Income Tax Severed Letters - 2001-01-19

Ruling

2000 Ruling 2000-0041953 - Reorganization

Unedited CRA Tags
55(3)(b)

Principal Issues: standard split up butterfly - no new issues

Position:

Reasons:

2000 Ruling 2000-0043633 - split-up butterfly

Unedited CRA Tags
55(3)(b)

Principal Issues: A routine butterfly

Position: no issues

Reasons: n/a

2000 Ruling 2000-0049383 - related persons divisive reorganization

Unedited CRA Tags
55(3)(a)

Principal Issues:
Significant increase in the total direct interest of the remaining siblings' in the distributing corporation on the redemption of the departing sibling's shares.

Position:
Not in the particular situation.

Reasons:
Distributing corporation controlled by mother and transferee corporation will also be controlled by mother.

2000 Ruling 2000-0060453 - RIA CONTINUE BUSINESS SOLE PROP.

Unedited CRA Tags
60(j.1)

Principal Issues: An individual's professional corporation will sell XXXXXXXXXX % of its practice to another professional corporation and the individual will resign from the professional corporation and will carry on the balance of the professional corporation's business as a sole proprietor, can the individual's professional corporation pay the individual a retiring allowance ?

Position: Yes.

Reasons: Based on the particular facts in this case, the employee/employer relationship with the professional corporation ceases and the carrying on of part of the business as a sole proprietorship will not affect this.

Technical Interpretation - External

16 January 2001 External T.I. 2000-0060005 - WAGE LOSS REPLACEMENT PLANS

Unedited CRA Tags
6(1)(f)

Principal Issues: Whether payments received pursuant to a "wage loss replacement plan" are taxable in the hands of the recipient.

Position: Question of fact..

Reasons: Paragraph 6(1)(f) of the Act will determine the taxable portion of any benefits received pursuant to a "wage loss replacement plan".

16 January 2001 External T.I. 2000-0033825 - 1994 CAPITAL GAINS ELECTION

Unedited CRA Tags
110.6(19)

Principal Issues:

Individual was denied forgiveness of Ontario Student Loans because his father elected under subsection 110.6(19) to include a capital gain on capital property held on February 22, 1994. The individual just wanted general information regarding the capital gains election.

Position TAKEN:

General information provided explaining 110.6(19) election.

Reasons: N/A

16 January 2001 External T.I. 2000-0058915 - VOLUNTEER SERVICES

Unedited CRA Tags
81(4)

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.

Principal Issues

Can payments made to full-time fire-fighters as volunteers for the same municipality be eligible for the $1,000 tax free allowance under subsection 81(4) of the Act?

Position TAKEN
No

Reasons FOR POSITION TAKEN

15 January 2001 External T.I. 2000-0061125 - COMBINED PER DIEM&KM MV ALLOWANCE

Unedited CRA Tags
6(1)(b)(x)

Principal Issues:

Taxation of motor vehicle allowance based partly on kilometers, and partly on a daily rate

Position:

Included in income

Reasons:

12 January 2001 External T.I. 2000-0057045 - EQUIVALENT TO SPOUSE

Unedited CRA Tags
118.1(1)(b) 118(5)

Principal Issues: Paragraph 39 of IT-513R states that "Because of subsection 118(5), an individual cannot claim a personal tax credit in respect of the individual's spouse or a child for a taxation year after 1996 if the individual is required to pay a support amount ... to his or her spouse or former spouse for that person, and the individual lives separate and apart from the spouse or former spouse throughout the year because of the breakdown of their marriage." As a result of these comments, an individual is not entitled to claim the equivalent-to-spouse credit. We have been asked whether we have a policy that would allow the individual to claim that credit.

Position: No

Reasons: There is no administrative position

11 January 2001 External T.I. 2000-0015215 - GIFT BY WILL-RESIDUE

Unedited CRA Tags
118.1(5) 118.1(6) 38(a.1)

Principal Issues:
1. Whether a gift of the residue of a taxpayer's estate to a registered charity would constitute a gift by will under subsection 118.1(5).

2. If the residue gifted consists of publicly traded shares, can the executor elect under subsection 118.1(6)?

3. If the residue gifted consists of publicly traded shares, will the reduced inclusion rate under paragraph 38(a.1) apply to a capital gain arising on the deemed disposition of such shares under section 70?

Position:
1. Yes, provided that the gift is made in accordance with the terms of the will.

2. Yes, provided the requirements of subsection 118.1(6) are met.

3. Yes, provided the requirements of paragraph 38(a.1) are met.

Reasons:
1. Previous opinions.

2. Previous opinions.

3. Where the gift is made in accordance with the terms of the will, it is our view that the reduced inclusion rate will apply if the requirements of paragraph 38(a.1) are otherwise met.

11 January 2001 External T.I. 2000-0011755 - GIFT BY WILL-RESIDUE

Unedited CRA Tags
118.1(5) 118.1(6) 38(A.1)

Principal Issues:

1. A taxpayer's will provides that a gift of a specific amount be made to a specific charity. If the executor uses shares to make the gift, can the executor elect under subsection 118.1(6)?

2. A taxpayer's will provides that a gift in cash or shares be made to a specific charity. If the executor uses shares to make the gift, can the executor elect under subsection 118.1(6)?

3. Will the reduced inclusion rate in paragraph 38(a.1) apply to a capital gain arising on the deemed disposition of the shares in either scenario?

Position:

1. Yes, provided the requirements of subsection 118.1(6) are met.

2. Yes, provided the requirements of subsection 118.1(6) are met.

3. Yes, provided the requirements of paragraph 38(a.1) are met.

Reasons:

11 January 2001 External T.I. 2000-0056115 - TRANSFER OF CAPITAL LOSSES-SPOUSES

Unedited CRA Tags
73(1) 74.5 74.2 53(1)(f)

Principal Issues:
Whether a taxpayer can transfer unrealized capital losses to the taxpayer's spouse by way of a sale at fair market value.

Position TAKEN:
Yes, subject to application of superficial loss rules.

Reasons:
If the sale occurs at fair market value and the transferee still holds the capital property or substitute property at end of 30 days, the superficial loss rules deny the taxpayer's capital loss and the denied loss is added to adjusted cost base of the spouse's capital property. The subsection 73(1) of the Act election prevents the transfer at adjusted cost base and section 74.5 of the Act prevents the attribution of the future capital loss back to transferor.

11 January 2001 External T.I. 2000-0015105 - GIFT BY WILL-RESIDUE

Unedited CRA Tags
118.1(5) 38(a.1)

Principal Issues:

1. Where the terms of an individual's will provide for a gift of a specific percentage of the residue of the individual's estate to a specific registered charity, would the gift constitute a gift by will for the purposes of subsection 118.1(5)?
2. If the terms of the will permit the trustee to distribute the residue in cash or in specie and the trustee transfers publicly traded shares to the charity in satisfaction of its residual interest in the estate, will the reduced inclusion rate under paragraph 38(a.1) apply?

Position:

1. Yes, provided that the gift is made in accordance with the terms of the will.
2. Yes, provided the gift is made in accordance with the terms of the will and the requirements of paragraph 38(a.1) are met.

Reasons:

10 January 2001 External T.I. 2000-0049585 F - DEDUCTIBILITE DES INTERETS

Unedited CRA Tags
20(1)(c)

Principal Issues:
Déductibilité des intérêts - Alinéa 20(1)(c)

10 January 2001 External T.I. 2000-0056135 - REPORTING TAXABLE BENEFITS

Unedited CRA Tags
153 Reg. 100 Reg. 200
agent may fulfill employer's source deduction obligations
source deductions made by agent on employer's behalf

Principal Issues: (1) What is the appropriate form (T4 or T4A) to be produced by a third party relocation services provider in respect of taxable benefits paid to the employees of the person for whom the services are provided?
(2) Who is responsible for withholding and remitting taxes on any taxable benefits provided to an employee (the third party services provider or the employer using the provider)?

Position: (1) T4 slip.
(2) The employer

Reasons: Answer is based on the assumption that the third party relocation services provider is an agent of the employer using the provider to help the employer's staff to relocate.

10 January 2001 External T.I. 2000-0007835 - EXEMP FROM WITHHOLDING TAX ON INTEREST

Unedited CRA Tags
212(1)(b)(vii)

Principal Issues:

1. Whether proceeds from an asset sale that are required to be used to reduce the principal of the loan or to be put on deposit with the lender would be acceptable thus allowing the interest on the loan to be exempt from withholding under subparagraph 212(1)(b)(vii).

2. Would offer and acceptance to repay more than 25% of the principal of the loan as a result of a "triggering event" preclude the application of the exemption in subparagraph 212(1)(b)(vii)?

