Income Tax Severed Letters - 2001-03-30

Miscellaneous

2000 Miscellaneous 2000-0061031 - supplementary file 2000-004014

Unedited CRA Tags
55(3)(b)

Principal Issues: Assumption of tenant inducement costs by transferee corporations

Position: Tenant inducement costs assigned to transferee corporations will be deductible on the same basis as that of the distributing corporation.

Reasons: Inducement Costs represents rights relating to leases in respect of the property transferred in the butterfly and the consideration paid for these rights should be deductible by the transferee corporations (See Ruling 3-980098).

Ruling

2000 Ruling 2000-0033283 - First Nation Settlement Trust

Unedited CRA Tags
149(1)(c) 75(2) 105(1)

Principal Issues:
1. Whether compensation paid by Canada to the First Nation pursuant to the Settlement Agreement will be received by the First Nation on tax-exempt basis?
2. Whether subsection 75(2) will apply so as to deem the trust's income from the Settlement Funds to be income of the First Nation.
3. Whether the First Nation will be considered to be a public body performing a function of government in Canada within the meaning of 149(1)(c).
4. Whether distributions made pursuant to the trust agreement will result in the application of 105(1) to the beneficiaries.

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

Reasons:
1. On the basis of 149(1)(c), as per ruling 3.
2. The First Nation, which is entitled to the Settlement Proceeds, will settle a trust and direct Canada to pay the Settlement Proceeds into the trust. The trust is for the benefit of the members of the First Nation and the capital of the trust will eventually be paid out for purposes that are beneficial to the First Nation. Furthermore, since distributions from the trust will be governed by the Comprehensive Plan (a plan requiring the approval of the members of the First Nation), the property of the trust cannot be disposed of except in accordance with the First Nation's direction.
3. As per opinion of work section 023 (file 2000-003475).
4. The trust will not be providing benefits of the type contemplated by 105(1).

2000 Ruling 2000-0035503 - Reorganization, 55(3)(b)

Unedited CRA Tags
55(3)(b)

Principal Issues: no new issues

Position:

Reasons:

Ministerial Correspondence

16 March 2001 Ministerial Correspondence 2001-0071534 - TAX TREATMENT OF STATUS INDIAN

Unedited CRA Tags
81(1)(a)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

March 16, 2001

XXXXXXXXXX

Dear XXXXXXXXXX :

The Honourable Martin Cauchon, Minister of National Revenue, has asked me to reply to your letter concerning the tax treatment of status Indians. The Honourable Paul Martin, Minister of Finance, sent a copy of your letter to Mr. Cauchon on

Technical Interpretation - External

28 March 2001 External T.I. 2000-0046345 - SALE OF VACANT LAND

Unedited CRA Tags
9(1) 110.1(1)

Principal Issues:

1. What is the income tax treatment when vacant land held for development is sold?
2. What is the income tax treatment when vacant land is donated to a Canadian Registered Charity?

Position:

1. When vacant land held for development is sold, the proceeds are business income.
2. The donor is deemed to have received proceeds of disposition equal to the fair market value of the land. A receipt is issued for the fair market value of the land.

Reasons:

26 March 2001 External T.I. 2000-0060185 F - Évaluation actions assurance-vie décès

Unedited CRA Tags
70(5.3)

Principales Questions: Les dispositions du paragraphe 70(5.3) de la Loi s'appliquent-elles pour déterminer, immédiatement avant le décès d'un actionnaire donné, la juste valeur marchande des actions d'assurance vie qu'il possédait à ce moment?

Position Adoptée: Si les modifications proposées au paragraphe 70(5.3) de la Loi sont adoptées telles que proposée par l'avis de motion de voies et moyens du 19 mars 2001, les dispositions du paragraphe 70(5.3) de la Loi pourraient s'appliquer pour calculer, immédiatement avant le décès de l'actionnaire donné, la juste valeur marchande des actions dont la JVM est fonction du produit d'assurance vie pourvu que l'assurance porte uniquement sur la vie de ce particulier ou sur la vie d'autres particuliers qui ont un lien de dépendance avec lui à ce moment ou au moment de l'établissement de la police.

26 March 2001 External T.I. 2000-0063065 - SETTLEMENT PAYMENT

Unedited CRA Tags
40(1)(a)(i)

Principal Issues: Whether the payment of an amount to settle a dispute over ownership of the lobster license can be included as part of the "adjusted cost base" of the lobster license or as an expense in selling it.

Position: Based on the facts provided, it is our view that the $XXXXXXXXXX settlement payment could likely be considered an outlay or expense "for the purpose of making the disposition" pursuant to subparagraph 40(1)(a)(i) of the Act.

Reasons: It seems to us that the settlement payment was an essential outlay that was made directly for the purpose of making the disposition, i.e., the lobster license could not be sold without confirmation of the Estate's ownership of it.

26 March 2001 External T.I. 2001-0064055 - DEDUCT. OF MANAGERS BONUSES&SALARIES

Unedited CRA Tags
67

Principal Issues: Whether the CCRA's position on the reasonableness of a manager's bonus applies where a manager does not directly own his or her own shares but holds shares through a holding company which is not 100% owned by the manager, but rather is owned by the manager and family members.

Position: Question of fact.

Reasons: In our view, one of the primary factors to be considered when determining the reasonableness of the amount of salary and/or bonus is the recipient's contribution to the business. Where a corporation pays a salary and/or bonus out of business profits to a manager who is actively engaged in the business of the corporation, it is unlikely that the reasonableness of the deduction will be questioned unless it results in an undue tax advantage. The CCRA does not and do not intend to develop criteria relative to the ownership and management structure of a Canadian-controlled private corporation in relation to the determination of whether the amount of salaries and bonuses will be considered reasonable.

26 March 2001 External T.I. 2001-0070895 - REPLACEMENT PROPERTY

Unedited CRA Tags
44(1) 248(1)

Principal Issues: Whether section 44 of the Act applies if all or substantially all of the proceeds of the sale of land and grain storage facilities is reinvested into building drying and elevator equipment and storage of roughly the same capacity as that sold.

Position: While a grain storage building may qualify as a former business property, it is our view that grain handling equipment would not since it is not real property. Also, a property will be considered to be a property acquired for the "same or similar use" if it is acquired to gain or produce income from the same or similar business and if it generally bears the same physical description as the former property, i.e., land replaced by land or a building replaced by a building.

Reasons: Based on our views set out in IT-259R3

23 March 2001 External T.I. 2001-0075035 - PRINCIPAL RESIDENCE

Unedited CRA Tags
54.1(1)

Principal Issues: Whether the taxpayer's employer is considered to be the "same employer" for purposes of ITA 54.1(1) after a change in name following an acquisition of another company

Position: No position taken. Referred to TSO

Reasons: Insufficient information

23 March 2001 External T.I. 2000-0005135 - Trust - Property From Alter Ego Trust

Unedited CRA Tags
108(1)

Principal Issues: Is a trust that is created as a consequence of death considered a testamentary trust if it receives property from an alter ego trust?

Position: no

Reasons: A trust that is created by the trustee of an inter vivos trust is excluded from the def'n of testamentary trust by reason of (a) of that def'n and a trust that receives property from an inter vivos trust created after Nov 12, 1981 is excluded from the def'n of testamentary trust by reason of (b) of that def'n.

23 March 2001 External T.I. 2001-0075375 - Trust rec'g property from an alter ego trust

Unedited CRA Tags
108(1)

Principal Issues: Is a trust that is created as a consequence of death considered a testamentary trust if it receives property from an alter ego trust?

Position: no

Reasons: A trust that is created by the trustee of an inter vivos trust is excluded from the def'n of testamentary trust by reason of (a) of that def'n and a trust that receives property from an inter vivos trust created after Nov 12, 1981 is excluded from the def'n of testamentary trust by reason of (b) of that def'n.

23 March 2001 External T.I. 2001-0067965 - SHAREHOLDER BENEFIT

Unedited CRA Tags
15(2) 15(2.3)

Principal Issues:
Corporation is proposing to loan funds to the daughter and son-in-law of the company's shareholders. The daughter and son-in-law will use the proceeds to purchase a farm in another province. The loan would be secured by a mortgage against the property to be purchased, would have a competitive interest rate, and would require monthly payments.

Would subsection 15(2.3) apply so that subsection 15(2) would not apply to the loan?

Position TAKEN:
Insufficient information provided. Likely no. General comments provided.

Reasons:
Based on jurisprudence and position in IT-442R.

23 March 2001 External T.I. 2000-0059755 - Trust rec'g property from an alter ego trust

Unedited CRA Tags
108(1)

Principal Issues: Is a trust that is created as a consequence of death considered a testamentary trust if it receives property from an alter ego trust?

Position: no

Reasons: A trust that is created by the trustee of an inter vivos trust is excluded from the def'n of testamentary trust by reason of (a) of that def'n and a trust that receives property from an inter vivos trust created after Nov 12, 1981 is excluded from the def'n of testamentary trust by reason of (b) of that def'n.

21 March 2001 External T.I. 2001-0074585 - LUMP SUM PAYMENTS

Unedited CRA Tags
110.2

Principal Issues: Is a retroactive payment made to employees in respect of a pay equity article of a collective agreement a "qualifying amount" for purposes of section 110.2 of the Act?

Position: No.

Reasons: Per 2001-006635, an arbitration award for purposes of section 110.2 does not include an award as a result of arbitration under normal collective bargaining.

XXXXXXXXXX 2001-007458
J. E. Grisé
March 21, 2001

21 March 2001 External T.I. 2000-0060235 - FARM PARTNERSHIP

Unedited CRA Tags
74.1 74.2 97(2) 73(1)

Principal Issues:

Taxpayer and his wife are partners in a farming operation with the wife having only a minimal interest in the partnership. Taxpayer wishes to dissolve the partnership and transfer the assets on a tax-deferred basis pursuant to subsection 98(3) of the Act and gift 50% of his farm property to his wife. They would then roll their farm property into a new partnership pursuant to subsection 97(2) of the Act with each spouse receiving a 50% interest in the partnership.

Do the attribution rules in sections 74.1 and 74.2 apply to the income earned by the new partnership?

Position TAKEN:

Unable to provide an answer in the context of a technical interpretation letter.

Reasons:

21 March 2001 External T.I. 2001-0072595 - WINDUP; PARTITION

Unedited CRA Tags
248(21) 85(3) 54

Principal Issues: partnership reorg - should be ruling request

Position: should be ruling request

Reasons: should be ruling request

21 March 2001 External T.I. 2001-0067995 - TRAVEL & OFFICE EXPENSES

Unedited CRA Tags
8(13) 6(1)(k)

Principal Issues: 1. Whether travel between an employee's home office and his or employer's place of business is personal in nature. 2. Whether an employee is entitled to deduct work space in the home expenses.

Position: 1. Generally, yes 2. No

Reasons: 1. If an employee, whose regular place of work is the home office, is required to regularly and habitually attend staff or other meetings at the main office, the main office generally remains one of two locations from which the employee regularly performs the duties of employment. As a result, travel between such locations is viewed as personal in nature. 2. The requirement in either subparagraph 8(13)(a)(i) or (ii) of the Act has not been satisfied.

21 March 2001 External T.I. 2001-0073855 - EXT. CAB TRUCK REAR SEATS REMOVED

Unedited CRA Tags
248(1)

Principal Issues: Whether an extended cab truck, with rear seats removed, will be considered an automobile per the definition in subsection 248(1) of the Act.

Position: Where the rear seats of a pick-up truck have been removed, it is our general view that the vehicle would still be regarded as having a seating capacity for more than the driver and 2 passengers for the purposes of the definition unless the removal of the back seat could be said to have permanently altered the vehicle such that the folding seats could not easily be refitted into the vehicle.

Reasons: In the latter case, the vehicle would be excluded from the definition of "automobile" since it would have a seating capacity for not more than the driver and 2 passengers, assuming that the use requirement in subparagraph (e)(i) of the definition is also satisfied

21 March 2001 External T.I. 2001-0071185 - INTERNET SERVICE AT HOME PAID BY EMP.

Unedited CRA Tags
6(1)(a)

Principal Issues: Whether a taxable employment benefit is received by virtue of the employer paying for internet service at home.

Position: In the situation outlined, it is unlikely that there is any significant taxable employment benefit as a result of having the internet service in the employee's home to assist him in carrying out his employment duties.

Reasons: Little or no personal benefit.

