Income Tax Severed Letters - 2000-09-01

Ruling

10 August 2000 Ruling 2000-0030793 - UK PPS Pension Plan

Unedited CRA Tags
56(1)(a)(i)

Principal Issues: Will amounts paid from a UK Personal Pension Scheme which has only received employee contributions constitute superannuation or pension benefits for purposes of the Act?

Position: No.

Reasons: The UK PPS will not qualify as a superannuation or pension plan for purposes of the Act where there are only employee contributions.

2000 Ruling 2000-0003253 - Safe income

Unedited CRA Tags
55(2) 85(1)

Principal Issues:

1. Where a share ("exchanged share") is exchanged for shares ("new shares") at ACB to the transferor on a rollover basis, whether the full safe income on hand attributable to the exchanged shares owned by the transferor immediately before the exchange will flow through to the new shares received by the transferor on the exchange.

2. Whether each of the dividend recipients will have a different safe income determination time for purposes of subsection 55(2) when the proposed dividend payments to each of the dividend recipients is part of the same series that includes the proposed transactions.

Position:

1. Provided that the condition set out below is met, the answer is yes.

2. No.

Reasons:

2000 Ruling 2000-0016043 - Class 43.1 Energy Conservation Equipment

Unedited CRA Tags
Class 43.1

Principal Issues: (a) Whether the facility (including a new natural-gas-powered turbine generator and a new heat recovery steam generator) would be considered as one system that is used by the taxpayer to generate electrical energy, or both electrical and heat energy, using only fuel that is fossil fuel as contemplated at clause (c)(i)(A) of Class 43.1, and whether an existing steam turbine would be considered as the steam host, notwithstanding that the facility and steam turbine would be used in a combined cycle for generating electricity. (b) Whether the heat rate requirements of clause (c)(i)(B) of Class 43.1 would be satisfied in respect of the facility.

Position: (a) Yes (b) Yes

Reasons: (a) Based upon the opinion of Natural Resources Canada dated May 29, 2000, the facility would be considered as one system and the steam turbine would be considered as the steam host to take delivery of steam generated from the facility, notwithstanding that the facility and steam turbine would be used in a combined cycle for generating electricity. (b) Based upon the opinion of Natural Resources Canada dated May 29, 2000, the heat rate requirement of clause (c)(i)(B) of Class 43.1 would be met.

XXXXXXXXXX
XXXXXXXXXX 2000-001604
XXXXXXXXXX

2000 Ruling 2000-0024213 - UNFUNDED RETIREMENT PLAN

Unedited CRA Tags
248(1) 207.5

Principal Issues:
1. Is the amount something other than a pension due to short work history?
2 Is the amount something other than a pension because of the non-competition clause?
3. Will shareholder's guarantee result in funding of the plan.?

Position:
1. No.
2. No.
3. No.

Reasons:
1-3. These positions were developed in a ruling previously provided, in respect of an arrangement that is substantially the same as the proposed plan. (See E9711103) (The original plan was not implemented at that time).

2000 Ruling 2000-0024583 F - conditions prescites-fds commun placement

Unedited CRA Tags
regle4803(2)

Principales Questions:

Est-ce que les parts du Fonds réparties dans le public après le dépôt auprès de la XXXXXXXXXX de la notice d'offre à l'égard du Fonds sera admissible à la répartition dans le public aux fins de l'alinéa 4801a) du Règlement de l'impôt sur le revenu?

Position Adoptée:

2000 Ruling 2000-0027373 - Term Preferred Shares

Unedited CRA Tags
248(1)

Principal Issues: Amendment to facts and request for extension.

Position: Okay.

Reasons: Does not affect the ruling given in file # 992747.

1999 Ruling 992244A - CLASS 43.1, SYSTEM, COGENERATION

Unedited CRA Tags
class 43.1(c)(i)(B)

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 992244

Attention: XXXXXXXXXX

XXXXXXXXXX, 1999

Dear Sirs/Mesdames:

Re: XXXXXXXXXX Advance Income Tax Ruling

1999 Ruling 9927193 - FILM RULING

Unedited CRA Tags
96(2.2) 125.5 143.2 18.1

Principal Issues:

1. This file is a XXXXXXXXXX deal which is almost identical to the one XXXXXXXXXX . There was the question of whether for the purposes of section 18.1 of the Act, the XXXXXXXXXX expenditure XXXXXXXXXX would meet the requirements of the provision. XXXXXXXXXX .

2. The issues concern (a) the applicability of section 18.1 to restrict the deductibility of the XXXXXXXXXX expenses incurred by the XXXXXXXXXX Partnership (b) the applicability of the at-risk amount and the at-risk adjustment under subsections 96(2.2) and 143.2(2) (c) the deductibility of management expenses (d) the applicability of the limited-recourse provisions under section 143.2 regarding loans granted to Limited Partners for acquisition of their partnership interests and (e) put/call options in respect of the master limited partnership's interest in the XXXXXXXXXX partnership.