Position:

1. No

2. Yes

Reasons:

10 January 2001 External T.I. 2000-0053385 - ELIGIBLE MEDICAL EXP. TAX CREDIT

Unedited CRA Tags
118.2(2)(i) Reg. 5700

Principal Issues: Is the cost of : i. a home traction devise and
ii. a Body Blade;
an allowable medical expense pursuant to subsection 118.2(2) of the Act?

Position: No

Reasons: Neither devise is included in any of the paragraphs of subsection 118.2(2) of the Act. They are also not included as a devise or equipment that is prescribed in section 5700 of the Income Tax Regulations.

10 January 2001 External T.I. 2000-0044955 - MEAL ALLOW. PAID BY EMPLOYERS

Unedited CRA Tags
67.1(2) 6(1)(b)(vii) 6(6)(a)(i)

Principal Issues: Deductibility of Meal Allowance paid to Employees

Position: 50% limitation does not apply if allowance is excluded from income under 6(6)(a)(i) and employees are working at sites in Canada that are at least 30 km from urban area with population of at least 40,000; question of fact whether 6(6) or
6(1)(b)(vii) applies to allowance

Reasons: Consistent with earlier opinions, and wording of statute.

9 January 2001 External T.I. 2000-0056145 - EPSP FOR ONE EMPLOYEE

Unedited CRA Tags
144(1)

Principal Issues: Can an EPSP be established for the benefit of one employee?

Position: Question of fact.

Reasons: we have previously stated no. Because we have never seen an EPSP for one employee, we will only revisit the issue in the context of a ruling request where all of the facts are made available.

9 January 2001 External T.I. 2000-0059705 - ANNUITANT CONTRACT FOR RRIF

Unedited CRA Tags
146.3(1)

Principal Issues: Can a RRIF annuitant enter into a contract on behalf of the RRIF?

Position: No.

Reasons: RRIF property is owned by the RRIF and only the RRIF itself can enter into contracts in respect of RRIF property.

9 January 2001 External T.I. 1999-0011405 - foreign affiliates - deemed active

Unedited CRA Tags
95(2)(a)

Principal Issues: Whether income derived by a controlled foreign affiliate from trade receivables purchased from a related controlled foreign affiliate would be included in its income from active business pursuant to paragraph 95(2)(a).

Position: Paragraph 95(2)(a) would apply to the income.

Reasons: All of the income of the foreign affiliate is income described in one of subparagraphs 95(2)(a)(i), (iii) or (iv) of the Act.

9 January 2001 External T.I. 2000-0059995 - SHAREHOLDER LOANS

Unedited CRA Tags
15(2.4)

Principal Issues:
Whether the exception in subsection 15(2.4) of the Act applies to a loan received by a specified employee where the loan is used by the specified employee to acquire a dwelling for his/her habitation.

Position: Question of fact.

Reasons:
The exception in paragraph 15(2.4)(b) of the Act will generally not apply to a loan to a specified employee. Our general position is that benefits are received as a shareholder, not an employee, where the shareholder can significantly influence the business policies of the corporation. Accordingly, subsection 15(2) of the Act will apply to the loan. Nevertheless, there may be situations where all of the requirements of subsection 15(2.4) of the Act are satisfied such that subsection 15(2) of the Act won't apply in those situations.

9 January 2001 External T.I. 2000-0055885 - RPP CONTRIBUTIONS BY INS. CO.

Unedited CRA Tags
REG 8502(b)

Principal Issues: Are contributions made to an RPP by an insurance company under a group long term disability plan (where the disabled employee paid all of the premiums relating to his or her coverage under the group long term disability plan) considered to be contributions made by the employee?

Position: Yes.

Reasons: Contributions to a RPP have to be made by the member, the employer or by way of transfer from another deferred plan. Therefore, we would have to conclude that contributions to the RPP are being made by an insurance company on behalf of the employee that has paid for all of the premiums under the insurance plan.

9 January 2001 External T.I. 2000-0021965 - Stock option deduction by foreign affiliate

Unedited CRA Tags
5907(1) 5907(2)

Principal Issues:
Whether a deduction taken by U.S. foreign affiliate in respect of a stock option plan where options for its shares are issued to its employees can be added back to earnings.

Position:
Since this is a notional deduction, it should not be deducted in the determination of earnings under Regulation 5907(1).

Reasons:
It is our view that the notional deduction should not be included in computing earnings as defined in subsection 5907(1) of the Regulations. This is consistent with our view on notional monetary inflationary adjustments and notional interest expense (see E9830735.) In these situations the adjustment in the computation of earnings under subsection 5907(1) is necessary to accurately portray actual income realized and available for distribution. (Note this position overrides the position taken in E5C6315 November 12, 1986, M. Carsley, where we said 5907(2)(b) was not applicable and no other provision would adjust the earnings.)

9 January 2001 External T.I. 2000-0042545 - Immovable property

Unedited CRA Tags
art XIII

Principal Issues: Whether a capital gain realized by a U.K. resident on the disposition of the shares of a private corporation resident in Canada that actively carries on a farming business in Canada would be exempt from taxation in Canada under Article 13 of the Canada-U.K. Treaty.

Position: Question of fact but if the value of shares of a Canadian corporation is derived primarily from real property in which the business of the corporation is carried on, such shares will not be immovable property for the purposes of Article 13 of the Canada-U.K. Treaty by virtue of paragraph 7(b) of Article 13 thereof.

Reasons: The law.

9 January 2001 External T.I. 2000-0060945 - INVESTMENT CLUBS AS QUALIFIED INVESTMENTS

Unedited CRA Tags
146(1) REG 4900

Principal Issues: Is an investment club a qualified investment for RRSP purposes if the investment club holds only qualified investments?

Position: We can't say without more details.

Reasons: We will have to know if the investment club is a trust, partnership or corporation.

9 January 2001 External T.I. 2000-0053445 - Non-resident treaty-exempt income

Unedited CRA Tags
81(1)(a) 110(1)(f)(i)

Principal Issues: Whether income of a corporation which is exempt from tax in Canada under the provisions of an income tax treaty must be included in income and is then deducted under subparagraph 110(1)(f)(i).

Position: No

Reasons: Income of a corporation which is exempt from tax under Part I pursuant to an income tax treaty is excluded from income pursuant to paragraph 81(1)(a). No deduction under subparagraph 110(1)(f)(i) may be claimed in respect of an amount exempt under paragraph 81(1)(a).

9 January 2001 External T.I. 2000-0055145 - ACCIDENT & SICKNESS INSURANCE

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

Principal Issues: - Sickness or accident insurance coverage provided to the only employee/shareholder of a professional corporation. Subparagraph 6(1)(a)(i) of the Income Tax Act provides an exemption for a "group sickness or accident insurance plan." In order for a group to exist, must there be more than one individual?

Position: Yes - Some general comments were also provided on the issue of "qua shareholder" versus "qua employee."

Reasons: Our current position is that a "group" must be comprised of more than one individual.

8 January 2001 External T.I. 1999-0008185 - Non-resident "treaty-protected business"

Unedited CRA Tags
115(1)(c) 111(9) 248(1)

Principal Issues: If only a part of the income of a non-resident from a business carried on in Canada would be exempt from tax in Canada under an income tax convention, would the business be a "treaty-protected business" under the definition in subsection 248(1).

Position: Yes

Reasons: The definition of "treaty-protected business" is a business "any income" from which is treaty exempt.

5 January 2001 External T.I. 2000-0010905 F - Valuation - Freeze shares

Unedited CRA Tags
85(1) 86(1)

Principal Issues: Whether the Agency's position that freeze shares be retractable is met when shares are retractable according to the corporation's constituting documents but the shareholder undertakes in writing not to request the repurchase unless all the shareholders agree ?

Position: No

Reasons: The retraction right is obstructed by the undertaking to the point of affecting the value of the shares.

4 January 2001 External T.I. 2000-0047605 F - FRAIS DE DIVERTISSEMENT

Unedited CRA Tags
67.1

Principales Questions:
1. Est-ce que les déboursés faits pour l'achat de billets de spectacles par une société qui oeuvre dans ce domaine représentent des divertissements sujets au paragraphe 67.1(1) de la Loi compte tenu du fait que le but de l'acquisition de ces billets est de recruter des artistes en vue de les présenter en spectacle ?

2. Si oui, est-ce que la dépense tombe sous l'application de l'exception prévue à l'alinéa 67.1(2)a) de la Loi ?

Position Adoptée:
1. aucune
2. non

4 January 2001 External T.I. 2000-0055475 - REDUCTION OF STATED CAPITAL

Unedited CRA Tags
20(1)(c)

Principal Issues:
Interest deduction on funds borrowed to redeem preferred shares.

4 January 2001 External T.I. 2000-0016665 - section 116 administrative position

Unedited CRA Tags
87(5) 116

Principal Issues: Whether the administrative position set out in paragraph 50 of Interpretation Bulletin 474R ("IT-474R") should be extended to certain dispositions of share options owned by non-residents where subsection 87(5) of the Act applies.

Position: For International Tax Directorate to consider.

Reasons: Administrative position is the responsibility of audit.

4 January 2001 External T.I. 2000-0057915 - BORROWED MONEY TO REDUCE STATED CAPITAL

Unedited CRA Tags
20(1)(c)

Principal Issues:
Deductibility of interest on borrowed money used to reduce share capital

3 January 2001 External T.I. 2000-0049755 - Designated Limited Partnership

Unedited CRA Tags
Reg 5900(7)

Principal Issues: Whether revenue of particular P/S is regulated per definition of "designated limited partnership in ss 5900(7) of the Regulations?

Position: no

Reasons: Revenue is subject to regulation if a complaint is made; otherwise the market determines revenues

3 January 2001 External T.I. 2000-0060655 - WORTHLESS INVESTMENTS IN RRIF

Unedited CRA Tags
146.3(11)

Principal Issues: 1) A RRIF did not make its minimum payment, will subsection 146.3(11) apply? 2) Can a RRIF dispose of its property to the annuitant?

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

Reasons: 1) Registered Plans Division would make this determination. 2) Nothing in the Act to prevent transactions between RRIF and annuitant.

3 January 2001 External T.I. 2000-0058135 - INTERSPOUSAL TRANSFERS AND CAPITAL LOSSES

Unedited CRA Tags
54 73(1) 40(2)(g)

Principal Issues: In order to transfer a capital loss from a taxpayer to his or her spouse where the taxpayer elects out of subsection 73(1) of the Act, does the spouse have to hold the loss property for at least 30 days after the transfer of the property?

Position: Yes.

Reasons: If the spouse does not own or have a right to acquire the property 30 days after the transfer of the property, there would not be a superficial loss. If there is a superficial loss then paragraph 40(2)(g) would apply to deny the loss and paragraph 53(1)(f) would apply to add the denied loss to the cost of the property held by the spouse.

2 January 2001 External T.I. 2000-0058055 - DSLP, REVIEW PLAN

Unedited CRA Tags
REG 6801(a)

Principal Issues: Does their proposed deferred salary leave plan satisfy the conditions described in paragraph 6801(a) of the Regulations?

Position: No.

Reasons: Certain conditions in paragraph 6801(a) are not satisfied.

28 December 2000 External T.I. 2000-0003915 - Article XXVI A of Canada-US Tax Treaty

Unedited CRA Tags
art XXVI A

Principal Issues: Would the CCRA interpret paragraphs 4, 8 and 9 of Article XXVI A of the Canada-U.S. Income Tax Convention as creating an obligation the collection of which the CCRA would enforce

Position: Yes, provided that the revenue claim has been established by the U.S. and Canada has accepted the request

Reasons: Interpretation of the law

28 December 2000 External T.I. 2000-0056505 - substance over form - Shell Canada

Unedited CRA Tags
245(1)

Principal Issues: Effect of Shell Canada case on assessing policy with respect to GAAR and substance over form.

Position: No formal change to policy - all Supreme Court decisions are relevant, however.

Reasons: Case is not definitive with respect to substance over form and predates GAAR..

21 December 2000 External T.I. 2000-0038285 - Classification of Generating Equipment

Unedited CRA Tags
20(1)(a) 13(5)

Principal Issues: Whether property can be reclassified from Class 1 to Class 43.1.

Position: Generally, yes, but not enough information was provided to make a determination in this particular case. The classification of property requires a determination be made based on an examination of all the facts regarding the property.

Reasons: Subsection 13(5)of the Act provides for transfers between prescribed classes. In addition, subject to the exception in subsection 1104(14) of the Regulations, subsection 13(5) of the Act would require a property to be transferred out of Class 43.1 when it no longer meets the requirements of the class. In certain situations, subsection 1104(14) of the Regulations deems a property to be operating in a manner required by paragraph (c) of Class 43.1, and would allow a property to remain in Class 43.1 when it would otherwise fail to meet the requirements of paragraph (c).

19 December 2000 External T.I. 2000-0047555 - SICKNESS AND ACCIDENT PLAN

Unedited CRA Tags
256(1) 125(7) 6(1)(f)

Principal Issues: A group of corporations would like to establish a sickness and accident plan. How would the premiums and benefits be treated for tax purposes? Will the plan cause the corporations to be associated? Will the corporations be considered to be personal services corporations?

Position: The resolution to each of the issued raised is determined by the facts of any given situation.

Reasons: The tax treatment of the premiums and benefits will be determined by the relationship between the corporations party to the sickness and accident plan.

6 December 2000 External T.I. 2000-0056225 - TEI QUESTION ON OFFICERS

Unedited CRA Tags
163.2(15)

Principal Issues:
TEI Question: Will an officer of a corporation be considered to be an "employee...employed by the other person" for purposes of subsection 163.2(15)?

6 December 2000 External T.I. 2000-0057095 - ISO UPDATE

Unedited CRA Tags
2

Principal Issues:

6 December 2000 External T.I. 2000-0056255 - DEBIT RESERVES LARGE CORPORATION TAX

Unedited CRA Tags
181.2(3) 181.3(3)

Principal Issues: The CCRA is asked for its views as to whether a "debit reserve" such as a provision for a pension asset should be deducted in calculating a corporation's capital for LCT purposes.

Position: There is no basis in Part I.3 of the Act as it currently reads for recognizing "debit" or "negative" reserves.

Reasons: The words of subsection 181.2(3) and 181.3(3) only include reserves "to the extent that they were deducted in computing income". This can never be a negative amount. The court in National Trust Company, in considering an analogous provision in Part VI, confirmed this view and noted that a negative amount for reserves would be contrary to the purpose of the provision.

6 December 2000 External T.I. 2000-0056035 - SHAREHOLDER LOANS

Unedited CRA Tags
15(2.6)

Principal Issues:
Whether the exception in subsection 15(2.6) of the Act can apply to a loan that is part of a series of loans and other transactions and repayments but the series is terminated within one year.

Position: Question of fact.

Reasons: Where there are bona fide repayments of the loans or other indebtedness, the exception in subsection 15(2.6) of the Act would apply.

6 December 2000 External T.I. 2000-0056445 - MOVING EXPENSES

Unedited CRA Tags
6(23)

Principal Issues:

6 December 2000 External T.I. 2000-0056045 - TENANT INDUCEMENTS

Unedited CRA Tags
3

Principal Issues:
What is the CCRA's assessing practice and how are tenant inducement payments deductible for tax purposes as a result of the Supreme Court decisions in Canderel and Toronto College Park.

Position: Question of fact.

Reasons: The Supreme Court set out six principles for calculating profit for purposes of the Act. These will be applied to each case to determine the deductibility of tenant inducement payments.

6 December 2000 External T.I. 2000-0056595 - CONSEQUENTIAL ADJUSTMENTS

Unedited CRA Tags
152(4.3)

Principal Issues:
Whether the ability to make consequential adjustments as a result of a reassessment of an earlier taxation year expires one year after all rights of objection or appeal by the taxpayer expire with respect to that particular issue or one year after all rights of objection or appeal with respect to the taxation year giving rise to the consequential adjustment.

23 November 2000 External T.I. 2000-0030565 - 118.5

Unedited CRA Tags
8(1)(i) 14(5) 18(1)(b)

Principal Issues:

21 November 2000 External T.I. 2000-0056495 - double taxation

Unedited CRA Tags
248(28) 17(2)

Principal Issues: Application of subsection 248(28)

Position: See below

Reasons: See below

21 November 2000 External T.I. 2000-0056055 - debt owing by non-resident

Unedited CRA Tags
17(2)

Principal Issues: Application of section 17

Position: See below

Reasons: See below

6 October 2000 External T.I. 2000-0038025 F - Congrès 2000 APFF Question 19 Catégorie 10

Unedited CRA Tags
20(1)(a) Reg 1104 Cat 10

Principales Questions:
1- Quelle est la définition des exceptions prévues aux alinéas f(i) et f(ii) de la catégorie 10 de l'annexe II du Règlement?
2- De l'équipement téléphonique peut-il être inclus dans la catégorie 10?

Position Adoptée:
1- Les expressions « équipement de contrôle ou de surveillance du processus électronique » et « équipement de contrôle des communications électroniques » ne sont pas définies dans la Loi ni dans le Règlement. Par conséquent, il faut interpréter ces expressions selon le sens ordinaire attribué à ces expressions dans l'industrie informatique. Des ouvrages tels le Dictionary of Computing publié par la presse universitaire d'Oxford et le dictionnaire Glossary of Computer Terminology de Prentice-Hall peuvent être utilisés comme référence pour définir ces expressions.
2- non catégorie 8

15 September 2000 External T.I. 2000-0027485 - Hedging Losses in Resource Profit Calculation

Unedited CRA Tags
1204(1) 1204(1.1)(a) 1206

Principal Issues: (a) Whether the losses incurred by A Co. from its oil and natural gas price hedging transactions under certain contracts could be considered as losses from speculation for investment purposes and not losses from A Co.'s oil and natural gas production business. (b) Whether these losses could be excluded from the resource profit calculation under section 1204 of the Regulations.

Position: (a) No (b) No

Reasons: (a) Given the jurisprudence and XXXXXXXXXX given that it appears the contracts were entered into in the normal course and as an integral part of A Co.'s oil and natural gas production business even though the contracts might not bear the normal characteristics of its other hedging instruments, we opine that the losses resulting from the contracts would be considered as losses from A Co.'s oil and natural gas production business and not from its speculation for investment purposes. (b) Based on the above-noted conclusion, these losses should be included in the resource profit calculation pursuant to subsection 1204(1) of the Regulations. For certainty, even if subsection 1204(1) of the Regulations did not apply to these losses, given that they relate to the "resource activity" of A Co. within the meaning of the expression in subsection 1206(1) of the Regulations, it is our view that these losses would reduce resource profits under paragraph 1204(1.1)(a) of the Regulations.

6 December 2000 External T.I. 2000-0056245 - DEFERRED INCOME TAXES

Unedited CRA Tags
PART 1.3

Principal Issues: Does the change in terminology from deferred income taxes to future income assets and liabilities have implications for purposes of Part I.3 tax?

Position: No.

Reasons: The change in terminology does not alter the legal nature of these amounts for purposes of Part I.3 tax.

Technical Interpretation - Internal

9 January 2001 Internal T.I. 2000-0061537 - Retiring allowance paid to non-resident

Unedited CRA Tags
115 80.4

Principal Issues:
1. Whether a retiring allowance paid to a non-resident of Canada is subject to taxes under Part I of the Act?
2. If a non-resident of Canada is reporting a benefit under 80.4(1) of the Act, can he take advantage of the deduction under paragraph 20(1)(c)?

Position:
1. No.
2. No.

Reasons:
1. Previous position - a "retiring allowance" as defined in subsection 248(1) of the Act, paid to a non-resident of Canada would not be subject to tax by virtue of subsection 114 and 115 of the Act.
2. The loss of the deduction in the above circumstances is solely a consequence of the Canadian tax system with respect to non-residents.

9 January 2001 Internal T.I. 2000-0062057 - RCA DISTRIBUTION OF PROPERTY

Unedited CRA Tags
248(1) 56(1)(x)

Principal Issues: 1) Does an RCA continue to exist after its refundable taxes are transferred to another tax account? 2) Can an RCA distribute its property to the beneficiary at its fair market value?

Position: 1) Yes. 2) Yes.

Reasons: 1) The RCA continues to exist until it has distributed its property in accordance with its terms. 2) There is nothing preventing the distribution of property.

8 January 2001 Internal T.I. 2000-0053647 - EMPLOY. INCOME OF COMMUNAL MEMBER

Unedited CRA Tags
143

Principal Issues: Whether the "T4 income" of members of a "communal organization," within the meaning of this term in section 143 of the Income Tax Act, may be reported on the T3 Trust Return filed by the communal organization.

Position: No.

Reasons: Section 143 of the Act applies to income which is derived from business, property or the other activities of a communal organization. It does not apply to any income received by a member of a communal organization in his or her own right.

5 January 2001 Internal T.I. 2000-0053767 F - IT-92R2 Paragraphe 1

Unedited CRA Tags
9 12(1)(b)

Principales Questions: La méthode d'évaluation des travaux peut-elle s'appliquer à un contribuable donné?

Position Adoptée: Le contribuable peut se prévaloir de la méthode d'évaluation des travaux prévue au Bulletin d'interprétation IT-92R2 pourvu d'une part, que le titre de propriété de la construction échoit au client du contribuable ou au propriétaire de l'immeuble à mesure que les travaux progressent et d'autre part, que la fabrication et l'installation des équipements soient prévues dans les plans et devis de la construction de l'immeuble.