20 March 2001 External T.I. 2001-0069425 - CLERGY RESIDENCE

Unedited CRA Tags
8(1)(c)

Principal Issues: Does a part-time pastor qualify for the housing allowance and is he restricted other than by his earnings?

Position: If he qualifies, the only restrictions are those that also apply to full-time pastors.

Reasons: Provided the individual meets the status and the function test.

20 March 2001 External T.I. 2001-0070015 - PERSONAL TAX CREDIT

Unedited CRA Tags
118(3)

Principal Issues: Is example 2 in paragraph 39 of IT-513R correct in view of subsection 118(5) of the Act?

Position: Yes

Reasons: Paragraph 118(5)(a) of the Act applies to deny a deduction under subsection 118(1) of the Act in respect of a person where throughout the year the taxpayer lives separate and apart from the spouse or former spouse to whom the taxpayer is required to pay a support amount.

20 March 2001 External T.I. 2001-0067465 - MEDICAL EXPENSE TAX CREDIT

Unedited CRA Tags
118.2(2)

Principal Issues:
Whether an amount paid as a prepayment for orthodontic work is an amount that qualifies as a medical expense under paragraph 118.2(2)(a) of the Act in the year it is paid.

Position: Question of fact.

Reasons: Provided that the expense is incurred, paid for and receipted in the same "period of 12 months ending in the year", as permitted by subsection 118.2(1) of the Act, the payment will qualify as a medical expense under paragraph 118.2(2)(a) of the Act.

20 March 2001 External T.I. 2001-0070295 - CHILD SUPPORT PAYMENTS IN ARREARS

Unedited CRA Tags
56.1(4)

Principal Issues:
Are payments received in settlement of child support payments in arrears taxable?

Position:
No

Reasons:
By virtue of the definition of "support amount" in subsection 56.1(4) of the Income Tax Act, for a payment of arrears to be deductible and required to be included in income, it must, inter alia, be identified with the payment of periodic amounts required by a written agreement or court order. Accordingly, when a reduced amount is paid to obtain a release from a liability imposed by an agreement or order, the payment is not deductible or required to be included in income because it was not made in accordance with the agreement or order.

20 March 2001 External T.I. 2000-0046125 - QUALIFIED FARM PROPERTY

Unedited CRA Tags
110.6(1) 248(4)

Principal Issues:
Whether real property qualifies as "property for which the property was substituted", as that expression is used in the definition of "qualified farm property" in subsection 110.6(1) of the Act, when the previous property was a leasehold interest in the same real property.

Position: Yes, provided the leasehold interest in real property is not described in the exclusions in subsection 248(4) of the Act.

Reasons: Subsection 248(4) of the Act provides that real property includes a leasehold interest in real property. The disposition of a leasehold interest in real property for the real property itself would therefore qualify as a substitution for the original property for purposes of the definition of "qualified farm property" in subsection 110.6(1) of the Act, unless the leasehold interest is specifically excluded pursuant to subsection 248(1) of the Act.

20 March 2001 External T.I. 2001-0070865 - SHAREHOLDER LOANS-GENERAL COMMENTS

Unedited CRA Tags
15(2)

Principal Issues: Whether a shareholder loan has to be included in income.

Position: Yes, unless one of the exceptions in subsection 15(2.2) to (2.6) applies.

Reasons: Rules in subsection 15(2) of the Act.

20 March 2001 External T.I. 2001-0068055 - INDIANS-SUBCONTRACTING INCOME

Unedited CRA Tags
81

Principal Issues:
Is the subcontracting income earned by a status Indian, who does not reside on reserve but maintains a proprietorship business office on reserve, from plumbing services rendered on homes located on reserve in respect of subcontracts with a general contractor corporation, which is owned by non-Indians and is not resident on reserve, exempt from income tax?

Position: Yes

Reasons: The major connecting factor is the location of the revenue generating activities, which in this case are the plumbing services rendered on homes located on reserve.

20 March 2001 External T.I. 2001-0073885 - QUALIFIED FARM PROPERTY

Unedited CRA Tags
110.6(1)

Principal Issues: Client asks us to reconsider our position as stated in technical interpretation 1999-0008385

Position: Issue is beyond the scope of an interpretation. We will only address issue on an advance ruling basis.

