of IT-365R2, Damages, Settlements and Similar Receipts, amounts received by a taxpayer as special or general damages for personal injury are excluded from income. If the compensation is in respect of special or general damages for personal injury as a result of you having acquired Hepatitis C through a blood transfusion, then, generally, it is our view that it would not be required to be included in income.

Principal Issues: Whether benefits paid by the Province of British Columbia under the Youth Agreement Program (the "Program") are taxable. This program is aimed at helping BC's most desperate youths, who often make up the "street kids" that live in our cities, and provides these youths with assistance for shelter costs (rent, hydro, telephone, etc.), support costs (food and incidental costs), education costs, and miscellaneous costs including security deposit, start-up costs (utility hook-ups, furnishings, etc.) and other one-time expenditures.

Position: In our view, the determination of whether or not payments made to youths under the Program are taxable will depend on the particular circumstances of each youth's case. However, based on our review of the Program, it is our view that most of the payments would be included as income as social assistance payments under paragraph 56(1)(u) of the Income Tax Act (the "Act") with an offsetting deduction pursuant to paragraph 110(1)(f) of the Act. However, where financial assistance is paid to a youth primarily to enable the youth to pursue an education, it may be that the amount will be taxable as a bursary under paragraph 56(1)(n) of the Act.

Reasons: The determination of the purpose of the payments is a question of fact.

Principal Issues: Can a child make a contribution to an RESP where the child's parent is the subscriber under the plan?

Position: If made on behalf of the subscriber, yes.

Reasons: A contribution may be made to an RESP by a subscriber or on behalf of a subscriber. However, it is our understanding that, in accordance with the legislation administered by HRDC, payments on behalf of a subscriber are not eligible for the new Canada Education Savings Grant.

Principal Issues: Whether ITA prevents deposit insurance corporation from requiring a credit union to use the capital it raised by issuing shares to RRSPs to offset the credit union's operating losses..

Position: No.

Reasons: Nothing in the Act on point.

Principal Issues: Is the normal reassessment period 3 years from the first assessment issued for that year or from the most recent assessment for that year

Position: Original Assessment is the first assessment issued for the year

Reasons: The normal reassessment period begins to run from the time that is the earlier of the day of mailing of an original assessment and the day of mailing of a notification that no tax is payable.

Principal Issues: Does each share in a particular corporation qualify as a "share of the capital stock of a family farm corporation" for purposes of subsection 73(4) of the Act or as a "share of the capital stock of a family farm corporation" for purposes of subsection 110.6(2) of the Act or as a "qualified small business corporation share" for purposes of subsection 110.6(2.1) of the Act.

Position: General comments.

Reasons: Depends on the facts of a particular situation.

Principal Issues: Tax treatment of premiums paid by an employer on group life insurance and group dependent life insurance.

Position: Premiums paid by an employer on "group term life insurance policy" are excluded from an employee's income .

A policy that covers both employees and dependents or dependents only would not be considered a "group term life insurance policy" Therefore, employer's premium payments on such a policy would be included in an employee's income.

Reasons: Subparagraph 6(1)(a)(i); Subsection 248(1); Subsection 6(4) and Part XXVII of the Regulation.

Principal Issues: The issue is whether an allowance paid to truckers for expenses such as meals and lodging is "reasonable" for the purposes of subparagraph 6(1)(b)(viii) of the Act. The quantum of the allowance is based on distance travelled. Subparagraph 6(1)(b)(vii) of the Act refers to reasonable allowances for travelling expenses received from the employer for travelling away from the Metropolitan area (assuming there is one), where the employer's establishment is located.)

Position: This issue is determined on a case-by-case basis. We have also provided general comments to the effect that it could be questionable whether an allowance for such expenses falls within subparagraph 6(1)(b)(vii) of the Act when the allowance is determined by distance travelled.

Reasons: See position.

Principal Issues: Various questions regarding the Indian Act Exemption for Employment Income Guidelines presented to employees of DIAND.

Position:

Reasons: