Income Tax Severed Letters - 2000-04-14


22 March 2000 Miscellaneous 2000-0010036 - RCA CONTRIBUTIONS

Unedited CRA Tags
8(1)((m.2) 207.6 207.7

Principal Issues:
follow-up to our file CCM File 7-993326, (CS-CIMS Folder 4537, ID 1999-001524)
1. Can funds be transferred between RCAs as a consequence of a marriage breakdown?
2. Can an employee contribution to an RCA be treated as a refundable overpayment of taxes if it is not deductible under paragraph 8(1)(m.2)?

1. Yes but the consequences may not be as expected.
2. No.

1. The taxability of the amounts to the employee may continue under the provisions of the Act.
2. Non-deductibility of the contributions will not result in an overpayment of any taxes.

21 March 2000 Miscellaneous 2000-0010186 - EMPLOYEE BENEFIT PLAN

Unedited CRA Tags

Principal Issues: Is a particular arrangement an employee benefit plan or an employee trust? Question is whether or not withholding of tax is required on a payment to a beneficiary.

Position: Arrangement is an employee benefit plan.

Reasons: There is nothing in the trust document to indicate that the arrangement is an SDA or an RCA. Since the trust was created in XXXXXXXXXX and did not elect to be an employee trust in its return of income for its XXXXXXXXXX taxation year, it cannot now elect to be an employee trust (paragraph (c) of the definition of "employee trust" in 248(1)).

14 March 2000 Miscellaneous 2000*0008965 - RCMP DISABILITY PENSION

Unedited CRA Tags

Principal Issues: 1) Will a pension payment under the Royal Canadian Mounted Police Superannuation Act ("RCMPSA") in respect of an injury, disability or death be exempt from tax? 2) Has the Agency changed its position in respect of the determination of the amount of pension that relates to the injury, disability or death?

Position: 1) The portion related to the disability is exempt. 2) No

Reasons: 1) The disability portion of pension under section 32 of the RCMPSA amount is not taxable under 81(1)(i) of the Act. 2) The Agency will accept the amount determined under the RCMPSA.

8 March 2000 Miscellaneous 2000-0011176 - FISCAL PERIOD

Unedited CRA Tags
249.1 152(4) Reg. 600(b.1)

Principal Issues: Prior to 1995, a taxpayer carried on a business that had a fiscal period that did not coincide with the calendar year. The taxpayer did not elect to keep the off-calendar year fiscal period but continued to report the business income using the pre-1995 fiscal period. Since 1995 is statute barred, we are asked to respond to some possible solutions.

Position: Barring fraud, misrepresentation, etc., we cannot open the 1995 taxation to include the stub period (from after the end of the usual fiscal period to December 31, 1995) in the taxpayer's 1995 income.
The taxpayer can not now elect to keep an off-calendar fiscal period.

Reasons: The 1995 taxation year will normally now be beyond the "normal reassessment period" of three years and there seems to be no basis in subsection 152(4) of the Income Tax Act for going beyond the three years.
Paragraph 600(b.1) of the Income Tax Regulations permitted a late election providing the request was made on or before January 31, 1998. The paragraph has since been revoked.

March 8, 2000

18 January 2000 Miscellaneous 9932456 F - MOT PAYABLE BIEN MEUBLE LÉGUÉ UNIVERSEL

Unedited CRA Tags
104(24) 152(4.2) 164(1.5)

Principales Questions: Lorsqu'un bien meuble est légué à un légataire universel, à partir de quel moment peut-on considérer que les revenus générés par ce bien sont payables à ce légataire au sens du paragraphe 104(24) de la Loi?

Position Adoptée: Lorsqu'une succession est régi par les dispositions du CcBC et qu'un testament ne crée pas de fiducie au sens du CcBc, les revenus générés par des biens meubles légués à un légataire résiduaire universel seront considérés être devenus payables à ce légataire qu'à partir du moment où l'administration de la succession sera terminée.

30 December 1999 Miscellaneous 9930716 - EMPLOYEE AUTOMOBILE PURCHASE PLAN

Unedited CRA Tags

Principal Issues:
1. Whether a employee vehicle purchase plan which offers discounts to employees are considered taxable benefits?
2. Whether a $XXXXXXXXXX gas allowance is considered a taxable benefit?
3. Whether employee rebate programs would be considered taxable benefits?


1. No.
2. Yes.
3. Yes.

1. The vehicle discount programs would be comparable to discounts described it paragraph 27 of IT-470R (Consolidated) to be non-taxable benefits.

20 December 1999 Miscellaneous 9932686 - SOCIAL ASSISTANCE PAYMENTS

Unedited CRA Tags
56(1)(u) 81(1)(h)

Principal Issues: Under the Child in the Home of a Relative Program of BC, payments are made to a caregiver who is also a "relative" of the child. The payments are income or assistance tested with respect to the child and not the caregiver.
Issue (1) Should the T5007 slips be made in the name of the child or in the name of the caregiver?
Issue (2) Is there authority to require T5007 slips for CIHR payments if they are exempt from taxation by virtue of ITA 81(1)(h)?

Issue (1) T5007 slips made in the name of the recipient of the CIHR payments.
Issue (2). Yes.

Issue (1) The slips are made in the name of the caregiver who receives the CIHR payments. Reg. 233(1) requires slips for payments described in ITA 56(1)(u). Both ITA 56(1)(u) and ITA 81(1)(h) are worded with reference to the recipient of the social assistance payments.
Issue (2) Reg. 233(1) requires slips for payments described in ITA 56(1)(u), meaning that there is no requirement that the payments be included in income under that paragraph but simply that they meet the description in it.


28 March 2000 Ruling 2000-0014403 - PERSONAL INJURY DAMAGES

Unedited CRA Tags
3 5 56(1)(a)(ii)

Principal Issues:


Unedited CRA Tags

Principal Issues: Whether RPP can be registered permitting past-service contributions.

Position: Cannot rule.

Reasons: Both a registrations matter and a question of fact and completed transaction (employment status in past).

2000 Ruling 2000-0004173 - LOSS UTILIZATION XXXXXXXXXX.

Unedited CRA Tags

Principal Issues: Transfer of deductions from sub to parent

Position: OK

Reasons: Previously provided in similar situations

2000 Ruling 1999-0011713 F - Transfert d'actions à fondation privée

Unedited CRA Tags
129(1.2) 245 69(11)

Principal Issues: (1) Est-ce que le paragraphe 129(1.2) est applicable?
(2) Est-ce que le par 69(11) est applicable?

Position: (1) Non (2) Non

Reasons: (1) Aucun des principaux objets de l'auteur du transfert ne vise à permettre à la société d'obtenir un RTD. (2) Les principaux objets de la série d'opérations ne visent pas à profiter de l'exemption d'impôt de la fondation privée.

2000 Ruling 2000-0007563 - SDA VESTING OF BONUS

Unedited CRA Tags

Principal Issues:
Will proposed amendments to an arrangement adversely affect rulings that were previously obtained with respect to the plan?


The proposed amendments do not have any effect on the rulings previously issued.

2000 Ruling 1999-0014773 F - APPLICATION DE LA LOI

Unedited CRA Tags

Principales Questions:
Est-ce que le paragraphe 110.6(8) de la Loi s'appliquera lors de la disposition par les contribuables de leurs actions pour refuser la déduction pour gain en capital à l'égard d'actions admissibles de petite entreprise si la société n'a pas versé de dividendes sur une catégorie d'actions non prescrites qu'elle a émises ?

Position Adoptée:
Nous n'appliquerons pas le paragraphe 110.6(8) de la Loi dans la situation présentée.

2000 Ruling 2000-0010713 - AMENDMENT TO RULIN - XXXXXXXXXX

Unedited CRA Tags

Principal Issues: Minor amendments to ruling 2000 - 000417

Position: OK

Reasons: Typos only

2000 Ruling 9911433 - QLP XXXXXXXXXX

Unedited CRA Tags
REG 5000(7)

Principal Issues: 1) Will the fact that a general partner has the right to catch-up earnings after the limited partners are paid an initial return and before the balance of the profits is allocated to the limited partners result in the partnership not being a qualified limited partnership? 2) Will the fact that the general partner may be a limited partnership established under the laws of the XXXXXXXXXX cause a problem?

Position: 1) No. 2) No

Reasons: 1) We have accepted that this catch-up does not affect 5000(7) because it is considered an allocation of profits that satisfies (b) of the definition of "qualified limited partnership". 2) There is nothing in the laws explicitly requiring the general partner to be established in Canada.

2000 Ruling 1999-0010733 - XXXXXXXXXX ITR - SUBSECTION 18(4)

Unedited CRA Tags
18(4) 245(2) 18(5)

Principal Issues: Whether subsections 18(4) and 245(2) apply to the partners' level where a partnership borrows money from a specified non-resident

Position: Based on facts of each case. In this case, no.

Reasons: In this case had the loan were made to the corporate partners, the conditions specified in paragraphs 18(4)(a) and (b) would have met such that the deduction of the interest paid in respect of the loan would not be denied

2000 Ruling 1999-0010743 - PARAGRAPH 85(1)(B)

Unedited CRA Tags
85(1)(b) 97(2) 20(1)(c)

Principal Issues: Whether paragraph 85(1)(b) will apply to a transfer of a property with liabilities in excess of cost amount where the excess is assumed by the transferee in consideration for the transfer by the transferor of cash in the amount of the excess.

Position: no.

Reasons: The cash amount transferred by the transferor to the transferee is consideration for the transferee to assume the excess liabilities of the transferor.

1999 Ruling 9932153 - MINOR AMENDMENTS TO RULING

Unedited CRA Tags

Principal Issues: Minor Amendments to Ruling

Position: OK

Reasons: Minor Amendments - ACO should be CCO and
CCO should be ACO in the ruling.

1999 Ruling 9909753 F - PAPILLON

Unedited CRA Tags

Principal Issues: Voir énoncé des principales questions



1999 Ruling 9927673 F - PAPILLON

Unedited CRA Tags

Principal Issues: Aucune nouvelle question



1999 Ruling 9927933 F - LICENCES

Unedited CRA Tags
69(1) 125.1 245

Principal Issues: Pas de nouvelles questions.




Unedited CRA Tags
97(2) 98(5) 103(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.




Dear Sirs:

Advance Income Tax Ruling and Advance GST/HST Ruling

1999 Ruling 9925233 - EMPLOYEE BONUS PLAN

Unedited CRA Tags
9 248(1)

Principal Issues:
1. Is the Employee Bonus Plan a Salary Deferral Arrrangement?
2. How is the income to be reported from the subsequent investment plan?

1. No
2. Section 9

1. Amounts paid within three years.
2. Similar to income from a derivatives product


Unedited CRA Tags


Position: OK


Technical Interpretation - External

6 April 2000 External T.I. 2000-0008465 - NON-RESIDENT CONTRIBUTIONS TO RRSP

Unedited CRA Tags

Principal Issues: Can an individual with RRSP contribution room who becomes a non-resident contribute to his or her RRSP or to a spousal RRSP after becoming a non-resident?

Position: Yes.

Reasons: There is nothing in the Act to prevent a non-resident from contributing to his or her RRSP.

6 April 2000 External T.I. 2000-0002865 - SETTLEMENT FOR LOST WAGES & GENERAL DAMAGES

Unedited CRA Tags

Principal Issues: Income tax treatment of amounts received out of settlement with employer in respect of lost wages and general damages.

Position: Special damages, such as those received for lost (unearned) wages or employee benefits, are taxable as employment income under subsection 5(1) or paragraph 6(1)(a) if the employee retains his or her employment or is reinstated, or as a retiring allowance under subparagraph 56(1)(a)(ii) if the employee loses his or her office or employment. When a loss of employment involves a human rights violation and is settled out of court, a reasonable amount in respect of general damages can be excluded from income.

Reasons: Based on position in paragraph 9 of IT-337R3.

6 April 2000 External T.I. 2000-0009395 - SHARES OF CORPORATION QUALIFIED INVESTMENT

Unedited CRA Tags
REG 4900(12)

Principal Issues: Will shares of a corporation that do not trade on a prescribed stock exchange be a qualified investment for an RRSP?

Position: Question of fact.

Reasons: Shares will only qualify if the corporation is a public corporation or if the shares qualify under 4900(6) or (12) of the Regulations.

6 April 2000 External T.I. 2000-0009515 F - Choix 1103(1) et Immeubles locatifs

Unedited CRA Tags
Reg 1103(1)

Principal Issues: Une société qui possède uniquement des immeubles locatifs peut-elle faire un choix en vertu du paragraphe 1103(1) du Règlement?

Position: Généralement oui

Reasons: Paragraphe 7 des Bulletins d'interprétation IT-177R2 et IT-350R et le paragraphe 8 du Bulletin d'interprétation IT-73R5

5 April 2000 External T.I. 2000-0001355 - Negative ACB Partner Interest Amalga

Unedited CRA Tags
40(3.1) 87(2)(e.1) 100(2.1)

Principal Issues:

Would there be a rollover of the negative adjusted cost base of a partnership interest acquired on amalgamation ?


The amalgamation, in and of itself, would not result in a realization of, or an income inclusion in respect of, any negative adjusted cost base of such predecessor corporation in respect of its interest in the partnership.

In the situation described, the grandfathering provisions of subsection 40(3.1) would no longer apply.


5 April 2000 External T.I. 1999-0014375 - 15(1) Benefit, Amalgamation

Unedited CRA Tags
15(1) 87(1)

Principal Issues: requested confirmation that Q32(b) reply at 1992 Round Table would apply. Determined that only general comments should be provided since the letter referred to a treaty exemption so our position may not be intended to apply in cross-border situations.



5 April 2000 External T.I. 1999-0008695 - Corporate Continuance

Unedited CRA Tags
250(5.1) 250(4)

Principal Issues: Corporate continuance - qualification as a Canadian corporation

Position: Corporation continued into Canada after 1992 will qualify as a Canadian corporation

Reasons: Corporation will be deemed to be incorporated in and resident in Canada

5 April 2000 External T.I. 2000-0003095 - PARTITION OF PROPERTY

Unedited CRA Tags
248(20) 248(21)

Principal Issues:
(1) Farm land is held by two brothers as tenants in common. The land is to be split so that one brother will own half the land outright while the other brother will own the other half outright. Can this be done without attracting any capital gains?
(2) Instead of owning the property outright, can putting each respective brother's spouse as joint tenant of the land be deemed to have happened some twenty years ago at the commencement of the farming business?

(1) Yes or at least a portion of the potential capital gain.
(2) No.

(1) Partition of property pursuant to subsections 248(20) and (21).
(2) There is no provision that would permit such a retroactive effect.

5 April 2000 External T.I. 2000-0003495 - EMPLOYER-PAID EDUCATIONAL COSTS

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

Principal Issues: Would educational costs paid by a company for a shareholder/employee be a) deductible to the corporation and b) taxable to the individual?

Position: The answer depends on whether or not subsection 15(1) of the Act is applicable.

Reasons: In situations where subsection 15(1) of the Act applies, the corporation would not be entitled to a deduction and the cost of the training would be included in the individual's income pursuant to subsection 15(1). In situations where subsection 15(1) does not apply, the education costs will generally be deductible provided they are reasonable. The guidelines provides in Technical News #13 should be used to determine whether the individual would receive a taxable benefit pursuant to paragraph 6(1)(a) of the Act. The employer will have to determine the taxation of educational costs on a case by case basis.

5 April 2000 External T.I. 1999-0004235 F - PERTE AU TITRE D'UN PLACEMENT D'ENTREPRISE

Unedited CRA Tags
39(1)c) 39(12)

Principales Questions:
Est-il possible de rencontrer le critère énoncé à la division 39(1)c)(iv)(A) de la Loi dans divers scénarios pour qu'un particulier soit en mesure de réclamer une PTPE.

Position Adoptée:
Oui pour les scénarios #1,2 et 3
Aucune réponse pour les scénarios #4 et 5

4 April 2000 External T.I. 1999-0014645 - ADJUSTED COST BASIS

Unedited CRA Tags
148(9) 20(1)(e.2)

Principal Issues: Is the "adjusted cost basis" of a life insurance policy reduced by the amount of the premiums payable which may be deducted pursuant to paragraph 20(1)(e.2)?

Position: Not per se but...

Reasons: The "adjusted cost basis" is reduced by the net cost of pure insurance.

4 April 2000 External T.I. 1999-0015935 - REINSURANCE

Unedited CRA Tags
138(3)(a)(i) 138(12) REG 1408(1) REG 1401

Principal Issues: Should a reinsurer which has reinsured pre-1996 life insurance policies compute its policy reserves using the rules for pre-1996 life insurance policies?

Position: Yes

Reasons: The insurer uses the rules for the pre-1996 life insurance policies to compute its policy reserves. The reinsurer should use the same rules.

4 April 2000 External T.I. 2000-0009095 - MOVING EXPENSES

Unedited CRA Tags
62(1) 248(1)

Principal Issues: If taxpayer waits nearly 8 years to move to a location because of extending circumstances, can he still claim the moving expenses?

Position: Question of fact but probably not.

Reasons: The eligible relocation must occur to enable the taxpayer to be employed at a new work location.

4 April 2000 External T.I. 2000-0005455 - DEDUCT. EMPLOY. BUSINESS EXPENSES

Unedited CRA Tags
18(1)(a) 18(1)(b)

Principal Issues: 1. Employee, deduction of clothing, travel expenses
2. Self-employed, deduction of clothing, travel expenses

Position: 1. Employee cannot claim travel expenses from home to office nor clothing expenses.
2. Self-employed cannot claim travel expenses if home not base of business operations; cannot claim regular clothing expenses but can claim cca in respect of uniform (Class 12) and clothing and costumes (Class 8) of Schedule II of IT Regulations.

Reasons: 1. Considered personal and living expenses.
2. Considered personal and living expenses except for clothing that come under Class 12 and Class 8 of the IT Regulations.

4 April 2000 External T.I. 1999-0014135 - TRANSFER OF CAPITAL PROPERTY

Unedited CRA Tags
73(1) 69(1) 74.1 74.2

Principal Issues: If spouses transfer their security portfolios (stocks and mutual funds) from individual ownership to joint tenants with rights of survivorship to reduce probate fees is there a deemed disposition and do the attribution rules apply ?

Position: YES 50% is disposed to the other spouse, and attribution rules may apply.

Reasons: 73(1) applies. Capital gains are deferred unless election is made to report proceeds of disposition.

3 April 2000 External T.I. 2000-0016425 - Absolute Assignment - Interest in Partnership

Unedited CRA Tags

Principal Issues:
Tax consequences for the assignee resulting from the absolute assignment of an interest in a partnership.

The position to be taken is under review.

3 April 2000 External T.I. 2000-0008775 - CORPORATE DEBT, QUALIFIED INVEST.

Unedited CRA Tags
146(1) 4900(1)

Principal Issues: Are investment certificates issued by an incorporated charitable organization qualified investments for an RRSP?

Position: No.

