Income Tax Severed Letters - 2000-11-10

Miscellaneous

25 October 2000 Miscellaneous 2000-00524911 - Foreign affiliate disposing goodwill

Unedited CRA Tags
5907(1) 5907(2)

Principal Issues: Whether a gain from the sale by a foreign affiliate resident in a designated treaty country of goodwill used in an active business carried on in a designated treaty country is included in exempt earnings.

Position: Yes

Reasons: Goodwill is not capital property of the foreign affiliate. Also the rules in section 14 which would provide for the inclusion of only 50% of the gain in income do not have any bearing on the computation of the earnings from an active business carried on by a foreign affiliate.

Ruling

19 October 2000 Ruling 2000-0029923 - INDIAN ACT EXEMP.-EMPLOYMENT INCOME

Unedited CRA Tags
81(1)(a)

Principal Issues: Exemption for Indian income from employment when employer and employee/shareholder reside on reserve. Deductibility of salaries, crew share and director's fees to Corporation.

Position: Salaries, crew share (if employment income), and director's fees would be exempt from taxation to the Indian recipient. A crew share, if business income, would be taxable. The amounts would be deductible to the Corporation, subject to the general limitations of the Act as would apply to non-Indian owned corporations.

Reasons: The employment situation fits within Guideline 2 of the Indian Act Exemption guidelines. Business income would be taxable, as revenue-generating activities are carried out off reserve. General comments provided.

3 October 2000 Ruling 2000-0036443 - TAXATION OF INDIAN TRUST

Unedited CRA Tags
81(1)(a) 75(2) 149(1)(c)

Principal Issues:
1) Is Indian trust exempt from income tax.
2) Does Band qualify as public body under 149(1)(c).
3) Is trust taxable on revenue not paid to beneficiary.
4) Is trust taxable on income added to capital account to compensate for inflation.
5) Are band members taxable on one time per capita payments under settlement agreement.

Position: 1) No 2) Question of Fact 3) Not necessarily 4) Not Necessarily 5) No

Reasons:
1) Trust is not an Indian under s. 87 of Indian Act
2) Depends on functions performed by Band.
3) Trust may be entitled to deduction if Band can enforce payment pursuant to 104(6) and 104(24). Also, 75920 might apply to attribute trust revenue to band.
4) Trust is taxable unless 75(2) applies
5) Band members not taxable on payments because they are paid from trust capital.

Ministerial Correspondence

11 October 2000 Ministerial Correspondence 2000-0040254 - QUALIFIED INVESTMENTS RRSP

Unedited CRA Tags
146(10) 146(6) REG 4900

Principal Issues:
Whether US cash a qualified investment for RRSP purposes.

Position: No.

Reasons:
Although US currency is a non-qualified investment, there is no requirement that an RRSP dispose of a non-qualified investment. There may be tax consequences, however, if a non-qualified investment is held in the RRSP. After June 27, 1999, certain foreign currency and deposits thereof will be a qualified investment for an RRSP, RRIF and RESP - proposed by August 8, 2000 legislation under Finance release #2000-059.

6 October 2000 Ministerial Correspondence 2000-0043534 - PRIVATE HEALTH SERVICES PLAN

Unedited CRA Tags
20.01

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.

October 6, 2000

XXXXXXXXXX

Dear XXXXXXXXXX :

Technical Interpretation - External

7 November 2000 External T.I. 2000-0050035 - WHETHER LTDP IS AN EMPLOYEE-PAY-ALL PLAN

Unedited CRA Tags
6(1)(f)

Principal Issues: Whether a wage loss replacement plan is an employee-pay-all plan where the employer pays half of the premiums to such plans but includes these amounts as taxable benefits in the hands of the employees.

Position: No.

Reasons: The existence of an employee-pay all plan is not determined by looking at the manner in which payments are made or reported, but rather it is determined by ascertaining who is contractually obligated to pay the premiums. If the legal obligation for paying the disability plan premiums is split 50-50 between the employer and the employee, an employee would be subject tax on any benefits received under the plan pursuant to paragraph 6(1)(f) to the extent that they exceed the deduction under subparagraph 6(1)(f)(v) in respect of employee contributions..

3 November 2000 External T.I. 2000-0040265 - REIMBURSING RETIRE. EMPLOYEES FOR RELOC.

Unedited CRA Tags
6(1)(a) 6(19) 6(20) 248(1)

Principal Issues: What is the income tax treatment of amounts paid to employees upon retirement to compensate them for relocating.

Position: (1) Generally taxable, unless exception in paragraph 36 applies. The exception applies to the reimbursement of moving expenses of retiring employee relocating out of a remote work location. (2) Further, any benefit from having an employer reimburse the employee for a housing loss is likely taxable under subsection 6(19).

Reasons: (1) Except where the Act provides otherwise, taxpayers are generally taxable on the value of all benefits they receive by virtue of their employment. Paragraph 36 of IT-470R provides an exception. (2) This is because to fit the definition of an "eligible housing loss" and qualify for a lesser benefit under subsection 6(20), a relocation must be an eligible relocation. One of the conditions of an eligible relocation is that it must enable the taxpayer to carry on business or to be employed at a location in Canada (or to be a student in full-time attendance enrolled in a program at a post-secondary level at a location of a university, college or other educational institution).

3 November 2000 External T.I. 2000-0041875 - UK PPS PENSION PLAN

Unedited CRA Tags
60(j)

Principal Issues: Can amounts held in a foreign pension arrangement be rolled into an RRSP after the member emigrates to Canada?

Position: Question of fact.

Reasons: We do not have sufficient information to determine whether the amount held in this U.K. arrangement is a pension, annuity or something else for purposes of the Act.

3 November 2000 External T.I. 2000-0049735 - RRIF TRANSFERS MINIMUM AMOUNT

Unedited CRA Tags
146.3(1)

Principal Issues: Could we explain why the original carrier of a RRIF has to retain the balance of any unpaid portion of the minimum amount when the property is being transferred to another RRIF carrier?

Position: Yes.

Reasons: Without this requirement, the minimum amount would not get paid out in the year of a transfer between carriers.

3 November 2000 External T.I. 2000-0050685 - LTDP IS AN EMPLOYEE-PAY-ALL PLAN

Unedited CRA Tags
6(1)(f)

Principal Issues: Whether a wage loss replacement plan is an employee-pay-all plan where the employer's benefits policy is to pay 50% of the total group insurance plan (consisting of a medical, dental, accidental death and dismemberment, life and long-term disability plans) for their employees. The employer arbitrarily allocates the reported payments among the plans so that the employees' portion of long-term disability plan premiums is shown at 100% while the employees' portion of premiums to the other plans is reported at less than 50%. When viewed from the perspective of total premiums paid, the 50-50 split between employer and employee contributions is maintained.

Position: Not an employee-pay-all plan.

Reasons: The existence of an employee-pay all plan is not determined by looking at the manner in which payments are made or reported, but rather it is determined by ascertaining who is contractually obligated to pay the premiums. If the legal obligation for paying the disability plan premiums is split 50-50 between the employer and the employee, an employee would be subject tax on any benefits received under the plan pursuant to paragraph 6(1)(f) to the extent that they exceed the deduction under subparagraph 6(1)(f)(v) in respect of employee contributions..

3 November 2000 External T.I. 2000-0047285 - WHETHER FOSTER CARE PAYMENTS ARE EXEMPT

Unedited CRA Tags
81(1)(b)

Principal Issues: Whether salaries paid to employees of private agency to provide foster care in their homes are exempt under paragraph 81(1)(h).

Position: Question of fact; however they may be exempt.

Reasons: The fact that foster care payments may be received by an individual as an employee is not determinative in ascertaining whether payments are exempt since the legislation refers to payments received directly or indirectly.

3 November 2000 External T.I. 2000-0024475 - INTEREST ON CAPITAL GAINS REFUND

Unedited CRA Tags
161(7) 160.1(1)

Principal Issues:
Whether a mutual fund trust will be subject to interest charges in the situation where a loss carry-back reduces its capital gains refund.

Position: Yes.

Reasons: Subsections 160.1(1) and 132(2.2) of the Act.

2 November 2000 External T.I. 2000-0049505 - RRIF TRANSFER TO DEPENDENT CHILD

Unedited CRA Tags
146.3(6) 60(l)

Principal Issues:
Can an amount be transferred out of a RRIF on a tax-deferred basis to an adult child of the annuitant of the RRIF on the death of the annuitant?

Position:
The amount may be transferred on a tax-deferred basis to an RRSP, a RRIF or an annuity under which the child is the annuitant, if the amount is a "refund of premiums" as that term is defined in the Act.

Reasons:
The Act provides for tax-deferred transfers of amounts between registered plans for the benefit of dependent children in certain circumstances.

2 November 2000 External T.I. 2000-0038255 - XXXXXXXXXX

Unedited CRA Tags
149(1)(l)

Principal Issues: We are asked to comment on two issues. First, whether the organization may issue donation receipts. Second, whether the organization is exempt from tax.

Position:. The organization may not issue donation receipts. It appears unlikely that the organization is tax exempt, as currently constituted.

Reasons: We are advised by charities that the organization is not registered; therefore, it may not issue donation receipts. The articles of the organization do not seem to prevent the members of the organization from personally benefiting from its income. Therefore, it is unlikely that the organization currently constitutes and NPO. However, this determination can only be made by the TSO, having regard to all the facts.

2 November 2000 External T.I. 2000-0051465 - FUNDS BORROWED TO BUY LIFE INSURANCE POLICY

Unedited CRA Tags
20(1)(c)

Principal Issues: Deductibility of interest on funds borrowed and used to purchase a life insurance policy

Position: Not Deductible

Reasons: Denied by wording of paragraph 20(1)(c).

1 November 2000 External T.I. 2000-0044495 - RRSP SHARES OF A CCPC

Unedited CRA Tags
REG 4900((6)

Principal Issues: Will shares of a CCPC be a qualified investment for an RRSP?

Position: Discussed 4900(6)(a) and 4900(12)(a).

Reasons: We cannot comment on the qualification of a specific corporation except in the context of an advance income tax ruling where an interpretation of law is required vis-a-vis the specific facts of the case.

1 November 2000 External T.I. 2000-0051715 - PRIVATE HEALTH SERVICES PLAN

Unedited CRA Tags
6(1)(a) 248

Principal Issues: Is the reimbursement of an employee's medical health plan premiums by the employer a taxable benefit?

Position: Yes. It could be non-taxable if the payment is made directly by the employer to a private health services plan.

Reasons: One of the exceptions to taxable benefits in subparagraph 6(1)(a)(i) is "any benefit derived from contributions of the taxpayer's employer to or under a...private health services plan." In this case the contribution is being made by the employee and is reimbursed by the employer.

1 November 2000 External T.I. 2000-0042965 - RRSP NON-ARM'S LENGTH FEES

Unedited CRA Tags
146(2)

Principal Issues: 1) Can an RRSP or RRIF pay investment counsel fees to a related party? 2) Will investment counsel fees be active business earned by the recipient corporation?

Position: 1) Yes, if reasonable. 2) Question of fact.

Reasons: 1) Nothing in the Act preventing non-arm's length transactions. 2) No comments can be provided.

31 October 2000 External T.I. 2000-0051495 - German compensation to holocaust survivors

Unedited CRA Tags
81(1)(g)

Principal Issues: A special German foundation was formed by German legislation recently and the German government funded the foundation. The purpose of the foundation was to make financial compensation available to holocaust survivors. The main issue is whether such financial compensation received by a Canadian taxpayer is exempt from tax in Canada.

Position: Yes such compensation is exempt from tax in Canada

Reasons: Such compensation payments fall under paragraph 81(1)(g) of the Act and are thus exempt from income tax in Canada. Also, no income tax is payable to the Federal Republic of Germany on such compensation payments made to or on behalf of holocaust survivors.

2000-005149
XXXXXXXXXX G. Middleton
(613) 957-2122
Attention: XXXXXXXXXX

31 October 2000 External T.I. 2000-0052995 - Film Credit - 95 year Distribution Agree

Unedited CRA Tags
125.4(4) Reg 1106

Principal Issues:
1. Will clause 1106(1)(a)(ii)(A) of the draft Regulations, at the definition of excluded production, apply to deny a Canadian producer's film tax credit, as a result of particular foreign distributors' participation in the production? This will involve distribution agreements with a potential term of 95 years.
2. Will subsection 125.4(4) of the Act apply to deny a Canadian producer's film tax credit, as a result of the same foreign distributors' participation in the production?

Position:
1. & 2. No, based on the facts as presented.

Reasons:
1. Since the film is a treaty co-production, clause 1106(1)(a)(ii)(A) of the draft Regulations, at the definition of excluded production, does not apply to the film.

2. Since the foreign distributors are not subject to tax in Canada, neither of the distributors would be an investor that may deduct an amount in respect of the film in computing its income, as is contemplated in order for subsection125.4(4) of the Act to apply.

31 October 2000 External T.I. 2000-0046025 - RETIRING ALLOWANCE

Unedited CRA Tags
60(j.1)

Principal Issues: Can an employee receive a "retiring allowance" (for purposes of tax-deferred transfer under paragraph 60(j.1)) if he was on an unpaid leave of absence and employed by an unrelated employer overseas at the time that his entitlement to the retiring allowance occurred?

Position: Yes.

Reasons: A person on unpaid leave may at law still be an employee. In any event, there is no requirement in the definition of "retiring allowance" in subsection 248(1) that the amount be paid by a current employer. Residency not relevant for 60(j.1) "years".

31 October 2000 External T.I. 1999-0010455 - Subsection 70(6) and article XXIX B

Unedited CRA Tags
70(6) art XXIX B

Principal Issues: Interaction between subsection 70(6) of the Income Tax Act and paragraph 5 of Article XXIX B of the Canada-United States Income Tax Convention

Position: See our comments in the letter

Reasons: Interpretation of the law

31 October 2000 External T.I. 2000-0043445 - LSVCC SHARES HELD IN RRIFS

Unedited CRA Tags
127.4 204.81 146.3 REG 4900

Principal Issues:
1. Can LSVCC shares be held in a RRIF?
2. Does the annuitant of a RRIF get the LSVCC tax credit if shares are purchased in a RRIF?
3. What happens to the LSVCC tax credit if shares are redeemed to pay minimum amount under a RRIF?

Position:
1. LSVCC shares may be held in a RRIF, but may not be issued to a RRIF by a federal LSVCC.
2. No.
3. Part XII.5 may be payable by the RRIF.

Reasons:
1. Shares of an LSVCC in section 6700 of the Regulations are qualified investments for a RRIF. Federal LSVCCs are issuable only to individuals and RRSPs under the registration requirements in subsection 204.81(1) of the Act.
2. RRIFs are not "qualifying trusts" under section 127.4 of the Act.
3. Part XII.5 tax is payable if a share is redeemed, acquired or cancelled less than 8 years after it is issued.

30 October 2000 External T.I. 2000-0013255 - PRODUCT ISSUED BY FOREIGN INSURER

Unedited CRA Tags
148 138.1 12

Principal Issues:
Tax treatment of an offshore investment product acquired by a non-resident individual when the individual later immigrates to Canada.

Position:
Provided very general comments.

Reasons:
The legal nature of the offshore investment product is not clear.

25 October 2000 External T.I. 2000-0031555 - RETIRING ALLOWANCE

Unedited CRA Tags
56(1)(a)(ii) 248(1)

Principal Issues:
Whether a payment received from an employee's union is a retiring allowance.

Position: Yes.

Reasons:
The definition of "retiring allowance" in section 248(1) of the Act includes a payment "in respect of" a loss of employment and this includes payments from third parties.

25 October 2000 External T.I. 2000-0042655 - MORTGAGE INTEREST DEDUCT.

Unedited CRA Tags
40(2)(b) 45(2) 20(1)(c)

Principal Issues: Mortgage interest deductibility when a mortgage on a principal residence was taken out to purchase another residence.

Position: The direct use of the borrowed funds is the test that predominates in determining the deductibility of the interest.

Reasons: The Queen v. Bronfman Trust (87 DTC 5059)

25 October 2000 External T.I. 2000-0016025 - HOME OFFICE & TRAVEL EXP.

Unedited CRA Tags
8(1)((i)(ii) 8(1)(i)(iii) 8(13)

Principal Issues:
1. Deductibility of home-office expenses by an employee?
2. Whether certain travel expenses are considered to be personal or business in nature?

Position:
1. Depending on the circumstances.
2. Travel from one's residence to one's regular work place is personal in nature.

Reasons:1. Where the condition of employment requires the employee to maintain a home-office, the expenses are reasonable and are not reimbursed, they are deductible.

25 October 2000 External T.I. 2000-0017065 F - CONVENTION DE RETRAITE ET ASSURANCE

Unedited CRA Tags
207.6(2) 207.5 56(1)x)

Principales Questions: Une fiducie doit-elle payer un impôt de la partie XI.3 de la Loi lorsqu'elle effectue des retraits d'une police d'assurance-vie qui a servi à provisionner une convention de retraite et que les dispositions du paragraphe 207.6(2) de la Loi s'appliquent.

Position Adoptée: Non

24 October 2000 External T.I. 2000-0050945 - LEASING PROPERTY CONCRETE READY-MIXERS

Unedited CRA Tags
16.1 REG 8200

Principal Issues: Whether concrete ready-mixers are "exempt property" and therefore, a "prescribed property" for purposes of section 16.1.

Position: No

Reasons: Similar to court decision

24 October 2000 External T.I. 1999-0015115 - Michigan Single Business Tax

Unedited CRA Tags
126(1) 18(1)(a)

Principal Issues: whether Michigan Single Business Tax is creditable

Position: No. However, it is deductible under paragraph 18(1)(a) of the Act

Reasons: Because it is not an income or profit tax for the purposes of section 126 of the Act

23 October 2000 External T.I. 2000-0046305 - STOCK OPTIONS IDENTICAL PROPERTY

Unedited CRA Tags
7 47

Principal Issues:
1. To which taxation years will the new position regarding identical shares acquired on a stock option exercise (as described in Technical News #19) be applicable?
2. What is the scope of the new position?

Position:
1. The new position is effective the date that Technical News #19 was published.
2. Cannot provide specific comments.

Reasons:
1. The new position will apply to taxation years that were open as of the date that Technical News #19 and are open at the time the new position is utilized.
2. Any variations from the general guidelines provided in Technical News #19 will be considered in the context of an advance income tax ruling.

23 October 2000 External T.I. 2000-0044395 - TRANSFER SPOUSAL RRSP AFTER DIVORCE

Unedited CRA Tags
146(8.3)

Principal Issues:
Can a spousal RRSP be transferred to a non-spousal RRSP after a divorce and therefore the attribution rule in 146(8.3) would not be applicable?

Position: Yes. However, the transfer will change the status of the transferee "non-spousal" RRSP to that of a "spousal RRSP".

Reasons:
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).

20 October 2000 External T.I. 2000-0041725 - Film Tax Credit

Unedited CRA Tags
125.4 1106

Principal Issues: Whether a corporation is a "Canadian" as defined in draft regulation 1106(1).

Position: It appears so.

Reasons: It appears meet paragraph (c) of the definition of "Canadian"

20 October 2000 External T.I. 2000-0048685 - Allocation Taxable Income Between Provinces

Unedited CRA Tags
Reg 402(6) Reg 402(5) Reg 402(3)

Principal Issues:
1. Whether a part of the gross revenue and salaries and wages of the partnership would be included in the gross revenue and salaries and wages of the partner for the purposes of subsection 402(3) of the Regulations.

2. Whether interest and dividend income would be included in the gross revenue for the purposes of subsection 402(3) of the Regulations.

3. Whether the taxable capital gain would be included in the gross revenue for the purposes of subsection 402(3) of the Regulations.

Position:
1. The corporation includes in its gross revenue and salaries and wages for the purposes of subsection 402(3) of the Regulations, a portion of the gross revenue and salaries and wages of the partnership based on its interest in the income/loss of the partnership.

2. The interest on bonds, debentures or mortgages and the dividend on shares of capital stock would be excluded.

3. The taxable capital gain would be excluded.

Reasons:
1. Subsection 402(6) of the Regulations.

2. Subsection 402(5) of the Regulations. The reference in subsection 402(5) of the Regulations to "that is not used in connection with the principal business operations of the corporation" refers only to "rentals or royalties from property" and not to the other items enumerated therein.

3. The definition of "gross revenue" in subsection 248(1) of the Income Tax Act specifically excludes amounts as or on account of capital.

20 October 2000 External T.I. 2000-0045665 - RETIRING ALLOWANCE

Unedited CRA Tags
56(1)(a)(ii) 248(1)

Principal Issues:
1. Can a portion of a retiring allowance be used by the employer to purchase increased pension benefits under its defined benefit pension plan in respect of the departing employee?
2. 2. If so, would this be considered to be an employer contribution and therefore not be taxable to the employee?

Position:
1. Insufficient information to offer an opinion.
2. 2. All of the retiring allowance will be included in the employee's income pursuant to paragraph 56(1)(a)(ii).

Reasons:
1. Requires a review of the terms of the pension plan and the relevant pension legislation (pension benefits standards act) governing the RPP.
2. 2. Character of the amount contributed to the RPP, if such a contribution is possible, would not change from that of a retiring allowance.

19 October 2000 External T.I. 2000-0044455 - RETIRING ALLOWANCE TRANSFER RELATED EMPLOYERS

Unedited CRA Tags
60(j.1)

Principal Issues:
The calculation of the amount of a retiring allowance that may be transferred to an RRSP when employees have had various employers over a number of years?

Position:
We provided basic comments on the calculation of an example transfer that covered a number of situations.

Reasons:
A determination can only be made on the basis of the facts present in a given situation.

19 October 2000 External T.I. 2000-0023675 - MUTUAL FUNDS RESP INVESTMENT

Unedited CRA Tags
146.1(1)

Principal Issues:
Are mutual funds denominated in a foreign currency qualified investments for an RESP?

Position:
Not disqualified on that basis

Reasons:
No provisions restrict the denomination of mutual fund investments for RESPs

13 October 2000 External T.I. 1999-0011435 - SR&ED

Unedited CRA Tags
127(9) 37(1)

Principal Issues:
1. Where the Canadian taxpayer directly undertakes the SR&ED will payments to a non-taxable supplier for SR&ED expenditures come under the exclusion in par. 127(9)(g) of the definition "qualified expenditures".

Position: 1.No.

Reasons:
1.Exception to the exclusion is only in respect of materials that are acquired from the non taxable supplier for SR&ED undertaken directly by taxpayer. Exception does not include labour or other expenses such as travel costs of non-resident.

10 October 2000 External T.I. 2000-0048485 - RETIRING ALLOWANCE

Unedited CRA Tags
56(1)(a)(ii) 248(1)

Principal Issues:

6 October 2000 External T.I. 2000-0038065 F - OPTIONS ACTROYES A UNE SOCIETE

Unedited CRA Tags
7(1.1)

Principales Questions: Le paragraphe 7(1.1) s'applique-t-il si une option est octroyée à une entreprise de services personnels?

Position Adoptée: non

6 October 2000 External T.I. 2000-0038075 F - PLACEMENT ADMISSIBLE ET REORGANISATION

Unedited CRA Tags
REG 4900(12) 51(1) 86(1)

Principales Questions: Les conditions énoncées au paragraphe 4900(12) doivent-elles être satisfaites à l'égard de nouvelles actions obtenues dans le cadre d'une réorganisation visée par les paragraphes 51(1) ou 86(1) de la Loi ?

Position Adoptée: Oui. Les conditions énoncées au paragraphe 4900(12) doivent être satisfaites au moment où une fiducie régie par un REÉR acquiert les nouvelles actions.

6 October 2000 External T.I. 2000-0037915 F - EQUITE-NOUVELLE DISP. DE LA LOI

Unedited CRA Tags
220(3.1)

Principales Questions: Est-ce que le dossier équité peut s'appliquer pour annuler les intérêts qui découlent de l'application rétroactive d'une nouvelle disposition de la Loi?

Position Adoptée: Non.

6 October 2000 External T.I. 2000-0038095 F - PENALITE POUR PROFESSIONNELS

Unedited CRA Tags
163.2

Principales Questions: Quels sont les progrès réalisés par l'Agence dans l'établissement de lignes directrices quant à l'application de la pénalité pour les professionnels?

Position Adoptée:

6 October 2000 External T.I. 2000-0037945 F - Commerce électronique/E-Commerce

Unedited CRA Tags
2(3)

Principales Questions: Est-ce que l'Agence est en mesure d'annoncer des politiques en matière de commerce électronique, notamment en matière d'établissement stable et de réalisation du revenu? / Whether the CCRA is ready to announce policies on e-commerce, particularly in regard to permanent establishment and realization of income.

Position Adoptée: Non. / No.

6 October 2000 External T.I. 2000-0038115 F - Congrès 2000 APFF Question 28

Unedited CRA Tags
125.4 96(1)(c)

Principales Questions: Doit-on considérer les activités d'une filiale et les activités d'une société de personnes dont une société est membre pour déterminer si les activités de la société consistent principalement à exploiter une entreprise de production cinématographique ou magnétoscopique canadienne?

Position Adoptée: 1- Il ne faut pas tenir compte des activités d'une filiale. 2- Une société pourra tenir compte des activités d'une société de personnes dont elle est membre si en vertu du droit civil ou du droit commun les activités de la société de personnes sont exercées par la société qui en est membre.

6 October 2000 External T.I. 2000-0037955 F - TRANSFERT ENTRE CONJOINT

Unedited CRA Tags
20(1)c)ii)

Position Adoptée:
Aucune

6 October 2000 External T.I. 2000-0038125 F - DOMMAGES INTERETS DANS LE CADRE D'UN REER

Unedited CRA Tags
146(8) 146(1) REG 103(4) REG 101(1)

Principales Questions: Comment doit-on traiter des dommages-intérêts à l'égard d'un REÉR ?

Position Adoptée: Ce n'est pas une prestation si le montant est versé directement au REÉR. Si les sommes sont versées au rentier, il s'agit d'une prestation imposable.

6 October 2000 External T.I. 2000-0038005 F - RESERVE-RETENU POUR GARANTIE

Unedited CRA Tags
40(1)a)(iii) 42

Principales Questions: Est-ce qu'un vendeur peut réclamer une réserve pour gain en capital en vertu du sous-alinéa 40(1)a)(iii) de la Loi si l'acheteur retient 10% du prix de vente en garantie de tout impôt additionnel dont pourrait être redevable la société dont les actions sont disposées?

Position Adoptée: Oui, si la retenue n'appartient pas au vendeur mais qu'il s'agit plutôt d'une modalité de paiement du produit de disposition et que cette somme est une somme payable après la fin de l'année.

6 October 2000 External T.I. 2000-0038035 F - Application 85(1)(b)

Unedited CRA Tags
85(1)(b)

Principales Questions: Où en est l'étude de l'Agence quant à sa position administrative à l'égard de l'application de l'alinéa 85(1)b)? / How is CCRA's study doing on its administrative position regarding the application of paragraph 85(1)(b)?

Position Adoptée: L'Agence a complété l'étude de cette question et a décidé d'abandonner la position administrative antérieure à l'effet qu'une dette pouvait être créée pour éviter l'application de l'alinéa 85(1)b), pour toute disposition de biens effectuée à compter du 1er janvier 2001. / CCRA has completed its study of this question and has decided to abandon its previous administrative position allowing the creation of a debt to avoid the application of paragraph 85(1)(b), with respect to all dispositions of property after December 31, 2000.

5 October 2000 External T.I. 2000-0037965 - Application of Parthenon Case - Control

Unedited CRA Tags
251 256

Principal Issues: Application of Parthenon case to non-CCPC situations.

Position: Application limited -see commentary below.

Reasons: Our interpretation of the FCA decision.

Technical Interpretation - Internal

1 November 2000 Internal T.I. 2000-0051477 - STOCK OPTIONS

Unedited CRA Tags
7(1)

Principal Issues: Is the value of shares awarded to an employee under an employee stock bonus award plan a taxable benefit? If so, is withholding of CPP and income tax required?

Position: Yes to both questions.

Reasons: Even though the quantum of the award depends upon the profitability of the corporate group for a given fiscal year, the arrangement is still "an agreement to issue shares" (albeit for no consideration) within the meaning of section 7. Per Employer's Guide - Taxable Benefit (T4130), paragraph 2.24 the value of the benefit is subject to CPP and income tax withholding (but not EI).

30 October 2000 Internal T.I. 2000-0047397 - MEDICAL-TUTORING

Unedited CRA Tags
118.2(2)(1.91)

Principal Issues: Whether a psychologist who tutors a child, is a person "ordinarily engaged in the business" of providing tutoring services to individuals for the purposes of subparagraph 118.2(2)(91) of the Income Tax Act.

Position: Likely not

Reasons: It is a question of fact whether the requirement has been satisfied. However, we are doubtful whether an individual who has a psychology practice would satisfy the test.

27 October 2000 Internal T.I. 2000-0034007 - Overseas Employment Tax Credit

Unedited CRA Tags
122.3(1)

Principal Issues: Whether the taxpayer is eligible for the overseas employment tax credit

Position: No

Reasons: His specified employer did not carry on business outside Canada under a contract with respect to qualified activities and not all or substantially all of the duties performed by the taxpayer is with respect to qualified activities

27 October 2000 Internal T.I. 2000-0049497 - CUSTOMS OFFICE ON FORMER RESERVE LAND

Unedited CRA Tags
81(1)(a)

Principal Issues:
1 ) Is the workplace located on a reserve
2 ) Is the employment income taxable.

Position: 1 ) No 2 ) Yes

Reasons:
1 ) Land was surrendered in XXXXXXXXXX
2 ) Employment income does not fall under the guidelines.

27 October 2000 Internal T.I. 2000-0047657 - TRANSFERS OF RIGHTS TO INCOME

Unedited CRA Tags
56(4)

Principal Issues: Are mutual fund and insurance commissions earned by and paid to an individual and subsequently assigned to and reported by a non-arm's length corporation included in the income of the individual pursuant to subsection 56(4) of the Income Tax Act?

Position: Yes

Reasons: We have previously indicated in 9619975 that 56(4) applies to real estate salespeople in BC who assign their commissions to their corporations. We have also indicated in 982417 that the commissions earned by an individual salesperson of mutual funds in Ontario should be reported by the salesperson and not the corporation to which the commissions are assigned. A salesperson of mutual funds in Ontario must by law be an individual.