Position:

1. Similar rulings are provided to those given in Rulings 983109, 963096 and 983239.

2. Section 18.1 would not apply, if before the end of the taxation year in which the XXXXXXXXXX expenditures are made, income in respect of the XXXXXXXXXX exceeding XXXXXXXXXX % of such XXXXXXXXXX expenses is included in computing the XXXXXXXXXX Partnership's income for that year.

3. The Secondary Loans made by the bank to the Limited Partners are provided with full recourse to the Limited Partners and are interest bearing. For the purpose of subsection 143.2(7), a proviso has been added to the ruling in respect of the Secondary Loans to provide that the interest on such loans must be paid at least 60 days after the end of the year of the Limited Partners.

4. Similarly, a proviso was added to the ruling with regard to Put/Call Option available to the Partnership to dispose of its interest in the XXXXXXXXXX partnership.

Reasons:

1999 Ruling 9905543 - PAID-UP CAPITAL/ORDINARY COURSE OF BUSINESS

Unedited CRA Tags
84(5) 84(4.2) 51

Principal Issues: Transfer of Paid-Up Capital Between Classes of Shares;
Taxable Preferred Shares; Term Preferred; Ordinary Course of Business

Position: See Issue Sheet

Reasons: See Issue Sheet

Ministerial Correspondence

21 August 2000 Ministerial Correspondence 2000-0037604 - Meaning of "Gift" for Tax Purposes

Unedited CRA Tags
118.1 110.1

Principal Issues: Meaning of the word "gift" for income tax purposes

Position: Please see letter below

Reasons: Please see letter below

4 August 2000 Ministerial Correspondence 2000-0037424 F - DONS

Unedited CRA Tags
110.1

Position Adoptée:
Aucune. La question est présentement sous étude.
RAISON POUR POSITION ADOPTÉE: N/A

Technical Interpretation - External

31 August 2000 External T.I. 2000-0035675 F - INSTITUT DE RECHERCHE AGRÉÉ

Unedited CRA Tags
37(1)(a)(ii)

Principales Questions:
Demande d'agrément pour un centre hospitalier.

Position Adoptée:
Non.

31 August 2000 External T.I. 2000-0029475 - EQUIV. TO SPOUSE AND CHILD TAX CREDIT

Unedited CRA Tags
118(1)(b)

Principal Issues:
Following a marriage breakdown where parents have joint custody of the two children, can a parent who is paying non-deductible child support claim equivalent-to-spouse credit?

Position TAKEN:
Yes, in year of marriage breakdown, subject to subsection 118(5). No, in subsequent years.

Reasons:
Consistent with earlier opinions. Question of fact.

31 August 2000 External T.I. 2000-0030695 - Employer cash-out right, 7(1)(a)

Unedited CRA Tags
7(1)

Principal Issues: 1) Under an agreement an employer has the right to issue shares to an employee or pay cash equivalent to the share appreciation - is there an agreement to issue shares as contemplated by section 7? 2) Will section 7 of the Act apply where cash is paid by the employer under such an agreement? 3) Will section 7 apply to a cash payout on termination of the plan?

Position: 1) Yes. 2) No 3) Question of fact.

Reasons: 1) Agreement to issue shares exists . 2) The employer has not agreed to sell or issue securities so section 7 can't apply. 3) The terms of the agreement and the previous application of the Act to the agreement would determine whether section 7 would apply.

30 August 2000 External T.I. 2000-0032245 - Back-end load costs, 146(8)

Unedited CRA Tags
146(8)

Principal Issues: Where an RRSP incurs costs to generate cash to distribute to the RRSP annuitant, will these costs affect the amount to be included in the annuitant's income?

Position: No.

Reasons: The costs are costs of the RRSP trust and they are not included in the annuitant's income. The annuitant only has to include the amount received net of the trust's costs but before withholding taxes in his or her income.

30 August 2000 External T.I. 2000-0039865 - Financially dependent, refund of premiums

Unedited CRA Tags
146(1)

Principal Issues: Will a disabled adult child be considered financially dependent for purposes of the definition of "refund of premiums" in subsection 146(1) of the Act?

Position: Question of fact.

Reasons: If the daughter's income is less than $500 plus her basic personal exemption in the year immediately preceding her parent's death, we will consider her financially dependent at that time.

30 August 2000 External T.I. 2000-0026725 - Financial planning fees paid from RRSP

Unedited CRA Tags
146(8)

Principal Issues: Can financial planning fees be paid from an RRSP?

Position: No

Reasons: These are expenses of the annuitant, and will be a benefit taxable under 146(8).

30 August 2000 External T.I. 2000-0043335 - Swap and RRSP

Unedited CRA Tags
146(9)

Principal Issues: Whether a swap of securities between RRSP/RRIF and non-registered accounts is treated as a purchase and sale.

Position: Question of fact.

Reasons: Depends on intention of parties and whether equivalent consideration passes between parties.

28 August 2000 External T.I. 2000-0017335 - COMMENCEMENT OF BUSINESS OPERATIONS

Unedited CRA Tags
18(1)(a)

Principal Issues:

Taxpayer in start-up phase of a business venture with customer outside Canada. After extended negotiations and some work, the venture collapsed. Taxpayer wants to know if the costs can be claimed as business losses.

Position TAKEN:

Question of fact. Insufficient information provided to determine if the business had commenced business operations.

Reasons:

28 August 2000 External T.I. 2000-0012565 - NON ARM'S LENGHT OF DEPRECIABLE PROP.

Unedited CRA Tags
REG 1103(21) REG 1102(14)

Principal Issues:
Can both subsections 1102(14) and 1103(2d) of the Regulations apply to the same transaction?

Position: Yes

Reasons:
Wording of the subsections does not provide for exclusive application in NAL situations;
Timing provided for in both subsections

28 August 2000 External T.I. 2000-0016035 - REASONABLENESS OF EMPLOYEE BONUS

Unedited CRA Tags
125(7) 67

Principal Issues:

(1) Whether income arising from the disposition of eligible capital property constitutes active business income.
(2) Shareholder-Manager Bonus Policy. Does the Agency's general position as set out in answer to question 42 at the Revenue Canada Roundtable at the 1981 Canadian Tax Foundation Annual Conference apply where shareholders hold shares in operating company through 100% owned holding companies?

Position TAKEN:

(1) Yes.
(2) Generally, yes.

Reasons:

25 August 2000 External T.I. 2000-0029015 - SPOUSAL RRSP ATTRIBUTION

Unedited CRA Tags
146(8.3)

Principal Issues: Will amounts withdrawn from certain spousal RRSPs be subjected to subsection 146(8.3) of the Act where the recipient's spouse makes contributions to another spousal RRSP?

Position: Yes.

Reasons: Subsection 146(8.3) applies where there is a withdrawal from a spousal RRSP and the recipient's spouse made contributions to any spousal RRSP in the two immediately preceding taxation years.

25 August 2000 External T.I. 2000-0026245 - Foreign Mergers - 87(8.1)

Unedited CRA Tags
87(8.1)

Principal Issues: Foreign Mergers - 87(8.1) applicable.

Position: Yes.

Reasons: Technical requirements met.

25 August 2000 External T.I. 2000-0036045 - CROSS CURRENCY SWAPS

Unedited CRA Tags
9(1)

Principal Issues: Treatment of payments re: cross-currency swap

Position: Confirmed that replies to q. 60 at 1984 Round Table continue to reflect our position

Reasons: No change to position

25 August 2000 External T.I. 2000-0027465 - DSLP, RETIREMENT

Unedited CRA Tags
REG 6801(d)

Principal Issues: Where an employee participates in a 6801(a) deferred salary leave plan and decides to retire after taking his or her leave of absence, will the deferred amounts be included in income at the end of the leave period?

Position: No.

Reasons: The deferred amounts have to be included in the taxpayer's income as of the date that it is known that the taxpayer will not satisfy the condition to return to work under the DSLP.

25 August 2000 External T.I. 2000-0038315 - CDN CO. US STOCK EXCHANGE FOREIGN PROP.

Unedited CRA Tags
206(1)

Principal Issues: Will shares of a Canadian company (or options to acquire such shares) be foreign property because its shares trade on a U.S. stock exchange?

Position: No.

Reasons: Where the shares or options are traded will not affect whether the shares or options are foreign property for purposes of the Act.

25 August 2000 External T.I. 2000-0038385 - QUALIFIED INVEST. OVER THE COUNTER EX.

Unedited CRA Tags
146(1) REG 3201

Principal Issues: 1) Are shares acquired by an RRSP on an "Over-The-Counter" exchange qualified investments? 2) Will the penalty provisions be applied if shares are acquired on the basis that the trustee assumed that shares were qualified investments for the RRSP?

Position: 1) No. 2) Not under proposed relieving legislation.

Reasons: 1) The "Over-The-Counter" exchange is not a prescribed exchange for purposes of the Act and Regulations. 2) The Department of Finance has stated that it will recommend retroactive relief on a transitional basis.

24 August 2000 External T.I. 2000-0041255 - UNPAID AMOUNT; BONUS

Unedited CRA Tags
78(4)

Principal Issues: income tax treatment of unpaid amount

Position: expense reversed until actually paid

Reasons: 78(4)

23 August 2000 External T.I. 2000-0025835 - DEFERRED SALARY LEAVE PLAN

Unedited CRA Tags
REG 6801(a)

Principal Issues: Does a proposed deferred salary leave plan satisfy the requirements of Reg. 6801?

Position: Yes.

Reasons: Assumes suggested amendments adopted.

22 August 2000 External T.I. 2000-0028615 - CALL OPTION AND FOREIGN PROPERTY

Unedited CRA Tags
206(1)

Principal Issues: Would the fact that the option price under a call option is more than the fair market value of the share that may be acquired under the option result in the option ceasing to exist for purposes of the foreign property limitations?

Position: No.

Reasons: An option will exist until it expires. The fact that an option holder would not exercise his or her right under the option would not result in the option ceasing to exist.

22 August 2000 External T.I. 2000-0002885 - SALE/LEASEBACK TRANSACTION

Unedited CRA Tags
16.1 REGS 1100(2.21) 1102(14) 1103(2d)

Principal Issues:
The application of section 16.1 of the Act and subsection 1100(2.21), 1102(14), 1103(2d), 1102(14.1) and section 8200 of the Regulations in respect of property that was subject to sale/leaseback transaction.

Position:
Provided general comments and technical interpretations of the relevant provisions that would be more appropriate to a hypothetical situation.

Reasons:
Situation could be a completed transaction which should be addressed to the tax services office or may be a proposed transaction in which case an advance ruling should be requested.

22 August 2000 External T.I. 2000-0026125 - INVESTMENT COUNSEL FEES AND RRSP

Unedited CRA Tags
146(8) 146(1)

Principal Issues: Will the payment of investment counsel fees by an "insured RRSP" constitute a taxable benefit to the annuitant of the RRSP (146(8))?

Position: No.

Reasons: Consistent with our current position regarding other types of RRSPs.

18 August 2000 External T.I. 2000-0024435 - RETIRED ALLOWANCE AND RELATED EMPLOYERS

Unedited CRA Tags
60(j.1)

Principal Issues: Are two employers considered related for the purposes of paragraph 60(j.1) of the Act where a taxpayer's service with the two employers is recognized in determining his or her pension benefits under an RPP?

Position: Yes.

Reasons: The employers are related under subparagraph 60(j.1)(v) of the Act.

18 August 2000 External T.I. 2000-0027535 - UNFUNDED PENSION RETIRING ALLOWANCE

Unedited CRA Tags
60(j.1)

Principal Issues: 1) Can a CCPC pay its owners a retiring allowance on their retirement from the business? 2) Will the payment of a monthly amount for a 5 or 10 year period by the CCPC to the owners after their retirement jeopardize the payment of the retiring allowance?

Position: 1) Yes. 2) Question of Fact.

Reasons: 1) There is nothing in the Act preventing the payment of a retiring allowance to a non-arm's length recipient. 2) A review of all of the facts would be required in order to determine whether the periodic payments would jeopardize the payment of the retiring allowance.

17 August 2000 External T.I. 2000-0029745 F - Amortissement-Equipememnt lazer epilation

Unedited CRA Tags
20(1)(a) Reg 1104(2)

Principal Issues: Dans quelle catégorie d'amortissement peut-on inclure un appareil au laser pour épilation?

Position: Catégorie 8

Reasons: Bien que l'appareil constitue du matériel électronique (diode=électronique) il ne constitue pas du « matériel électronique universel de traitement de l'information » puisqu'entre autre, l'utilisateur de l'appareil ne peut pas modifier le ou les programmes informatiques sous-jacents au logiciel qui sont utilisés dans l'appareil. Voir également 9209825, 910300 5-9687 et 912310

17 August 2000 External T.I. 2000-0025025 F - BIENS ETRANGERS - FONDS MUTUELS DERIVES

Unedited CRA Tags
206(1) REG 5000(1)

Position Adoptée:
Commentaires généraux.

16 August 2000 External T.I. 2000-0031305 - Gross Resource Profits & Gas/Oil well equi,

Unedited CRA Tags
1104(2) 1204(1)(b) 1204(3) 248(1)

Principal Issues: (a) Whether a pipeline transporting the mixture of dehydrated and compressed natural gas and natural gas liquids to a natural gas processing plant (the second plant) for further processing would be considered as "gas or oil well equipment" within the meaning of the expression in subsection 1104(2) of the Regulations. (b) Whether the company's "gross resource profits" within the meaning of the expression in subsection 1204(1) of the Regulations would be determined by computing its income from operations up to and including the processing of the natural gas and natural gas liquids at the second plant.

Position: (a) Yes (b) Yes

Reasons: (a) Considering the ordinary meaning of the term "gas", it is our view that the pipeline may be considered as gas or oil well equipment by virtue of paragraph (b) of the definition of the expression under subsection 1104(2) of the Regulations. We note that in order to qualify as gas or oil well equipment, the pipeline cannot be used for purposes other than transmitting gas to a natural gas processing plant (e.g., shipping marketable natural gas to market).
(b) By analogy to the case of Texaco Exploration Company, it is our view that the operations of the company up to the inlet separator of the second plant may be considered as production of natural gas and related hydrocarbons for the purpose of subparagraph 1204(1)(b)(i) of the Regulations. By virtue of the definition of the expression "Canadian field processing" in subsection 248(1) of the Act, it is our view that the activities of the company in operating the second plant may be considered as Canadian field processing for the purpose of subparagraph 1204(1)(b)(vi) of the Regulations. As a result, the company's income from the operations up to and including the processing of the natural gas and natural gas liquids at the second plant may be considered as gross resource profits for the purpose of subsection 1204(1) of the Regulations, provided that subsection 1204(3) of the Regulations do not apply to the company.

16 August 2000 External T.I. 1999-0009615 - Paragraphs 95(2)(f) and (g)

Unedited CRA Tags
95(2)(f) 95(2)(g)

Principal Issues: Paragraph 95(2)(f) and (g) and foreign currency gains and losses.

Position: Several issues - please see letter

Reasons: Law.

15 August 2000 External T.I. 2000-0016445 - PARTNER ROLLOVER & QUAL. FARM PRO.

Unedited CRA Tags
97(2) 8591)(e.2) 110.6

Principal Issues:
1. What will the elected amount be in a 97(2) rollover scenario where an individual transfers class 8 assets to a partnership at an amount equal to the undepreciated capital cost of the assets, and the transferor does not deal at arm's length with the partnership?
2. Would the answer differ if the individual deals at arm's length with the partnership?
3. Would farm land that a son acquired from his father be eligible for the $500,000 capital gains exemption when the son sells the land?
4. Would farm land in respect of which a farmer filed a valid "election for property owned on February 22, 1994" (pursuant to subsection 110.6(19) of the Act) be eligible for the $500,000 capital gains exemption when the farmer sells the land?

Position:
1. If the fair market value of the transferred assets exceeds the greater of (i) the fair market value of the consideration received from the partnership, and (ii) the elected amount, then the elected amount will be increased to the extent it is reasonable to regard any part of the excess as a benefit that the taxpayer desired to have conferred on a related person.
2. Where the transfer to the partnership does not include any person related to the taxpayer, then paragraph 85(1)(e.2) of the Act would not apply to alter the elected amount. However, consideration may be given to the possible application of section 245 of the Act ["GAAR"],depending on the particular circumstances.
3. Yes.
4. Question of fact.

Reasons:
1. Application of subsection 97(2) and paragraph 85(1)(e.2) of the Act.
2. Paragraph 85(1)(e.2) of the Act requires a related person before it applies. In this general reply, we do not know why the transferor would transfer assets for less than fair market value consideration. There may be situations involving avoidance transactions where the application of GAAR would be considered in order to alter the elected amount.
3. The son's father farmed the land and certain criteria were met such that the son disposed of qualified farm property, as defined in subsection 110.6(1) of the Act.
4. In order to claim the capital gains deduction in subsection 110.6(2), amongst other things, the farmer would have to have disposed of qualified farm property, as defined in subsection 110.6(1) of the Act. In order to meet this definition either of subparagraph (vi) or (vii) must be met. It is a question of fact as to whether the farmer would meet the criteria in subparagraph (vi). Since the farmer elected under subsection 110.6(19), he is deemed to have last acquired the property after June 18, 1987. Therefore, the criteria in subparagraph (vii) are not met.

11 August 2000 External T.I. 2000-0036905 - ELIGIBLE AMOUNT INHERITANCE

Unedited CRA Tags
60.01

Principal Issues: Can amounts received from a deceased parent's U.S. individual retirement account be rolled over to the recipient's RRSP under subparagraph 60(j)(ii) of the Act?

Position: No.

Reasons: The amount received from a deceased parent's U.S. individual retirement account would not be an eligible amount within the meaning assigned by section 60.01 and, as such, is not eligible for the deduction under 60(j) of the Act.

11 August 2000 External T.I. 2000-0025635 - SPOUSAL RRSP

Unedited CRA Tags
146(8.3) 146(1)

Principal Issues: Can a spousal RRSP be transferred to a non-spousal RRSP where the spouses are living separate and apart by reason of a breakdown of their marriage and therefore the attribution rule in 146(8.3) would not be applicable?

Position: Yes.

Reasons: However, the transfer will change the status of the transferee "non-spousal" RRSP to that of a "spousal RRSP". An RRSP is a "spousal RRSP" when the RRSP has received a contribution from a taxpayer at a time that the taxpayer was the spouse of the annuitant of the RRSP (or the RRSP has received a payment from another RRSP or RRIF that was a spousal plan).

10 August 2000 External T.I. 2000-0039215 - MORTGAGE IN NON-RESIDENT'S RRSP

Unedited CRA Tags
146

Principal Issues: Any problem in non-resident using RRSP funds to provide a mortgage?

Position: Can't tell what the issue is (e.g., is it non-residency, the particular mortgage, lack of "earned income" to contribute to RRSP).

Reasons: Referred to IT-320R2 commentary on mortgages and directed to RPDivision if non-residency of annuitant was the issue.

10 August 2000 External T.I. 2000-0018195 - US 403(B) PLANS

Unedited CRA Tags
248(1) 6(1)(g) ART XVIII US Treaty

Principal Issues: 1. Are contributions to a U.S. 403(b) plan deductible for Canadian income tax purposes. 2. If not, is there double taxation if the contributions and accumulated income are used to purchase a deferred annuity upon the retirement of the contributor?

Position: 1. No. 2. No.

Reasons: 1. There is no deduction under the Income Tax Act("Act") for contributions by an employee to a non-resident pension plan (Note: This plan is not a 207.6(5) arrangement). 2. The plan is an employee benefit plan for Canadian tax purposes. Income therefrom excludes employee contributions (6(1)(g)(ii)).

10 August 2000 External T.I. 2000-0024275 - LIEU OF NOTICE, RETIRING ALLOWANCE

Unedited CRA Tags
248(1)

Principal Issues: Would a certain payment or part of the payment paid to laid-off employees qualify as a retiring allowance for purposes of the Act?

Position: Yes.

Reasons: The portion of the payment that exceeds the notice period required under the employment contract (including the Employment Standards Act of Ontario) would qualify as a retiring allowance for purposes of the Act.

10 August 2000 External T.I. 2000-0016875 - SAR DISPOSITION, SHARES

Unedited CRA Tags
7(1.1) 248(28)

Principal Issues: 1) Will the disposition of a SAR in exchange for shares result in the deferral of the recognition of the employment income from the SAR because of section 7 of the Act? 2) Will the provisions of subsection 248(28) apply where a share redemption results in the application of subsection 7(1.1) and subsection 84(3) of the Act?

Position: 1)Yes. 2) Yes.

Reasons: 1)The income inclusion from the exercising of a SAR right would normally be employment income in the year the right is exercised. Where the SAR right is exercised and the employer satisfies its obligations by issuing shares, the provisions of section 7 would apply. 2) Even though a document 5-5135 concluded that former subsection 4(4) would not apply to the share redemption, the different wording used in subsection 248(28) which replaced subsection 4(4) in the Act would support its application to avoid the deemed dividend when there is a stock option benefit resulting on the share redemption.

9 August 2000 External T.I. 2000-0038555 - Film Tax Credit

Unedited CRA Tags
125.4(4)

Principal Issues: Details requested re: previously issued ruling.

Position: General comments provided

Reasons: confidentiality

9 August 2000 External T.I. 2000-0029185 - ESTATE DESIGNATES CHARITY AS BENEFICIARY?

Unedited CRA Tags
118.1 70(5)

Principal Issues:
Whether a charitable organization which has been named as the sole residual beneficiary of an estate of a deceased taxpayer (the "Estate") could be treated by the Estate as an income beneficiary in regards to the periodic annuity payments under a fixed term annuity which continue after death and are received by the Estate for the period commencing at the date of death and ending when the guarantee period expires.

9 August 2000 External T.I. 2000-0016205 - PAYMENTS TO CONTRACTORS

Unedited CRA Tags
REG 238

Principal Issues:
Where a joint venture makes payments to contractors for construction work performed on behalf of the joint venture will the CCRA look to the primary business of the JV or to the members for purposes of reporting such payments?

Position: Look to members.

Reasons: JV not a separate entity for purposes of Act.

7 August 2000 External T.I. 1999-0007055 - CAPITAL OF A CHARITY

Unedited CRA Tags
149.1(1)

Principal Issues: We are asked whether following types of gifts would be viewed as "contributions or other payments of capital to the organization" for the purposes of that paragraph. The first type of gift is "contributions or loans" made to the organization by non-arms length individuals to enable the organization to meet its operating expenses. The second type of gift is a gift by will, or by beneficiary designation, of the guaranteed residual portion of an annuity that was payable to the donor during his or her lifetime. The third type of gift is the forgiveness, by will, of debt owing by the organization to the donor.

Position: It is possible for loan funding to form part of a charity's capital. If a charity has a specific concern about the amount of its indebtedness held by one or more individuals, it should contact the Charities Directorate. Any gift by will that is specifically excluded from the charity's income under subparagraph (i) of the definition of a charity's income in paragraph 149.1(12)(b) forms part of the charity's capital. We would generally not distinguish between a gift of property by will and a forgiveness of debt by will in this respect. We are not in a position to comment on "gifts" by way of beneficiary designation.

Reasons: In general, income and capital are said to be mutually exclusive terms. The income of a charity is defined in paragraph 149.1(12)(b). Amounts that are not included in the charity's income under this paragraph (or under section 9) form part of the charity's capital. The 2000 Budget included a proposal respecting "gifts" by way of beneficiary designation; however, as no legislation is in force in that respect, we are not in a position to provide comments. Under the current law, a donation by way of beneficiary designation is not a gift for tax purposes.

Technical Interpretation - Internal

25 August 2000 Internal T.I. 2000-0035007 - SDA INCENTIVE UNITS BASED ON FUTURE EARNINGS

Unedited CRA Tags
248(1)

Principal Issues: Would a plan constitute a salary deferral arrangement for purposes of the Act?

Position: Question of fact.

Reasons: It appears that no right to receive an amount is being deferred and the plan is not tax motivated but this determination would require a review of the terms of the plan and any other relevant facts.

24 August 2000 Internal T.I. 2000-0034117 F - PROGRAMME DE RETRAITE ANTICIPÉE

Unedited CRA Tags
248(1) 56(1)(a)(ii) 5(1) 6(3)

Principales Questions: Quelle est la nature de certains montants reçus à l'égard de la perte d'un emploi ?

Position Adoptée: Certains montants sont des allocations de retraite, d'autres des revenus d'emploi.

15 August 2000 Internal T.I. 2000-0027727 - AUTO EXP.&MOTOR VEHICLE ALLOW.

Unedited CRA Tags
6(1)(b)(viii) 8(1)(h.1)

Principal Issues: Can an employee include a motor vehicle allowance in income and claim automobile expenses?

Position: An employee in receipt of a motor vehicle allowance that is unreasonably low can include the allowance in income and claim expenses if he or she otherwise qualifies

Reasons: Consistent with previous opinions.

27 July 2000 Internal T.I. 2000-0037177 - TEMPORARY AND PERMANENT WRITE DOWNS PART 1.3

Unedited CRA Tags
181(3) 181(1)

Principal Issues: The role of the recommendations in the CICA Handbook and the Handbook of the Canadian Institute of Public Real Estate Companies Accounting Practices (CIPREC) in determining whether or not an amount written down on a corporation's balance sheet constitutes a reserve within the meaning of subsection 181(1) of the Act.

Position: The fact that a write down is made in accordance with the accounting recommendations of the CICA or of CIPREC would not, in and of itself, be determinative as to whether or not a reserve arises as a consequence of the write down.

Reasons: A permanent write down in value of a capital asset of a corporation results in a reduction of the corporation's capital for Part I.3 purposes. Where a write down is made due to a temporary impairment of an asset's value, the amount of the write down constitutes a reserve within the meaning of subsection 181(1) of the Act. The determination whether the decline in value of an asset is temporary or permanent can only be made having regard to all the facts.

27 July 2000 Internal T.I. 2000-0037447 - US SOCIAL SECURITY AS WAR PENSION

Unedited CRA Tags
81(1)(e) 56(1)(a) 110(1)(f)

Principal Issues: Is an amount received from US Social Security by a widow of a US military veteran exempt from tax?

Position: It may be exempt under 81(1)(e), although we do not have enough information to determine if the amount is ordinary US Social Security survivor benefits, or pension related to death or disability arising out of military service during a war.

Reasons: 81(1)(d) exempts amounts received under or subject to certain Canadian war-related legislation. 81(1)(e) will exempt similar payments from foreign countries if the foreign country exempts Canadian pensions identified in 81(1)(d).

25 July 2000 Internal T.I. 2000-0030237 - DONATIONS OF GIFT CERTIFICATES

Unedited CRA Tags
149.1 110,1(1)(a)

Principal Issues: 1. Does a donation of a gift certificate, redeemable for goods and/or services qualify as a gift for the purposes of paragraph 110.1(1)(a)?
2. Is it relevant whether the gift certificate is donated by a third party or issued by the donor to the charity directly?
3. Is the appropriate valuation of the donation of a gift certificate the cost to the issuer of redeeming the certificate or the fair market value of the goods or services received by the charity?

Position: 1. and 2. The donation of a gift certificate qualifies as a gift for the purposes of paragraph 110.1(1)(a) if the gift is made by a person who has given consideration for that gift certificate to the issuer thereof. Where a donor issues a gift certificate directly to a charity, no gift is made at the time the gift certificate is issued. If, however, the gift certificate is issued voluntarily and without consideration, a gift may be recognized at the time that the charity redeems the gift certificate for property. If, instead, the charity transfers the gift certificate to a third person, no gift may be recognized at the time that the third person redeems the gift certificate.
3. If the gift is made by a person who has given consideration for the gift certificate, the value of the gift is the fair market value of the right evidenced by that gift certificate. Typically, this would be less than the face value of the gift certificate, unless the gift certificate is redeemable for cash. If the gift is made without consideration such that a gift occurs when the gift certificate is redeemed by the charity, the value of the gift is the fair market value of the property given to the charity on redemption of the gift certificate.

Reasons: A gift certificate is essentially, a promise to provide goods or services on the presentation of the certificate. A promise bestows a right if it is enforceable. A right is a property and hence, can be gifted. A promise is enforceable if it is made for consideration. Since a donor cannot receive consideration for a gift, it is not possible for a person to make a gift by issuing a gift certificate directly to a charity. In those circumstances, however, if the gift certificate is issued voluntarily and without consideration, the property transferred on redemption of the certificate may be a gift.

4 July 2000 Internal T.I. 2000-0023887 - STOCK OPTIONS

Unedited CRA Tags
7(1)(a) 110(1)(d)

Principal Issues: Does the particular individual get a deduction pursuant to paragraph 110(1)(d) on his stock option benefit

Position: no

Reasons: Because he purchases shares at a XXXXXXXXXX % discount from the lower of FMValues of the shares at the beginning or end of a six-month period, he does not meet the criteria in subparagraph 110(1)(d)(ii)

30 June 2000 Internal T.I. 2000-0027587 - XXXXXXXXXX

Unedited CRA Tags
118.1(b)

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.

19 June 2000 Internal T.I. 2000-0027787 - OPTIONS, ROLLOVER

Unedited CRA Tags
85.1(5)

Principal Issues: Can a benefit under section 7 of the Act be deferred under proposed subsection 85.1(5)?

Position: No.

8 June 2000 Internal T.I. 1999-0012817 F - Sociétés associées

Unedited CRA Tags
256(6) 256(3)

Principal Issues: Est-ce que le paragraphe 256(6) est applicable?

Position: Non

Reasons: Sauvegarde des droits sur des actions n'était pas la seule raison de l'existence du contrôle. De plus, les actions ne sont pas rachetables par la société.

1 June 2000 Internal T.I. 2000-0006167 - LARGE CORPORATION TAX GOLD CONSIGNMENTS

Unedited CRA Tags
181.2(3)(c)

Principal Issues: The appropriate treatment, for capital tax purposes, of gold held by a jeweller pursuant to an agreement that has been characterized by the jeweller as a "consignment" agreement.

Position: The amount of gold "outstanding" under a particular subcontract is a loan or advance to the jeweller within the meaning of paragraph 181.2(3)(c) of the Act.

Reasons: The name ascribed to a contract by its parties does not determine its nature at law. In our view, the contract and subcontracts do not constitute together, or individually, consignment agreements at law. Instead, the contracts provide for two discrete types of transactions. First, they provide the terms upon which the jeweller may borrow gold from the bank on a revolving basis. Second, they provide the terms upon which the jeweller may purchase gold from the bank from time to time. At any given time, the amount of gold subject to a subcontract that has not been sold to the jeweller constitutes a loan or advance to the jeweller within the meaning of paragraph 181.2(3)(c) of the Act.

26 May 2000 Internal T.I. 2000-0025790 - ALLOCATION TRANSFER PROGRAM-STATUS INDIAN

Unedited CRA Tags
81(1)(a) 14(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.

Department of Fisheries & Oceans
Allocation Transfer Program
Questions and Answers
For Canada Customs and Revenue Agency Client Services

18 May 2000 Internal T.I. 2000-0006037 F - FRAIS D'ACQUISITION

Unedited CRA Tags
9 18(9.02)

Position Adoptée:

11 May 2000 Internal T.I. 1999-0007237 - INVESTMENT BY RRSP/RRIF IN UNITS OF SBILP

Unedited CRA Tags
REG 5102(1) 96(2.2) 146(4) 146(10)

Principal Issues: Discussion of certain tax consequences under Reg. 5102(1), and sections 96, 143.2, 146 and 146.3 where an RRSP or RRIF trust purchases units of one of two classes of units of a small business investment limited partnership ("SBILP") with a combination of cash, full-recourse promissory notes and post-dated cheques.

PositionS:
1. Two classes of units, each class having different attributes will not satisfy the definition of a SBILP.

2. Title may not pass in law and may result in contravention of paragraph (i) of subsection 5102(1) of the Regulations.

3. If title does pass, the cash and full-recourse promissory notes would form part of the cost of the partnership units for purposes of the "at-risk" rule in section 96 of the Act. For the post-dated cheques, either 96(2.2)(c) will reduce the "at-risk" amount until the post-dated cheque is cashed or 143.2(7) will apply to deem the amount of the post-dated cheque to be a limited-recourse amount and subsection 143.2(6) will apply.

4. The use of the promissory notes receivable from the RRSP/RRIF by the SBILP as security for the acquisition of new investments is not relevant to the determination as to whether the SBILP satisfies the definition in subsection 5102(1)(h).

5. If the consideration for the partnership units paid by the RRSP/RRIF trust exceeds the FMV of the units, there is an income inclusion to the annuitant pursuant to 146(9)(b)/146.3(4)(b).

Reasons:
1. Contravenes the requirement that all units be identical under 5102(1)(d).
2. In this case the full-recourse promissory notes could constitute "deposits".
3. Post-dated cheques are either "amounts owing" to the SBILP under 96(2.2)(c) or "limited recourse amounts" which reduce the cost of the unit to the holder under 143.2(7) and 143.2(6).
4. The promissory notes receivable held the SBILP (payable by the RRSP/RRIF) constitute an asset of the SBILP and therefore could not possibly be "borrowed money" (a liability of the SBILP, a "promise to repay").
5. 146(9)(b)/146.3(4)(b) requirements.