Reasons: A debt of the corporation does not satisfy any of the investments described in the definition if "qualified investment" in subsection 146(1) of the Act or section 4900 of the Regulations.

3 April 2000 External T.I. 2000-0016855 - INDIAN BAND AS A CDN. MUNICIPALITY

Unedited CRA Tags
149(1)(C) 149(1)(D.5)

Principal Issues: Whether we can rule on whether a band owned corporation is exempt from tax.

Position: No.

Reasons: Insufficient documentation provided to determine if the band meets the criteria to be considered a municipality as set out in Otineka. No proposed transactions were given on which we could rule.

3 April 2000 External T.I. 2000-0005755 - REPORTING OF CONSTRUCT. ACTIVITIES

Unedited CRA Tags
221 238

Principal Issues: A company installs plumbing (including drains) and carries out related repair services. The issue is whether these activities are considered to be "construction" for the purposes of the definition of that term in section 238 of draft Income Tax Regulations.

Position: The activities fall within the definition of construction

Reasons: The definition of construction is very broad - it is defined to include, but is not limited to activities related to the erection, installation, alteration, modification, repair, improvement, demolition, dismantling, or removal of any part of a building, structure, surface or subsurface construction.

3 April 2000 External T.I. 2000-0013135 - WHETHER LOAN ORDINARY LENDER'S BUSINESS

Unedited CRA Tags
15(2) 15(2.3)

Principal Issues: Whether the exemption in subsection 15(2.3), which provides, inter alia, that subsection 15(2) does not apply to a "loan made in the ordinary course of the lender's ordinary business of lending money," will apply in a situation in which a company ceases or reduces its active business, and, as a result, it will have money to invest. It is considering lending money to an individual who does not deal at arm's length with it.

Position: This question requires a factual determination, but the likely answer is no.

Reasons: Based on jurisprudence and our position in IT442R.

31 March 2000 External T.I. 2000-0016465 - DONATION-ECOLOGICAL PROPERTY

Unedited CRA Tags

Principal Issues: Whether Covenant provided to municipality in exchange for right to subdivide is a gift.

Position: Provide details by way of ruling request. Concern raised.

Reasons: Proposed transaction. Meaning of gift.

31 March 2000 External T.I. 1999-0008715 F - PROPOSE DE LA LOI - XXXXXXXXXX

Unedited CRA Tags

Principales Questions:

1. Est-ce que le montant inclus dans le revenu d'un enfant mineur par l'effet du paragraphe 104(13) de la Loi relativement à une fiducie associée de la société de personnes serait assujetti aux dispositions de l'article 120.4 proposé en considérant que ladite société de personnes peut tirer un revenu via son entente de gestion, avec une personne liée à l'enfant, de biens ou services aux clients de cette personne liée.

Position Adoptée:

30 March 2000 External T.I. 2000-0017175 - REMOTE WORK SITE

Unedited CRA Tags

Principal Issues: Whether the XXXXXXXXXX location qualifies as a remote work site for purposes of subsection 6(6) of the Act.

Position: Yes.

Reasons: The issue was examined in 1989 by the Source Deductions area, after extended discussions between the taxpayer and Mr. Wilson (source deductions) it was concluded that the location would meet the basic tests to qualify as a remote work site. The main reason for this decision was the complete lack of access to the location. There are no roads leading to the location.

29 March 2000 External T.I. 1999-0004275 - INDIANS-EMPLOYEE LEASING

Unedited CRA Tags

Principal Issues:
1.Has the 1999 adverse decision by the FCTD in the Shilling case resulted in any change to the Indian Act Exemption for Employment Income Guidelines?
2.If affairs are arranged to reflect the situation in Shilling, what happens if employers do not withhold tax and the employees do not follow the Guidelines?

1. No changes to the Guidelines.
2. Interest charges and penalties may be assessed.

1.Since the judgement in Shilling has been appealed by CCRA, no changes will be made to the Guidelines until the issues are resolved by the courts.
2.Interest charges and penalties may be applicable if the obligations are not respected. Employees who fail to file, file late or fail to include all income taxable may be assessed or reassessed and may be liable to interest and penalties. Employees that file in accordance with the Guidelines, may file objections to protect themselves if the outcome of the appeal of the Shilling case is favourable to them.

29 March 2000 External T.I. 2000-0008315 - INTEREST

Unedited CRA Tags

Principal Issues: Deductibility of interest on funds borrowed to make an interest free loan.

Position: Not deductible

Reasons: The recipient of the interest free loan has no independent source of income to fund dividends on the lender's shares thus the lender cannot be borrowing for the purpose of earning net income.

29 March 2000 External T.I. 2000-0004315 F - Revenu gagné dans une province

Unedited CRA Tags
Reg 402(5)

Principales Questions:

1. Est-ce que les intérêts d'obligations ou d'hypothèques et les dividendes d'actions de capital social sont inclus dans le calcul des recettes brutes en vertu du paragraphe 402(5) du Règlement s'ils sont des biens utilisés relativement à la principale activité commerciale de la société ?

2. Est-ce que la société exerce une seule activité ?

Position Adoptée:

29 March 2000 External T.I. 2000-0004565 - COST AMOUNT OF FOREIGN PROPERTY IN AN RRSP

Unedited CRA Tags
206 248

Principal Issues: What is the cost amount for Part XI tax (foreign property limits)

Position: Definition of cost amount and ACB as per the ITA and general comments.

Reasons: ITA

29 March 2000 External T.I. 2000-0010065 - medical expense tax credit

Unedited CRA Tags

Principal Issues: Whether an "Ultramatic Bed" is a hospital bed for the purposes of paragraph 118.2(2)(m) of the Income Tax Act (the "Act") and Regulation 5700 (h)

Position: No

Reasons: A hospital bed is considered to refer to the type of bed normally found in and used by patients in a hospital.

29 March 2000 External T.I. 2000-0002575 - SHAREHOLDER BENEFIT-CORP. OWNED LIFE INS.

Unedited CRA Tags

Principal Issues:
1) The tax implications of a term insurance rider of $XXXXXXXXXX , naming the sole shareholder's spouse and daughter as beneficiaries, on a corporate-owned last-to-die life insurance policy insuring the lives of the shareholder and the shareholder's wife, in which the corporation would be the beneficiary.
2) Whether a taxpayer can have two spouses for tax purposes.
3) The tax implications where a corporation assigns its universal life insurance policy as security for a loan to be taken out by the shareholder

1) It would depend on the actual insurance contract. However, it is likely a taxable shareholder benefit.
2) Yes.
3) Shareholder benefit.

1) Based on the facts.
2) According to the extended meaning of "spouse" in subsection 252(4) of the Act, a spouse of a taxpayer includes a person of the opposite sex who has been cohabiting in a conjugal relationship with the taxpayer for at least 12 months or who is a parent of a child of whom the taxpayer is also a parent. Accordingly, if a taxpayer is not divorced from a spouse to whom he or she was legally married, and the taxpayer is now living with another person, he or she may have two spouses for income tax purposes,
3) Position taken in Question 41 of the 1991 Revenue Canada Round Table.

29 March 2000 External T.I. 1999-0006985 - DONATION RECEIPT

Unedited CRA Tags
118.1 110.1

Principal Issues: Is the assignment by a graphic designer to a charitable organization of certain rights to a logo a gift?

Position: This is a question of fact.

Reasons: For example, it may be a contract for services

29 March 2000 External T.I. 2000-0016595 - TRANSFERS BETWEEN REGISTERED PLANS

Unedited CRA Tags
147.3(9) 147.3(4) REG 8517(2) REG 8503(1)

Principal Issues: Whether a reimbursement from the Consolidated Revenue Fund (CRF) of contributions (plus interest) made by a judge, in the event of retirement before becoming eligible to receive an annuity under the Judges Act, can be transferred to an RRSP?

Position: Yes

Reasons: 147.3(4) of the ITA and subsections 50(1) through (3) of the Judges Act. Subsection 50(3) of the Judges Act deems the amounts contributed pursuant to subsections 50(1) and (2) of the Judges Act (judges contribute a percentage of their salary to the CRF) to be contributed to or under a registered pension plan for the purposes of the ITA.

29 March 2000 External T.I. 2000-0004985 - RESEARCH GRANTS AND AWARDS

Unedited CRA Tags

Principal Issues: Whether awards are income from employment under 5(1) or as research grants under 56(1)(o).

Position: The awards are income from employment.

Reasons: In our previous opinion regarding these awards given in our letter of December 20, 1999 we said the awards were employment income. Since then, the Centre changed the wording of the award agreements but the changes do not substantively alter the nature of the employer/employee relationship between the Centre and the awardees. Our comments in our previous letter still apply. International section will reply regarding the taxation of non-resident recipients.

29 March 2000 External T.I. 2000-0012805 - REPLACEMENT PROPERTY LEASEHOLD INTEREST

Unedited CRA Tags

Principal Issues: Whether replacing a long-term lease for land (with a provincial government) for land for the purposes of gaining or producing income from farming qualifies for the replacement property rules in section 44.

Position: Question of fact. However, it is our general view that the replacement property rules in section 44 may apply when land is acquired to replace a leasehold interest in land for the purpose of carrying out the same or similar business.

Reasons: This is based on our understanding that a leasehold interest in land is an "interest ... in real property" pursuant to the definition of "former business property" in subsection 248(1) of the Act.

29 March 2000 External T.I. 2000-0003805 - SPECIAL WORKSITE

Unedited CRA Tags

Principal Issues: Treatment of special work site allowance in respect of completed and proposed transaction.

Position: .General comments only.

Reasons: Involves completed and proposed transactions.

28 March 2000 External T.I. 2000-0009555 - INTEREST DEDUCTION PRESCRIBED ANNUITY

Unedited CRA Tags

Principal Issues: Interest on funds borrowed to purchase a "Prescribed Annuity Contract"

Position: No

Reasons: PAC is not subject to the accrual rules in 12.2 - therefore, interest expense is denied by 12.2(1)(b)

28 March 2000 External T.I. 2000-0010055 - TRAVELLING ALLOW. FOR TRUCK DRIVER

Unedited CRA Tags

Principal Issues: Whether a travelling allowance based on an estimate of the average cost of room and board, to be paid by a company to an employed truck driver in respect of trips to Arizona and California, would be non-taxable.

Position: Whether an allowance is reasonable is a question of fact. However, it is likely non taxable.

Reasons: An allowance under subparagraph 6(1)(b)(vii) of the Act may generally be considered reasonable if it is based on an estimate of the average expense or travel cost that the employees will incur on an ongoing basis.

28 March 2000 External T.I. 2000-0010885 - INTEREST RATE BUY-DOWN RELOCATION

Unedited CRA Tags
6(23) 80.4(1.1)

Principal Issues: Does subsection 80.4(1.1) apply in an employer requested move?

Position: It depends.

Reasons: It is a determination of fact whether, given a particular set of circumstances, it would be reasonable to conclude that the loan or debt from a third party lender would not have been received or incurred but for the individual's office or employment, such that the deeming provision of subsection 80.4(1.1) would be applicable. The determination would take into account the degree of involvement of the individual's employer, such as whether the employer provides documentation to the lender to support the employee's loan application, guarantees the principal and/or interest, and pays the interest subsidy to the lender.

28 March 2000 External T.I. 2000-0007445 F - Fusion et paragraphe 13(5.1)

Unedited CRA Tags
13(5.1) 87

Principales Questions:

Est-ce que le paragraphe 13(5.1) s'applique lors de la fusion d'une société-mère qui détient un immeuble et une filiale qui détient une tenure à bail dans cet immeuble ?

Position Adoptée:

28 March 2000 External T.I. 2000-0016215 - CCRA

Unedited CRA Tags

Principal Issues:

27 March 2000 External T.I. 2000-0001465 - CAPITAL LOSSES

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

Principal Issues: Capital loss re unpaid loans in specific fact situation..

Position: Pursuant to subparagraph 40(2)(g)(ii) of the Act loss is nil.

Reasons: Loans were non interest bearing and no adequate consideration received.

27 March 2000 External T.I. 1999-0008965 - SMALL BUSINESS CORPORATION

Unedited CRA Tags

Principal Issues: Whether the shares of a particular corporation are shares in a small business corporation.

Position: It is a question of fact but in this case it is likely that the shares do not qualify.

Reasons: Each asset of a corporation must be looked at separately in determining that "all or substantially all of the fair market value of the attributable to assets that are used principally in an active business carried on primarily in Canada..." Land and each building or structure on the land are separate assets.

23 February 2000 External T.I. 1999-0005645 - qsbc shares

Unedited CRA Tags

Principal Issues: The taxpayer is a XXXXXXXXXX licenced in the province of British Columbia and has a professional corporation Dr. A. Inc. He is the sole shareholder of XXXXXXXXXX which owns and operates a farming business. XXXXXXXXXX

Will the shares of XXXXXXXXXX qualify as qualified small business corporation shares and will the taxpayer be eligible to claim the $500,000 capital gains exemption on the capital gains realized on the disposition of the shares? Can the taxpayer claim all of the capital gains exemption resulting from the shares of XXXXXXXXXX for the XXXXXXXXXX taxation year even though he will be receiving payments for the sale of the shares over XXXXXXXXXX years. If after the sale of shares of XXXXXXXXXX , the loans to XXXXXXXXXX are declared to be defunct by the investor, can the taxpayer and Dr. A Inc. claim allowable business investment losses?

Position: Question of fact. General comments given.

Reasons: See 9805845, 9521185, 9613885, 9513305, 9510015, 9225255, 9004363, 9819816, 9502255, 9522580, 9809947, 9640437, 9802347, 9529667, 9726496, 9317905,

17 January 2000 External T.I. 9911385 F - XXXXXXXXXX

Unedited CRA Tags

Principales Questions : déterminer si des frais payés pour suivre le cours de XXXXXXXXXX sont admissibles pour les fins du crédit d'impôt pour frais de scolarité.

Position Adoptée : aucune détermination possible; résumé de la politique de l'Agence.

17 January 2000 External T.I. 9914425 F - EXAMEN D'AGREMENT

Unedited CRA Tags

Principales Questions : déterminer si des frais d'examen d'agrément payés à XXXXXXXXXX en vue d'en devenir membre sont admissibles pour les fins du crédit d'impôt pour frais de scolarité.

Position Adoptée : question de fait.

Technical Interpretation - Internal

30 March 2000 Internal T.I. 2000-0005797 - PROVINCIAL ALLOCATION SALE OF MORTGAGES

Unedited CRA Tags
REG 404

Principal Issues:
Whether mortgages transfered by bank to trust were sold and therefore should be excluded from "loans" of the bank in determining provincial allocation under section 404 of the Regulations

Mortgages were sold to the trust and should not be included in "loans" of the bank for purposes of section 404 of the Regulations

Terms of the agreement transferring mortgage receivables from bank to trust

29 March 2000 Internal T.I. 2000-0006267 F - INSTIT. FINANCIERE VERITABLE CONTROLE

Unedited CRA Tags
248(1) 256(6.1) 142.2(1)

Principales Questions: Comment s'applique la notion de contrôle lorsqu'il s'agit d'établir si une société est une institution financière véritable ?

Position Adoptée: On peut considérer le contrôle ultime.

29 March 2000 Internal T.I. 2000-0011467 F - DATE D'EXECUTION-PENSION ALIMENTAIRE

Unedited CRA Tags

Principales Questions:
Est-ce qu'il y a une date d'exécution aux fins du paragraphe 56.1(4) de la L.I.R. à la suite d'un accord signé par les parties en date du XXXXXXXXXX et entériné en date du XXXXXXXXXX

Position Adoptée:

28 March 2000 Internal T.I. 2000-0009427 - REPAIRS-VEHICLE ACCIDENTS

Unedited CRA Tags

Principal Issues: A self-employed individual (the "Individual"), who was an insurance agent, was involved two accidents in XXXXXXXXXX . The respective costs of repairing the vehicle to its original condition in XXXXXXXXXX were $XXXXXXXXXX and $XXXXXXXXXX . The Individual did not claim any amount from his insurer. Can the individual deduct these costs?

Position: Yes

28 March 2000 Internal T.I. 1999-0006187 - TAX TREAT.-FISHING INCOME-STATUS INDIAN

Unedited CRA Tags

Principal Issues: 1. Tax treatment for business income of Status Indians;
2. Indian Act Exemption for Employment Income Guidelines

Position: 1. Insufficient information provided therefore general comments given. One significant factor that serves to connect business income to a location on reserve or off reserve is the location of the customers. Another significant connecting factor would be the location where the activities are carried out. If all of the Indian's business income was derived from customers located off reserve, and all of the work was done off reserve, the business income would generally not be exempt. If a portion of the business activities were carried on on reserve, a similar portion of the business income would generally be exempt.

2. As per the Guidelines

Reasons: N/A

7 March 2000 Internal T.I. 2000-0010177 - DSLP

Unedited CRA Tags
REG 6801(a)

Principal Issues: Will a deferred salary leave plan satisfy the conditions under paragraph 6801(a) of the Regulations?

Position: Yes

Reasons: All of the conditions are satisfied.

8 February 2000 Internal T.I. 1999-0007277 - PENSION INCOME ON MARRIAGE BREAKDOWN

Unedited CRA Tags

Principal Issues: Whether the payment of pension benefits pursuant to a marriage breakdown is taxable to the wife as pension income

Position: Yes, pursuant to the divorce agreement the husband assigned to the wife one-half of gross pension accumulated during the marriage and the wife is being paid directly out of the pension by the pension plan administrator

Reasons: The husband and wife are each taxed on their share of the pension income received pursuant to 56(1)(a)(i) based on the terms of the divorce agreement.

Ministerial Letter

8 March 2000 Ministerial Letter 2000-0011708 - SR&ED Tax Credit - General Info

Unedited CRA Tags

Principal Issues: Basic information on SRED tax credit

Position: Basic information provided

Reasons: For information only

7 March 2000 Ministerial Letter 2000-0003298 - REVENUS DE PLACEMENTS-INDIENS

Unedited CRA Tags

Principales Questions: Est-ce que les revenus de placements gagnés par des Indiens ne résidant pas sur une réserve sont exonérés d'impôt en vertu de l'alinéa 81(1)a) de la Loi?

Position Adoptée: Question de fait.

6 March 2000 Ministerial Letter 2000-0006188 F - COTISATION PROFESSIONNELLE

Unedited CRA Tags
8(1)i)(i) 8(2)

Principales Questions: Est-ce que les cotisations versées à des associations professionnelles à titre de chercheur scientifique sont déductibles en vertu du sous-alinéa 8(1)i)(i) de la Loi?

Position Adoptée: Commentaires généraux.

1 February 2000 Ministerial Letter 1999-0009658 - Foreign Spin-Offs

Unedited CRA Tags

Principal Issues: Taxation of Canadian shareholders on a spin-off by a foreign corporation.

Position: A share dividend received by Canadian shareholders is a taxable dividend.

Reasons: Amendments to the Income Tax Act would be necessary to permit Canadian residents to defer the taxation of a share dividend. The Department of Finance, which has responsibility for changes to the Act, has consistently rejected requests for such amendments.