24 October 2000 Internal T.I. 2000-0048177 - DEDUCTIBILITY OF INTEREST ON ASSUMED DEBT

Unedited CRA Tags
20(1)(c)

Principal Issues: Deductibility of interest on debt assumed by a corporation as proceeds on the redemption of its preferred shares

Position: Not deductible

Reasons: No money borrowed (20(1)(c)(i) by the corporation and no property acquired as required by 20(1)(c)(ii).

23 October 2000 Internal T.I. 2000-0048907 - COMPENSATION CONDITIONAL ON REPAYMENT

Unedited CRA Tags
147.1(1)

Principal Issues:
Will a payment of an amount to an employee by an employer constitute "compensation" as that term is defined in subsection 147.1(1) of the Income Tax Act where the employee is required to contribute the amount as a charitable donation.

Position:
No.

Reasons:
A payment that is conditional upon its repayment would not be accepted as a bona fide payment.

17 October 2000 Internal T.I. 2000-0049487 - INDIAN ACT EXEMPTION

Unedited CRA Tags
81(1)(a)

Principal Issues: 1. Whether we will look through the main purpose of establishing a connecting factor or whether we accept situations where the legal documentation is effected to establish an employer on a reserve. 2. Whether the 50% rule in Guideline 3 should be applied to business income in a similar manner, that is, once 50% of business income is on a reserve, all the business income should be exempt.

Position: 1. Our approach depends on the type of income. Employment income may not be connected to a reserve in cases where a placement agency is involved. 2. No.

Reasons: 1. The Guidelines apply to employment income. Our positions with respect to business income is based on the criteria established by the Court in Southwind. An employer would be considered to be resident on a reserve if the central management and control of the corporation was exercised from the reserve. 2. Guideline 3 applies only to employment income and the criteria laid out in Southwind apply to business income.

17 October 2000 Internal T.I. 2000-0047377 - RRSP MORTGAGE COSTS CARRYING CHARGES

Unedited CRA Tags
20(1)(c)

Principal Issues: 1) Where an RRSP invests in a non-arm's length mortgage and the annuitant uses the mortgage proceeds to invest in GICs, will the mortgage set-up costs be deductible by the annuitant as carrying charges? 2) Where mortgage interest costs exceed the income earned from GICs acquired with the mortgage proceeds, will the interest on the mortgage be deductible by the annuitant?

Position: 1) No. 2) No.

Reasons: 1) The mortgage set-up costs are incurred by the RRSP to acquire the qualified investment. Since the costs are incurred by the RRSP and not the annuitant, they may not be claimed by the annuitant as an expense. If the annuitant pays such expenses then the costs will be considered premiums paid by the annuitant. 2) The interest will not be deductible because there will not be any income earned from a business or property.

13 October 2000 Internal T.I. 2000-0027037 - INDIAN TAX-SELF-EMPLOYED INCOME

Unedited CRA Tags
9(1) 81(1)(a)

Principal Issues:
1 ) Whether payments made to status Indians for services provided off the reserve will be taxable
2 ) does the fact that the services provided off the reserve are provided only to status Indians alter our position in 1 above; and,
3 ) if the argument is presented that the status Indians to whom the services are being provided would otherwise be on a reserve, would that change our position in 1 above.

Position:
1 ) Income is taxable under the ITA, 2 ) No 3 ) No

Reasons:
1 ) The current situation mirrors the Southwind case in that the location of the sole client and the location where the services were performed are situated off reserve.
2 ) it does not connect the place where the services are provided to a reserve.
3 ) the services are provided to the contractee for the benefit of the status Indians. The status Indians cannot be considered to be the "customer". The contractee pays the elders for services rendered.

13 October 2000 Internal T.I. 2000-0042477 F - depenses d'emploi-vendeur valeurs mobiliers

Unedited CRA Tags
8(1)f)(ii)

Principales Questions:
Est-ce qu'un vendeur en valeurs mobilières peut respecter le sous-alinéa 8(1)f)(ii) de la Loi ?

Position Adoptée:
Oui, c'est possible.

18 September 2000 Internal T.I. 2000-0043647 F - Perte transfert bâtiment personne affiliée

Unedited CRA Tags
13(21.1) 13(21.2)

Principales Questions:

Est-ce que l'expression « qui représenterait par ailleurs le produit de disposition du bien transféré » utilisée à l'alinéa 13(21.2)b) de la Loi signifie le produit de disposition réel d'un bâtiment ou le produit de disposition réputé selon le paragraphe 13(21.1) de la Loi ?

Position Adoptée: