Income Tax Severed Letters - 2000-06-09

Miscellaneous

15 May 2000 2000-0008210 F - ADMINISTRATEUR DE FACTO

Unedited CRA Tags
227.1(1)

Principales Questions:
L'Agence a-t-elle élaboré des critères qui permettraient aux contribuables de déterminer quand ils peuvent être considérés comme administrateurs de facto ?

Position Adoptée:
Non. Cependant, certains exemples où l'Agence pourrait considérer être un administrateur de facto sont donnés.

Ruling

17 March 2000 Ruling 2000-0009130 F - CONSTRUCTION BEROU INC.

Unedited CRA Tags
248(3)

Principales Questions: Quelle est la position de l'Agence dans l'affaire Construction Bérou Inc. (dossier A-249-96 en date du 15 novembre 1999 - Cour d'appel fédérale)?

Position Adoptée: Restreint le jugement de la Cour fédérale aux cas similaires pour les années d'imposition avant 1991. Pour les situations après 1990, la position est telle que stipulée dans les Nouvelles Techniques n. 5 du 28 juillet 1995 et expliquée dans la présente.

2000 Ruling 2000-0016683 - Reorg, 55(3)(b), additional transaction

Unedited CRA Tags
55(3)(b)

Principal Issues: additional transaction disclosed. capital dividend to be paid prorata to common shareholders of distributing corporation. no problems since assets distributed prorata to each shareholder.

Position:

Reasons:

2000 Ruling 2000-0019173 - STRUCTURAL SETTLEMENT

Unedited CRA Tags
12.2

Principal Issues:
An individual (the Claimant ) sustained personal injuries when XXXXXXXXXX was involved in an auto accident. The individual 's is a minor and the next friend (XXXXXXXXXX) commenced an action against XXXXXXXXXX, the owner of the other vehicle and the operator of the other vehicle who ran a red light. Pursuant to court settlement, the defendants' insurers (the other vehicle's owner insurance carrier) will agree to make periodic payments to the Claimant and if the Claimant dies within the guarantee period, to the Claimant's estate.

The issue is the income tax treatment of the periodic payments.

2000 Ruling 2000-0004183 - INTEREST EXPENSE CONSOLIDATION

Unedited CRA Tags
20(1)(c)

Principal Issues: Interest Deductibility

Position: OK

Reasons: Standard Ruling on interest consolidation/matching.

2000 Ruling 1999-0005513 - PUBLIC BODY PERFORM FUNCTION OF GOVT

Unedited CRA Tags
149(1)(c) 75(2) 12(1)(m)

Principal Issues: 1. Whether an Indian Band will be considered a public body performing a function of government in Canada and thus qualify for exemption under paragraph 149(1)(c) of the Income Tax Act.
2.. Whether 75(2) applies to attribute trust income to the First Nation.

Position: 1. Yes
2. Yes.

Reasons: 1.Reasons: (a) The Band has been involved in the negotiation of a settlement agreement with Canada and will continue to be involved in the administration and implementation of the settlement agreement.(b) The Band has entered into an arrangement with Canada to assume responsibility for the delivery of programs and services such as land management, social and economic development programs and capital infrastructure; and (c) The Band has passed bylaws under sections 81 and 83 of the Indian Act in XXXXXXXXXX.
2. The First Nation is entitled to receive funds from the government, and it will direct the government to place the funds into the trust. The First Nation will be the sole contributor, and the First Nation will be the sole beneficiary of the trust.

2000 Ruling 2000-0005513 - Mutual Fund - Reclassification of Units

Unedited CRA Tags
104(6) 104(13) 104(7.1) 245(2)

Principal Issues:
This ruling request involves certain mutual fund trusts in a particular family or group of mutual funds which propose to amend their trust agreements to: i) rename their existing units; ii) add two new series of units that will be available to investors who satisfy certain criteria; and iii) add reclassification features to each series of units which, in certain circumstances, will allow these units to be reclassified as another series of units of the same fund. The purpose of the proposed transactions is to permit the manager of the funds to more effectively market the funds to different segments of the investor market and to tailor the fees and expenses applicable to such segments by offering a separate series of units of each such fund. In this ruling, the principal issues are:

2000 Ruling 1999-0008543 - DSLP

Unedited CRA Tags
REG 6801(a)

Principal Issues:
Does plan meet 6801(a) [deferred salary leave plan] requirements?

Position:
Yes.

Reasons:
General review

2000 Ruling 1999-0009533 - QUALIFIED INVESTMENT FOR RRSP

Unedited CRA Tags
146 REG 4900(12)(a)

Principal Issues:
a) Whether all or substantially all of the fair market value of assets (which in this case consists substantially of cash) of a Canadian corporation is attributable to assets that are used principally in an active business for purposes of definition of "small business corporation" in subsection 248(1) of the Act and qualified investment described in paragraph 4900(12)(a) of the Regulations.
b) Whether an annuitant of an RRSP trust will be a "connected shareholder" as defined in subsection 4901(2) of the Regulations by virtue of subsection 4901(2.2) of the Regulations and each shareholder's "right of first refusal" in the unanimous shareholders' agreement.
c) If fractions of a share are qualified investments for purposes of paragraph 4900(12)(a) where the complete share would be qualified, how is the percentage ownership of shares calculated to determine if a particular RRSP trust and non-arm's-length persons hold 10% or more of the shares thereby causing the annuitant to be a "connected shareholder".
d) Does the phrase "owns, directly or indirectly" in the definition of "specified shareholder" contemplate a proportionate "look-through" of shares held through a company, shares of which are held as an arm's length investment?

Position:
a) Yes
b) No
c) A fractional interest in a share can be a qualified investment, and the fraction constitutes a percentage interest relative to the total shares of the corporation.
d) No

Reasons:
a) At the time immediately after acquisition by the RRSP based on the historical and projected use of cash which is supported by the described operations and the early stages of their business.
b) We have said in IT-419 that a "right of first refusal" does not confer a right to acquire a share, but rather an option to acquire a right. Subsection 4901(2.2) does not apply unless it is clear that the right of first refusal is being used to disguise a true 10% or greater ownership.
c) Definition of "share" in subsection 248(1) includes a fraction of a share and each fractional interest is valued on its own and is not viewed as ownership of an undivided whole.
d) Could find no previous interpretation of this issue, but concluded that the better view is, since the concept of "ownership" is stricter than the concept of "control" and there is no legislation similar to 256(1.2)(d), the proportionate look-through rule should not be applied.

2000 Ruling 2000-0009143 F - DEDUCTION POUR GAINS EN CAPITAL

Unedited CRA Tags
110.6(2) 110.6(8) 6205

Principales Questions:
Lors d'une cristallisation que deux actionnaires se proposent d'effectuer avec leurs actions ordinaires et certaines actions privilégiées de leur société, est-ce que le paragraphe 110.6(8) de la Loi s'appliquera pour refuser la déduction pour gains en capital à l'égard d'actions du capital-actions d'une société agricole familiale si la société n'a jamais versé de dividendes sur des actions prescrites et non prescrites qu'elle a émises?

Position Adoptée:
Non. Le paragraphe 110.6(8) de la Loi ne s'appliquera pas.

2000 Ruling 1999-0012793 - FOREIGN PROPERTY TAX

Unedited CRA Tags
PART XI 245(2)

Principal Issues: Will GAAR apply to a reorganization the primary purpose of which is to avoid the foreign content rules in Part XI?

Position: No.

Reasons: Not an abuse or misuse of the provisions of the Act read as a whole.

2000 Ruling 2000-0015753 - Article 13 - Canada-Netherlands Treaty

Unedited CRA Tags
art 13 116

Principal Issues:

Paragraph 4 of Article 13 of the Canada-Netherlands Treaty - resource property

Position:

Resource property comes within the exclusion for property in which the business of the company is carried on if the property is actively exploited or held for future exploitation. The exception applies on a look-through basis.

Reasons:

2000 Ruling 1999-0013983 - LOSS UTILIZATION

Unedited CRA Tags
20(1)(c) 245(2) 15(1)

Principal Issues:
1. Is property leasing property?
2. Is interest on loan used to repay loan used to pay a dividend deductible?
3. Does GAAR apply in respect of loss utilization arrangement?
4. Does 15(1) apply in respect of an interest free loan between sister corporations that is used to fund a loan to the parent?

Position:
1. No
2. Yes
3. No
4. No

Reasons:
1. BCO will XXXXXXXXXX. Position is similar to that of full-service boat charters vs. bare-boat charters.
2. Bank Loan is used to pay a dividend that will not exceed retained earnings thus interest on the Bank Loan would be deductible. 20(3) is, therefor, applicable to the refinancing of the Bank Loan.
3. Although the only reasons for entering into the transactions are to obtain tax benefits, since they are undertaken to utilize losses within an affiliated group they are not considered to result in a misuse or abuse.
4. All of the corporations are resident in Canada thus there is no imputed benefit under 80.4. With respect to interest free loans, 15(1) is only applicable to the extent that 80.4 imputes a benefit.

Technical Interpretation - External

8 June 2000 External T.I. 1999-0006105 F - TRANSFERT DE BIENS A UN CONJOINT

Unedited CRA Tags
74.1(1) 74.5(1)

Principales Questions : est-ce que les règles d'attribution cessent lorsque le bien sujet auxdites règles est cédé en paiement du solde de prix de vente dû lors de la cession initiale qui a enclenché les règles d'attribution?

Position Adoptée : aucune.

6 June 2000 External T.I. 1999-0009815 - Accrued interest on Immigration on CSB

Unedited CRA Tags
12(1)(c) 128.1 248(28)

Principal Issues:
Whether interest received, or accrued interest receivable, on Canada Savings Bonds is fully taxable to a Canadian resident under paragraph 12(1)(c) of the Act in spite of the fact that the accrued interest relates to years throughout which the person is a non-resident person.

Position: yes

Reasons: Interest received or receivable by a Canadian resident is required to be included in income and is subject to Part I tax to the extent it has not been included in income in a prior year by virtue of paragraph 12(1)(c) of the Act.

5 June 2000 External T.I. 1999-0012305 - Payment by Discretionary Trust Benefit Minor

Unedited CRA Tags
104(24) 104(18)

Principal Issues: whether an amount deposited into a segregated trust account by a discretionary trust for the benefit of a minor beneficiary qualifies as an amount payable to that beneficiary

Position: question of fact, but likely not, based on the scenario as described

Reasons: 104(18) does not apply to a discretionary trust by reason of (c). In the scenario described, the direction that the payment be made into a separate subtrust would come from the terms of the discretionary trust and not from either the minor or the guardian of the minor's property; accordingly, the conditions in ITTN#11 would not be met and the amount would not be payable within the meaning of 104(24).

5 June 2000 External T.I. 1999-0012315 - Trust - Allocation of Gains

Unedited CRA Tags
104(21) 104(24) 104(13)

Principal Issues: Where the trustee of a trust has no right to encroach on the trust's capital for the benefit of the income beneficiary, and the capital beneficiary's interest in the trust is a residual interest, can realized taxable capital gains of the trust be allocated to the capital beneficiary and thus excluded from the trust's income? (The capital beneficiary is a charitable organization.)

Position: No.

Reasons: Trusts allocate "net taxable capital gains" pursuant to subsection 104(21), and any allocation requires that the amount must have been payable to the beneficiary under subsection 104(13) (subsection 104(14) and section 105 are irrelevant to this scenario). According to subsection 104(24), an amount is not payable unless it was paid in the year or the beneficiary was entitled in the year to enforce payment of the amount.

5 June 2000 External T.I. 2000-0026095 - Partner of LLP as Limited Partner

Unedited CRA Tags
40(3.14) 96(2.4)

Principal Issues: whether member of limited liability partnership is "limited partner"

Position: not if Act is amended as proposed

Reasons: proposed amendments to 40(3.14) and 96(2.4)

5 June 2000 External T.I. 2000-0010615 F - Developpement d'un equipement - RS&DE

Unedited CRA Tags
37 127(9)

Principales Questions:

Est-ce que les dépenses de sous-traitance, de main-d'œuvre et de matériel (dépense de nature courante) reliées aux activités de RS&DE dans le cadre du développement d'un équipement seraient des dépenses courantes aux fins de l'article 37 de la Loi et aux fins du crédit d'impôt à l'investissement ?

Position Adoptée:

2 June 2000 External T.I. 2000-0000765 - Foreign share-for-share exchange

Unedited CRA Tags
85.1(5) 85.1(6)

Principal Issues: Whether our administrative position contained in Interpretation Bulletin IT-450R will be extended to transactions that are subject to draft subsections 85.1(5) and (6).

Position: Yes.

Reasons: Consistency

1 June 2000 External T.I. 2000-0017375 - DSLP, 6 MONTH LEAVE

Unedited CRA Tags
6801(a)

Principal Issues: 1) Can a DSLP provide for a leave of absence of only six months? 2) Can a leave of absence be taken anytime in the final year of an acceptable plan?

Position: 1) Yes. 2) Yes if it commences immediately after deferrals cease.

Reasons: Both are allowed under subparagraph 6801(a)(i) of the Regulations.

1 June 2000 External T.I. 2000-0001065 - NOTE RECEIVABLE HELD ON DEATH

Unedited CRA Tags
70(5) 40(2)(e.1)

Principal Issues: Would a capital loss result on death if the fair market of a debt (note) receivable is less than the ACB of the note? Would 40(2)(e.1) deny the loss ?

Position: Yes, capital loss would result, however 40(2)(e.1) would not deny the loss

Reasons: The individual is deemed to have disposed of the capital property at fair market value immediately before death.

31 May 2000 External T.I. 2000-0004615 - PRINCIPAL RESIDENCE-NO DESIGN. MADE

Unedited CRA Tags
54 40(2)(b) 220(2.1)

Principal Issues: Statutory authority for par 13 of IT 120R4. Does a taxpayer who seeks to claim a principal residence at a point in time subsequent to the disposition of another otherwise eligible property precluded from doing so ?

Position: YES,

Reasons: Although no designation was made, the earlier return satisfying the principal residence exemption was used for those years at that time.

31 May 2000 External T.I. 2000-0009695 F - FRAIS MEDICAUX-PREPOSE A PLEIN TEMPS

Unedited CRA Tags
118.2

Principales Questions:

Le coût de certains soins peut-il constituer la rémunération d'un préposé à plein temps au sens de l'alinéa 118.2(2)b) LIR?

Position Adoptée:

29 May 2000 External T.I. 2000-0013205 - CHILD SUPPORT-PRE-MAY 1997 ORDER

Unedited CRA Tags
56(1)(b) 60(b) 56.1(4)

Principal Issues:

25 May 2000 External T.I. 2000-0021445 - Exemption from 55(2)

Unedited CRA Tags
55(3)(a) 55(2)

Principal Issues: Whether paragraph 55(3)(a) will apply to exempt the proposed transactions from the applicability of subsection 55(2).

Position: No.

Reasons: The proposed transactions do not meet the tests in paragraph 55(3)(a)

25 May 2000 External T.I. 2000-0006435 - SHARE OF CS OF A FAMILY FARM CORP.

Unedited CRA Tags
110.6(1)

Principal Issues: Whether more than 50% of the fair market value of the assets (or property) of a corporation is attributable to a particular type of asset (or property) used by that corporation principally in an active business (or in the course of carrying on the business of farming). The assets of the corporation are used by a partnership, of which the corporation is a partner, to carry on a farming business.

Position: The question is one of fact that can only be determined following an actual review. However, insofar as it concerns those assets of the corporation that are used by the partnership, of which the corporation is a partner, the corporation will be considered to have used these assets principally in the course of carrying on the business of farming in Canada if the partnership uses these assets principally in the course of carrying on the business of farming in Canada.

Reasons: It is our general view that assets or property used by a partnership, of which a corporation is a partner, in the course of carrying on a business will be considered to be used by the corporation in the course of carrying on that business.

24 May 2000 External T.I. 2000-0022495 - RPP DEATH BENEFIT

Unedited CRA Tags
PART XIII 212(1)(b)

Principal Issues: Where a member of an RPP names a non-resident beneficiary, will the payment of any benefit as a result of the death of the RPP member be subjected to taxes under Part XIII of the Act?

Position: Yes.

Reasons: Under paragraph 212(1)(h) of the Act, any payment out of an RPP to a non-resident will be subject to tax under Part XIII of the Act.

24 May 2000 External T.I. 2000-0023585 - RETIRING ALLOWANCE FOREIGN SERVICE

Unedited CRA Tags
212(1)(j.1)

Principal Issues: Whether certain portion of retiring allowance can be attributed specifically to services rendered while non-resident for purposes of 212(1)(j.1)((i).

Position: Question of fact and law.

Reasons: What portion of a retiring allowance can "reasonably be regarded as attributable to services rendered" while non-resident depends on the facts and terms of employment/termination.

24 May 2000 External T.I. 2000-0024905 - CLERGY RESIDENCE

Unedited CRA Tags
8(1)(c)

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 2000-002490

Attention: XXXXXXXXXX

May 24, 2000

XXXXXXXXXX,

23 May 2000 External T.I. 2000-0023575 - Estate - Loss Carryback

Unedited CRA Tags
104(23)(a) 164(6) 220(3.2)

Principal Issues: Whether an estate can retroactively change the period for which its accounts were made up, so as to take advantage of ss.164(6).

Position: No.

Reasons: Ss. 164(4) does not contemplate retroactive changes. Requests to change year-end are TSO responsibility -- follow IT-149R. Not a "fairness" issue.

23 May 2000 External T.I. 1999-0012915 - Testamentary Trust

Unedited CRA Tags
108(1) 70(6)

Principal Issues: Does the Act prohibit a surviving spouse from being the sole trustee of a testamentary trust created by the deceased spouse?

Position: No.

Reasons: The Act does not contain any restrictions as to the trustees for a testamentary trust.

19 May 2000 External T.I. 2000-0022335 - EMPLOYEE CONTRIB. TO A LEGAL FUND

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

Principal Issues: Whether annual dues to the "Mounted Police Member's Legal Fund" are deductible by employees under subparagraph 8(1)(i)(iv).

Position: No.

Reasons: In our view, the primary object of the Legal Fund is not to promote the improvement of the members' conditions of employment or work.

17 May 2000 External T.I. 2000-0024795 - MEDICAL-CHIROPRACTIC BED

Unedited CRA Tags
5700(m)

Principal Issues: Chiropractic bed-medical expenses

Position: A chiropractic bed would not qualify as a medical expense.

Reasons: Section 5700 of the Regulations only includes a "hospital bed."

17 May 2000 External T.I. 2000-0022015 - HOME OFFICE EXPENSES OF EMPLOYEE

Unedited CRA Tags
8(13)

Principal Issues: Can an employee (who is not a commission sales employee) deduct capital cost allowance on renovations made to his home to construct enclosed office space? Can an employee deduct a portion of mortgage interest, taxes and insurance in respect of office space in the home?

Position: In the case of all the above expenditures, no deduction is allowed.

Reasons: Deductions for home office expenses can be claimed under paragraph 8(1)(i) of the Act, subject to meeting the conditions in subsection 8(13). 8(1)(i) only allows deductions for supplies consumed. Paragraph 6 of IT-352R2 also specifically prohibits a deduction for those expenses. A reasonable portion of property taxes and insurance paid can only be claimed by commission sales employees entitled to claim expenses under paragraph 8(1)(f).

17 May 2000 External T.I. 2000-0024945 - ROYALTY AGREEMENT QUALIFIED INVESTMENT

Unedited CRA Tags
146(1)

Principal Issues: Would we revisit the comments provided in file 991350 regarding rights to royalties?

Position: No.

Reasons: The position in file 991350 was based on the limited information provided in the incoming letter and the author has not provided any additional information.

16 May 2000 External T.I. 2000-0024995 - MEDICAL EXPENSES-WHEEL CHAIR

Unedited CRA Tags
118.2(2)(i)

Principal Issues: Whether motorized wheelchair qualifies as medical expenses.

Position: Yes

Reasons: A wheelchair is listed as a device in 118.2(2)(i)

16 May 2000 External T.I. 2000-0022205 - Qualifying Environmental Trust

Unedited CRA Tags
20(1)(ss) 248(1)
a person assuming reclamation obligations must be liable to the Province (rather than only to be previous obligor) in order to be recognized

Principal Issues: Whether a parent corporation can assume the reclamation obligations of its wholly-owned subsidiary and meet the requirements of a "qualifying environmental trust" ("QET") in subsection 248(1) of the Act.

Position: Question of fact.

Reasons: Subsection 248(1) of the Act requires, amongst other things, that the QET must be maintained pursuant to a contract or pursuant to legislative requirements. Each situation would have to be reviewed on its facts including the relevant contract or the relevant legislation.

16 May 2000 External T.I. 2000-0009955 - FRAIS DE DEMENAGEMENT-ANALYSE PYRITE

Unedited CRA Tags
62(3) 6(1)

Principales Questions: Coût d'une inspection d'une résidence se qualifie t-il comme frais de déménagement aux fins de l'alinéa 62(3)e) LIR ?

Position Adoptée: oui

16 May 2000 External T.I. 2000-0005125 - INTEREST EXPENSE ATTRIBUTION

Unedited CRA Tags
20(1)(c) 74.1

Principal Issues:

1. Transferor spouse borrows funds to acquire shares. Shares transferred to spouse for no consideration. No 74.5(1) election. Is interest deductible?

2. Does 20.1 apply?

Position:

1. No

2. Depends

Reasons:

16 May 2000 External T.I. 2000-0011015 - WITHHOLDING TAX ON INDEX-LINKED INTEREST

Unedited CRA Tags
212(1)(b)(viii)((C)

Principal Issues: Whether interest computed by reference to foreign exchange rates or a stock exchange index would be exempt from withholding under paragraph 212(1)(b)(vii).

Position: General Comments.

Reasons: Question of fact depends on all relevant information pertaining to the situation.

15 May 2000 External T.I. 2000-0004995 - Tax Treatment Website Development Costs

Unedited CRA Tags
20(1)(a) 9(1)

Principal Issues: Tax treatment of website development costs

Position: Breakdown of components of the fees has to be done and classified depending upon their nature

Reasons: Position expressed in file 2000-001714 and 9818577 and analogy with an article published in tax notes

15 May 2000 External T.I. 1999-0013165 - Alter Ego Trusts

Unedited CRA Tags
73(1) 107(4) 104(4)

Principal Issues: General commentary on alter ego trusts.

Position: General comments provided.

Reasons: Draft legislation released in December, 1999, introduced the concept of an alter ego trust.

15 May 2000 External T.I. 2000-0005905 - SHIFT EXCHANGE OR PAYMENT FOR SERVICES

Unedited CRA Tags
3 8(2)

Principal Issues: Tax treatment of: 1. cash payment and payment in kind from one employee to another re shift worked for payor 2. Exchange of work shifts

Position: 1. Amount of cash or payment in kind received to be included in income 2. No tax consequence

Reasons: 1. Amount received for services provided 2. A straight exchange -

15 May 2000 External T.I. 2000-0001995 F - CONGE SANS SOLDE-REGIME DISTINCT

Unedited CRA Tags
6(1)f)

Principales Questions:

Est-ce que les prestations d'assurance pour l'invalidité de longue durée reçues par un employé qui était en congé sans solde lorsque l'invalidité est survenue devraient être incluses dans le calcul du revenu de l'employé ou est-ce qu'on devrait considérer que ces prestations ont été versées en vertu d'un régime distinct de celui auquel participent les autres employés et que l'employeur n'a pas contribué à ce régime?

Position Adoptée:

12 May 2000 External T.I. 2000-0021185 - NORTHERN TRAVEL

Unedited CRA Tags
110.7(1)(A)

Principal Issues: How many trips for other than to obtain medical services can be made and is it by individual or by family in regards to the Northern Travel Benefit.

Position: 2 per individual

Reasons: Finance technical notes 1991 and 110.7(3).

12 May 2000 External T.I. 1999-0012165 - Deductibility of Carrying Charges

Unedited CRA Tags
115(1)(a)(ii) 20(1)(c)

Principal Issues:

Whether carrying charges on funds borrowed to acquire an interest in a Canadian limited partnership by a non-resident would be deductible, specifically where, for the years in question, there was no income from the partnership.

Position:

It depends on a finding on whether the funds were borrowed for the purpose of earning income from a business or property and whether there as a reasonable expectation of profit from the partnership.

Reasons:

11 May 2000 External T.I. 2000-0007105 - Foreign Exploration Development Expense

Unedited CRA Tags
66(4)

Principal Issues: (a) Whether the CCRA's position as stated in Window On Canadian Tax under the heading of "Foreign Exploration and Development Expenses Could be Lost" (#1563) dated November, 1991 (the "1991 Letter") in respect a "deductible amount", would remain unchanged. (See our file #E9131130 dated November 21, 1991.) (b) Whether a recent proposed amendment to subsection 66(4) of the Act would have any impact on our views.

Position: (a) With respect to the issue of deductible amount, the CCRA's position in the 1991 Letter regarding foreign resource income would remain unchanged but the position regarding the 10% discretionary claim would be amended as described below effective on the date of this letter and thereafter. (b) The recent proposed amendment to subsection 66(4) of the Act as described below would have impact on this revised position effective for 1995 and subsequent taxation years, provided that this proposed change would be enacted into the Act. As a result, this further revised position would now be consistent with the CCRA's position in the 1991 Letter.

Reasons: (a) Given the jurisprudence in respect of the issue on "deductible" vs. "deducted" and the CCRA's comments in the Interpretation Bulletin IT-270R2 in respect of the issue of "amount not deductible" vs. "amount not claimed and deducted", for the first example in the 1991 Letter wherein the taxpayer could have claimed a 10% maximum deduction of $100 - he may claim an amount not exceeding 10%, but did not do so, it is our view that in determining the taxpayer's subsection 66(4) claim for 1992, the amount of 1991 FEDE which was not deductible in 1991 for the purpose of paragraph 66(4)(a) of the Act would be $900 instead of $1,000. As a result, the CCRA's position in the 1991 Letter in respect of the 10% discretionary claim would be amended accordingly effective on the date of this letter and thereafter. (b) Given that under the proposed subsection 66(4) of the Act a taxpayer "may deduct... such amount as the taxpayer claims... ", the better view is that this change would result in whatever amount claimed (i.e., not may be claimed) by the taxpayer under paragraph 66(4)(b)(i) of the Act in a taxation year would become deductible (i.e., may be deducted) by the taxpayer under subsection 66(4) of the Act for the taxation year. In other words, whatever amount not claimed under paragraph 66(4)(b)(i) of the Act would not be considered as deductible under subsection 66(4) of the Act. Accordingly, given this proposed change, in the first example in the 1991 Letter, the taxpayer could have claimed a 10% maximum deduction of $100 in Year 1 - he claims an amount not exceeding 10%, but did not claim anything. As a result, the amount that may be deducted in Year 1 would be the amount being claimed - nil. It is our view that in determining the taxpayer's subsection 66(4) claim for Year 2, the amount of Year 1 FEDE which was not deductible in Year 1 for the purpose of paragraph 66(4)(a) of the Act would be $1,000. This would now be consistent with the CCRA's position in the 1991 Letter and would be effective for 1995 and subsequent taxation years, provided this proposed change would be enacted into the Act.

11 May 2000 External T.I. 2000-0005025 - CROWN CORPORATIONS

Unedited CRA Tags
149(1)(d.3)

Principal Issues: Interpretation of the provisions of paragraph 149(1)(d.3) of the Act..

Position: General Comments.

Reasons: Question of fact and not enough information provided.

11 May 2000 External T.I. 1999-0012335 - Trust - Capital Gains and CDA

Unedited CRA Tags
104(21) 39(1) 89(1)

Principal Issues: Whether the non-taxable portion of a trust's capital gains can be added to a corporate beneficiary's CDA account where the trust allocates a portion of its net taxable capital gains to the beneficiary pursuant to subsection 104(21).

Position: No.

Reasons: As per E9524995 and questions 7 and 20 at the 1999 APFF conference. The beneficiary is deemed for purposes of sections 3 and 111 (except as they apply for purposes of section 110.6) to have a taxable capital gain, but the beneficiary is not deemed to have a capital gain and it cannot otherwise be determined that the beneficiary has a capital gain.

11 May 2000 External T.I. 2000-0009605 F - Démolition d'un immeuble

Unedited CRA Tags
13(21.2) 20(16) 40(2)g) 40(3.3)

Principales Questions:
1. Est-ce que la perte finale encourue lors de la démolition d'un immeuble est limitée en raison du paragraphe 1100(11) du Règlement ?

2. Lorsqu'une société détient un immeuble qui est démoli, est-ce que la perte finale est limitée en raison du fait que la société détient le terrain sur lequel l'immeuble était bâti ?

3. Est-ce que le paragraphe 40(2)g)(i) s'appliquerait relativement à la perte en capital sur un immeuble qui est démoli en raison du seul fait que le contribuable détient le terrain sur lequel l'immeuble était bâti ?

4. Lorsqu'une société détient un immeuble qui est démoli, est-ce que le paragraphe 40(3.4) de la Loi s'applique relativement à la perte en capital sur l'immeuble uniquement en raison du fait que la société détient le terrain sur lequel l'immeuble était bâti.

Position Adoptée:
1. Non
2. Non
3. Non
4. Non

10 May 2000 External T.I. 2000-0005475 - PRIVATE FOUNDATION LIMITED PARTNER

Unedited CRA Tags
149.1(4)

Principal Issues: Whether a foundation would be considered to be carrying on a business if it becomes a limited partner in a partnership.

Position: Yes

Reasons: A partnership is defined in common law as the relationship between persons carrying on business in common with a view to profit.

9 May 2000 External T.I. 2000-0020445 - Website Costs

Unedited CRA Tags
20(1)(a)

Principal Issues: how are costs of developing a web site to be treated

Position: component parts ie : costs of software, hardware and misc, expenses

Reasons: web site development encompasses several different inputs.

9 May 2000 External T.I. 2000-0020685 - DONATIONS BY ARTISTS

Unedited CRA Tags
118.1(7) 118.1(7.1) 10(6)

Principal Issues:
What are the income tax implications when an artist donates a work of art from his inventory?

Position:
Provided general comments on subsections 10(6), 118.1(7) and (7.1).

Reasons: Legislation.

Conference

17 March 2000 APFF Roundtable Q. 11, 2000-0008260 F - DEDUCTION POUR PLACEMENTS

Unedited CRA Tags
181.2(4)(b) 181.2(4)(c)

Principales Questions:
Il y a t il une déduction pour placements dans le cas d'un solde de prix de vente et frais payés d'avance aux fins du calcul de l'impôt des grandes sociétés?

Position Adoptée:
Solde de prix de vente - Question de fait. On doit déterminer le caractère juridique véritable de la transaction. En général, n'a pas le caractère d'un prêt ou d'une avance au sens de 181.2(4)b). Peut aussi être une dette décrite à 181.2(4)c) si constaté par une obligation, un effet, un mortgage, une hypothèque ou un titre semblable d'une autre société, sauf une institution financière.

Technical Interpretation - Internal

24 May 2000 Internal T.I. 2000-0017677 F - PENSION ALIMENTAIRE

Unedited CRA Tags
56.1(4)

Principales Questions :

Application de la définition du terme «pension alimentaire» à des faits particuliers.

Position Adoptée :

11 May 2000 Internal T.I. 2000-0008270 F - Perte finale disposition bâtiment

Unedited CRA Tags
13(21.1)

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.

TABLE RONDE 2000 - CGA (QUÉBEC)

Question 12

Application de l'alinéa 13(21.1)b) L.I.R.

11 May 2000 Internal T.I. 2000-0019097 F - RAP RETRAIT EN JANVIER ANNEE SUIVANTE

Unedited CRA Tags
146.01(2)(d) 146.01(2)(f)

Principales Questions: Comment interpréter l'alinéa 146.01(2)d) de la Loi.

Position Adoptée: La demande de retrait supplémentaire n'a pas à être faite avant la fin de l'année d'imposition précédant l'année du retrait.

3 April 2000 Internal T.I. 2000-0006067 - PREPAID GRAIN STORAGE

Unedited CRA Tags
14(5)

Principal Issues: Whether the prepaid fees paid under a grain storage license agreement is ECE, prepaid rent, or something else. As described in clause XXXXXXXXXX of the Agreement, the producer does not acquire any ownership rights in the grain facility, but simply acquires a right in perpetuity to store up to XXXXXXXXXX bushels of grain per unit.

Position: It is our opinion that the $XXXXXXXXXX payment, per unit, made by the producer will be considered ECE for purposes of section 14 of the Act.

Reasons: The fees are not paid for rent but are for a right in perpetuity. Since it is not for a limited period it cannot qualify class 14 depreciable property.

Ministerial Letter

30 May 2000 Ministerial Letter 2000-0025178 - REASONABLE EXPECTATION OF PROFIT

Unedited CRA Tags
248(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.

May 30, 2000

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your letter of April 27, 2000, regarding the possible issuance of an interpretation bulletin on the reasonable expectation of profit test as it relates to the horse racing industry.

29 May 2000 Ministerial Letter 2000-0023778 - Taxable Canadian Property of a Trust

Unedited CRA Tags
104

Principal Issues: reports of loss of tax revenue on the emigration of a trust or on the distribution of property to a non-resident beneficiary

Position: referred to draft legislation which proposes to ensure that all persons, including trusts, who leave Canada or transfer property from Canada, will realize a deemed disposition at the time of departure (with exceptions for Canadian real estate and Canadian business property which is taxed when sold)

Reasons: House of Commons Standing committee report of Set 18, 1996; draft legislation on migration dated Dec 17, 1999

16 May 2000 Ministerial Letter 2000-0018828 F - FRAIS JURIDIQUES ET PENSION ALIMENTAIRE

Unedited CRA Tags
18(1)(a)

Principales Questions:
Est-ce que les frais juridiques déboursés à l'égard d'une pension alimentaire sont déductibles pour :
a) le payeur
b) le bénéficiaire

Position Adoptée:

15 May 2000 Ministerial Letter 2000-0018858 - MECHANICS TOOLS EMPLOYMENT DEDUCTION

Unedited CRA Tags
8(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.

May 15, 2000

XXXXXXXXXX

Dear XXXXXXXXXX:

4 May 2000 Ministerial Letter 2000-0016908 - INDIAN TAXATION-BUSINESS INCOME

Unedited CRA Tags
81(1)(a)

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.

May 4, 2000

XXXXXXXXXX

Dear XXXXXXXXXX:

28 April 2000 Ministerial Letter 1999-0005038 - INDIAN BUSINESS INCOME

Unedited CRA Tags
81(1)(a)

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.

April 28, 2000

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your letter of September 9, 1999, concerning the taxation of Treaty Indians. As you know, on November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (CCRA).

28 April 2000 Ministerial Letter 2000-0011888 - Public Trustee Fees

Unedited CRA Tags
9

Principal Issues: whether the public trustee fees paid to administer the estate of an incompetent are deductible

Position: no

Reasons: while such fees are necessary, they are not incurred to earn income from business or property and there is no other provision, including medical expense tax credit, that permits the deduction of such fees

25 April 2000 Ministerial Letter 1999-0005618 - INDIAN TAXATION

Unedited CRA Tags
81(1)(a)

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.

April 25, 2000

XXXXXXXXXX

Dear XXXXXXXXXX:

20 April 2000 Ministerial Letter 2000-0011718 - RESTRICTED FARM LOSSES

Unedited CRA Tags
31

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.

April 20, 2000

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your letter of February 14, 2000, on behalf of the XXXXXXXXXX, concerning their proposal to amend the Income Tax Act with respect to the taxation of horse racing.

17 April 2000 Ministerial Letter 1999-0014548 - Residency determination or status

Unedited CRA Tags
2 250(1)

Principal Issues: How to determine a person's residency status.

Position: A person's residency status is based solely on facts for that person. (i.e. question of fact).

Reasons: A person should file form NR73 for a residency determination.

30 March 2000 Ministerial Letter 2000-0010998 - Bare Trust

Unedited CRA Tags
54

Principal Issues: 1. Does the 21 year rule apply to a commercial trust? 2. Is the trust entitled to a rollover if it transfers its assets to a bare trust?

Position: 1. no 2. A transfer to a bare trust does not result in a disposition so that no gain or loss is reported as a result of the transfer.

Reasons: 1. (g) of the def'n of trust in 108(1) 2. (e) of the def'n of disposition in 54 - also covered by proposed changes to 104(1) and (f) of the proposed def'n of disposition in 248(1)

15 March 2000 Ministerial Letter 2000-0005628 - AUTOMOBILE STANDBY CHARGE

Unedited CRA Tags
6(2)

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.

March 15, 2000

XXXXXXXXXX

Dear XXXXXXXXXX:

10 March 2000 Ministerial Letter 2000-0001868 - TAGS-CPP ELIGIBILITY

Unedited CRA Tags
56(1)(vi)

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.

March 10, 2000

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your letter of October 19, 1999, concerning the eligibility of former Atlantic Groundfish Strategy recipients for Canada Pension Plan (CPP) disability benefits.