Reasons: Our previous letter reflects our general position on the above issue and, in our view, is supported in law. In addition, as indicated in our previous letter, the comments in that letter were based on limited facts.

19 March 2001 External T.I. 2001-0067105 - Meaning of winding-up

Unedited CRA Tags
78(2) 88(1.1)

Principal Issues:
1. Whether our administrative position on when a corporation is wound-up applies for purposes of subsections 78(2) and 88(1.1).

Position:
1. It would apply to 78(2) but not to 88(1.1).

Reasons:
1. Since subsection 88(1.1) allows the parent corporation to claim the subsidiaries losses in any taxation year beginning after the commencement of the winding-up, a more liberal interpretation of the term "wound up" is not necessary, and therefore for purposes of subsection 88(1.1), we should apply a strict interpretation and not consider a corporation wound up until it had been formally dissolved.

19 March 2001 External T.I. 2001-0071735 - CAPITAL GAINS

Unedited CRA Tags
110.6

Principal Issues: Amount of capital gains claimed in 1994

Position: Referral to TSO

Reasons: TSO matter

19 March 2001 External T.I. 2001-0073045 - LATE-FILED ELECTION; FUTURE OBLIGATIONS

Unedited CRA Tags
20(24) Reg. 600

Principal Issues: recommend adding 20(24) elections to Reg 600

Position: recommend

Reasons: discretion of Minister is appropriate

19 March 2001 External T.I. 2001-0063345 F - RS & DE - MANDATAIRE

Unedited CRA Tags
37 127(9)

Principales Questions:
Demande d'agrément à la division 37(1)a)(ii)(E)

Position Adoptée:
Aucun agrément.

19 March 2001 External T.I. 2001-0074075 - Non-share consideration - 85 rollover

Unedited CRA Tags
85(1)(b)\

Principal Issues: Would Department's previous position on 85(1)(b) apply to transfers before 2001 if the 85(1) or (2) elections were filed in 2001

Position: Yes

Reasons: Transfers must take place before 2001 but elections to be filed may be in 2001, provided it is within the time limit in 85(6).

15 March 2001 External T.I. 2001-0070605 - ALLOW. BUSINESS INVEST. LOSSES

Unedited CRA Tags
39(1)(c)

Principal Issues: An individual owns shares of a corporation. As the shares apparently have no value, we have been asked whether the individual has sustained a business investment loss pursuant to paragraph 39(1)(c) of the Income Tax Act.

Position: We have provided general comments.

Reasons: The information provided was limited.

14 March 2001 External T.I. 2000-0043015 - VOLUNTEER

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.

PRINCIPA ISSUES:

Are the payments made to employees who are volunteer members of an XXXXXXXXXX qualify for the exemption under subsection 81(4)?

Position TAKEN

NO, the exemption does not apply. The amounts are taxable.

REASON FOR POSITION TAKEN:

13 March 2001 External T.I. 2001-0065365 - SALE OF HOUSE

Unedited CRA Tags
54 40

Principal Issues:

Taxpayer or taxpayer's wife purchased a new residential home and on behalf of a friend who could not arrange financing. The cost of the home was approximately $117,000. The friend contributed $10,000 towards the purchase price with the taxpayer or his wife paying the rest by way of a $100,000 mortgage and $7,000 of their own funds. The friend was to make all the mortgage payments and repay the $7,000.

Less than two years later, the friend "purchased" the home for consideration of the outstanding balance of the mortgage, $7,000 and the amount of a number of mortgage payments that were missed. At that time, the appraised value of the house was $155,000.

Would the "purchase" of the home by the friend result in a capital gain for the taxpayer?

Position TAKEN:

General comments provided.

Reasons:

8 March 2001 External T.I. 2000-0048405 F - Usufruit sur immeuble en France

Unedited CRA Tags
248(3) 75(2)

Principales Questions: Un nu-propriétaire doit-il s'imposer, en vertu de la Loi, sur le revenu net de location généré par des immeubles situés en France?

Position Adoptée: Si l'usufruit est créé en vertu du droit privé français les dispositions du paragraphe 248(3) de la Loi ne s'appliquent pas. Le nu-propriétaire s'imposera sur les revenus de location à partir du moment où l'usufruit sera expiré i.e. lorsqu'il y aura remembrement du droit de propriété. Par contre, si l'usufruit est créé en vertu de droit privé québécois et que le propriétaire du bien conserve la nue-propriété, le nu-propriétaire doit s'imposer sur les revenus nets de location par l'effet combiné des dispositions des paragraphes 248(3) et 75(2) de la Loi.

8 March 2001 External T.I. 2000-0060635 - Transfer of shares

Unedited CRA Tags
84.1 85(2.1)

Principal Issues: If section 84.1 "applies" but has no effect can subsection 85(2.1) be applied?

Position: No conclusive response.

Reasons: Need a thorough review of all the facts

6 March 2001 External T.I. 2001-0068875 - PRINCIPAL RESIDENCE-CAPITAL OR INCOME

Unedited CRA Tags
40(2)(b)

Principal Issues:
1) Whether real property could be considered the taxpayer's principal residence under paragraph 40(2)(b) of the Act;
2) Whether the sale of such property can be considered on income or capital account.

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

Reasons:
1) In the event a gain resulting from the proposed transactions would be on account of capital, for a property to qualify as a taxpayer's principal residence, it must be demonstrated inter alia that the property was ordinarily inhabited by the taxpayer or his or her spouse, former spouse or child. Both issues involve questions of fact for which insufficient information was provided;
2) From the facts submitted, the taxpayer has not established that, on a balance of probabilities, when the property was purchased he did not have either a primary or secondary intention of selling it at a profit. Moreover, the taxpayer is an experienced realtor and the property was heavily financed. The facts submitted cannot allow us to conclude definitely as to the nature of any gain resulting from the proposed transactions.

2 March 2001 External T.I. 2001-0069555 F - Dividendes - (U.S. spin-off)

Unedited CRA Tags
86.1

Principales Questions: Quelles sont les conséquences fiscales, pour des actionnaires canadiens, de la cession des actions du capital-actions de XXXXXXXXXX ? / What are the tax consequences for canadian shareholders of the spin-off of XXXXXXXXXX ?

Position Adoptée: Commentaires généraux concernant l'article 86.1 proposé de la Loi. / General comments provided on proposed section 86.1 of the Act.

23 February 2001 External T.I. 2001-0066265 F - Salaire différé français

Principales Questions: Déterminer si un " salaire différé " français est imposable au Canada.

Position Adoptée: Le paiement d'un " salaire différé " français constitue, pour les fins de la Loi de l'impôt sur le revenu, une disposition d'un droit de créance pouvant donner lieu à un gain ou à une perte en capital.

22 February 2001 External T.I. 2000-0058645 - SPOUSAL SUPPORT-PERCENT. OF BONUSES

Unedited CRA Tags
56.1(4) 60(b)

Principal Issues:
Divorce agreement effective XXXXXXXXXX , requires that the taxpayer pay spousal support to his former spouse $XXXXXXXXXX per month in spousal support plus:

9 January 2001 External T.I. 2000-0060445 - EMPLOYEE BENEFITS - MEALS

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

Principal Issues: Whether the provision of meals by an employer to an employee results in a taxable benefit which has to be included in the employee's income for tax purposes.

Position: Yes, unless they are supplied at a special worksite or remote work location.

Reasons: Unless the exception in subsection 6(6) of the Act applies, the provision of meals is considered to be an "other benefit of any kind whatever" for purposes of paragraph 6(1)(a) of the Act and must therefore be included in an employee's income.

Technical Interpretation - Internal

21 March 2001 Internal T.I. 2001-0066357 - ARBITRATION AWARD

Unedited CRA Tags
110.2

Principal Issues: Whether retroactive pay equity payments would be considered "qualifying amounts" under paragraph (a) of the definition of this term. In some cases, an arbitrator, whose decision was binding, determined the pay equity settlement.

Position: No.

Reasons: Since the other expressions used in this definition, i.e., "an order or judgment of a competent tribunal" and "a contract by which the payor and the individual terminate a legal proceeding," refer to more formal processes, it is our view, based on the principle of noscitur a sociis or associated words, that an arbitration award for purposes of section 110.2 does not include an award as a result of arbitration under normal collective bargaining.

20 March 2001 Internal T.I. 2000-0061887 - CANADA/FIRST NATIONS FUNDING

Unedited CRA Tags
81(1)(a)

Principal Issues: Whether funding for education/training paid out of funds received by an Indian band pursuant to a Canada/First Nations Funding Agreement would be taxable to the recipient.

Position: General comments provided

Reasons: Insufficient information provided.

20 March 2001 Internal T.I. 2001-0063947 - VACANT LAND-FORMER BUSINESS PROPERTY

Unedited CRA Tags
44(1)

Principal Issues: Whether vacant land that was purchased for the construction of a manufacturing facility meets definition of former business property

Position: The property is not former business property.

Reasons: The land was not used prior to its disposition to earn income from a business. The taxpayer's intention changed when a new property was selected for its manufacturing facility. A strong argument can be made that the land was converted to inventory when the company started subdividing and servicing the lots with a view to selling them.

12 March 2001 Internal T.I. 2001-0066387 - SPECIAL WORK SITE

Unedited CRA Tags
6(6)(a)(i)

Principal Issues: Whether the value of a luxurious house in downtown XXXXXXXXXX exempt under subpar. 6(6)(a)(i).

Position: It may be, provided that the conditions in subpar. (6)(6)(a)(i) apply. However, if the employee is a shareholder, it is likely that the benefit was received qua shareholder rather than qua employee. If the benefit was received by the employee qua shareholder, it is subject to tax under subsection 15(1) of the Act and the exemption in subparagraph 6(6)(a)(i) would not apply. In our view, the more exclusive or luxurious the property, the stronger the presumption is that the executive received the benefit qua shareholder.

Reasons: It is our view that downtown XXXXXXXXXX , may qualify as a special work site if it is a location at which the duties performed by the employee are of a temporary nature. However, in our view, it is unlikely that an employee would be provided with a luxurious home in downtown XXXXXXXXXX .

12 March 2001 Internal T.I. 2000-0056087 - REINSTATEMENT OF CREDITS TO PHSP

Unedited CRA Tags
6(1)(a)(i) 248(1)

Principal Issues: Whether health spending accounts can be reinstated to account for amounts reimbursed to HSA under Section B of car insurance.

Position: There may be a reinstatement of credits in the year in which accident-related expenses were incurred. If plan administrator allows a claim to be filed for those years, the subscriber may be reimbursed for other eligible medical expenses to the extent of the reinstatement.

Reasons: This does not violate guidelines set out in IT-529, and does not affect status of HSA as a plan of insurance.

21 February 2001 Internal T.I. 2000-0006597 - scholarships rec. by indians

Unedited CRA Tags
81(1)(a)

Principal Issues: The effect of the Federal Court of Appeal's decision in the Everett Kakfwi case (99 DTC 5639) on the income tax treatment of scholarships received by status Indians. Our position before Kakfwi is that an agreement referred to in paragraph 90(1)(b) of the Indian Act must flow from a treaty.

Position: No change.

Reasons: In Kakfwi, the Federal Court of Appeal referred with favour to the Supreme Court's interpretation of the terms "treaty" and "agreement" in Mitchell v. Peguis Indian Band ((1990) 2 SCR 85). That is, these terms take colour from one another and that the use of the term "given" can be taken as a distinct and pointed reference to the process of cession of Indian lands.

7 February 2001 Internal T.I. 2000-0059737 - ARBITRATION AWARD

Unedited CRA Tags
5(1)

Principal Issues: What is the appropriate tax treatment of an amount received as an arbitration award after a breach of the collective agreement between an employer and an employee.

Position: In this particular case, income from an office or employment.

Reasons:
The amount received by the employee is compensation for lost wages and the payment "arose clearly and unequivocally by virtue of the contract of employment" such that it is considered to be income from an office or employment and included in income for tax purposes pursuant to subsection 5(1) of the Act.

11 January 2001 Internal T.I. 2000-0001017 - Sourcing of income & foreign tax credit

Unedited CRA Tags
126 4

Principal Issues: Determination of profits allocable to a Japanese branch of a Canadian
corporation for the purposes of the foreign tax credit calculation.

Position: Profits should be allocated between jurisdictions in a manner that reflects the contribution of the activities in each jurisdiction that gave rise to those profits.

Reasons: 1) jurisprudence
2) sourcing rules in Act
3) intent of foreign tax credit regime

11 January 2001 Internal T.I. 2000-0037167 F - CLAUSE D'AJUSTEMENT DE PRIX

Unedited CRA Tags
12(1)x) 53 54

Position Adoptée:
Appliquées en réduction du coût des actions acquises.

9 January 2001 Internal T.I. 2000-0058047 F - FRAIS JURIDIQUES

Unedited CRA Tags
40(2)(g)(ii) 60(0) 18(1)(a)

Position Adoptée:
Non.

14 December 2000 Internal T.I. 2000-0057927 F - Bénéfices relatifs à des ressources

Unedited CRA Tags
20(1)(v.1) Reg 1204(1) Reg 1210

Principales Questions:
Est-ce qu'un gain comptable réalisé par un contribuable (qui n'a aucun gain en capital ni récupération imposable en vertu du paragraphe 13(1) de la Loi) est inclus dans les bénéfices bruts relatifs à des ressources, tel que cette expression est définie au paragraphe 1204(1) du Règlement ?

Position Adoptée:
Le gain comptable réalisé ne serait pas inclus dans le calcul des bénéfices bruts relatifs à des ressources.

15 November 2000 Internal T.I. 2000-0048477 - THIRD PARTY PENALTIES-DISCLOSURE

Unedited CRA Tags
163.2

Principal Issues:
Whether the disclosure of the existence of a false statement in a return is sufficient to preclude the penalty provisions of section 163.2 of the Act from applying. It is claimed that the Hudson Bay Mining and Smeting Co., Limited case supports the view that the disclosure would be sufficient.

26 October 2000 Internal T.I. 2000-0044387 - Subsection 95(2)(a)(i)

Unedited CRA Tags
95(2)(a)(i)
directly earned property income of managementco would not be active

Principal Issues: Whether foreign affiliate's income from the development of real estate was subject to subparagraph 95(2)(a)(i).

Position: NO

Reasons: The test in clause 95(2)(a)(i)(B) was not satisfied.

19 October 2000 Internal T.I. 2000-0047267 F - VERSEMENT PENSION PERIODE DETERMINEE

Unedited CRA Tags
56(1)b)

Principales Questions: Est-ce qu'un montant payable mensuellement pour une période de XXXXXXXXXX ans représente une pension alimentaire ou autre allocation pour subvenir aux besoins du contribuable ou est-ce qu'il s'agit plutôt de versements à valoir sur un montant forfaitaire ou sur un montant de capital?

Position Adoptée: Aucune.

13 October 2000 Internal T.I. 2000-0034027 - REWARD POINTS IN PROMO. PROGRAM

Unedited CRA Tags
20(1)(m)(i) 18(1)(e) 9(1)

Principal Issues: Whether the Taxpayer is entitled to a reserve under subparagraph 20(1)(m)(i) of the Act for the cost of merchandise it anticipates will have to be delivered after the end of the year on the redemption of its customers' reward points in its promotional program where the reward points relate to XXXXXXXXXX .

Position: While we agree that the Taxpayer may not claim a 20(1)(m)(i) reserve in respect of reward points XXXXXXXXXX , since this paragraph indicates that the reserve is only available for amounts that have been included in computing the taxpayer's income from a business in the year or in a previous year under in paragraph 12(1)(a), we are inclined to the view this item may give rise to a deductible expense in computing the Taxpayer's profit for the year under subsection 9(1) of the Act.

Reasons: Based on the relevant caselaw, the fact that the Taxpayer's liability in respect of unredeemed reward points is based on an estimate does not make the liability a contingent one. Further, the fact that the customer has the option of redeeming the reward points or not redeeming them does not change the nature of the liability. Accordingly, it is our view that paragraph 18(1)(e) does not apply to deny the deduction of a reserve for unredeemed reward points on credit sales. Finally, in accordance with the principles set out by the Supreme Court in Canderel Limited, a taxpayer is free to adopt any method for computing profit which is consistent with the provisions of the Income Tax Act, established case law principles or "rules of law," and well-accepted business principles.

October 13, 2000

3 October 1996 Internal T.I. 1996-9523657 - Capitalization rules applicable to non-res.

Unedited CRA Tags
18(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.

TRANSLATION FROM FRENCH

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