Income Tax Severed Letters - 2001-05-25

Principales Questions:
Déductibilité des dépenses de commissions payées par un assureur à l'égard de polices d'assurance de dommages.

Position Adoptée:
Généralement, avant 2000, déductibles dans l'année où elles sont encourues. Après 1999, il est proposé, au paragraphe 18(9.02) de reporter la dépense à l'égard des polices d'assurance de dommages sauf une police d'assurance contre les accidents et la maladie non résiliable ou à renouvellement garanti. Il est aussi proposé de modifier le calcul des réserves fiscales au Règlement 1400 et suivants pour refléter les modifications proposées au paragraphe 18(9.02).

Principal Issues:
Whether certain relocation expenses paid by the employer would be considered a taxable benefit to the employee.

Position: Likely no.

Reasons: Where an employer pays or reimburses an employee for reasonable temporary living expenses while waiting to occupy the new, permanent accommodation, the employers guide to taxable benefits T4130 indicates that such a payment or reimbursement will generally not constitute a taxable benefit to the employee.

Principal Issues:
Deductibility of various moving expenses. Meaning of ordinarily resided.

Position: General Comments

Reasons: General Comments

Principal Issues: Is the ACB of shares redeemed by an estate subject to 47(1)
when the deceased taxpayer's proceeds of disposition of some of the shares were determined under 70(5) and the proceeds for other identical shares determined under 70(6) -(because some shares are to be distributed to the child of the taxpayer and some are to be distributed to the spouse)?

Position: No.

Reasons: As the estate is not a spousal trust as described in 70(6), 70(6) has no application to the ACB of shares held by the estate.

Position Adoptée:
Commentaires généraux

Principal Issues:
1. If the terms of a will require a beneficiary to assume an equitable charge in order to receive a bequest of a "right or thing", is the amount of the equitable charge added to the cost amount of the right or thing under 69(1)(c)?
2. If the terms of a will require a beneficiary to assume an equitable charge in order to receive a bequest of capital property, is the amount of the equitable charge an "eligible offset" as defined in the amendments to 108(1)?
3. Are payments made by the beneficiary pursuant to an equitable charge taxable to the recipient under 105(1)?
4. Does the definition of beneficiary include an individual who is entitled to a bargain purchase price under the terms of a will such that the rollover provisions in section 70 can apply to such transactions?

Position: 1& 2. Question of fact 3. No 4. Yes.

Reasons:
1. One would not ordinarily expect the terms of a will to impose an equitable charge on a bequest of a right or thing since the value of, and even the existence of, a right or thing is dependant on the circumstances existing at the time of death. Suggest a ruling be obtained in respect of a will drafted to impose such a condition.
2. The proposed def'n of eligible offset only applies to obligations that can reasonably be considered to be applicable to the property transferred to the beneficiary. This would not include an equitable charge imposed on one beneficiary to make distributions to other beneficiaries.
3. Our response is based on the assumption that the beneficiary does not hold the property in trust for the recipient. 105 only applies to benefits received from or under a trust.
4. Whether or not the purchaser is a beneficiary of the estate within the meaning of subsection 248(25), the rollovers described in 70(6) and (9) only apply where the property is acquired "as a consequence of death" within the meaning of 248(8). The transaction in the Husel case can be distinguished from bargain purchase options provided under the terms of a will in that the beneficiary of the Husel estate negotiated the purchase with herself as executor separately, since the deceased had died intestate.

Principales Questions: Est-ce que le paragraphe 7(5) de la Loi s'applique à une situation spécifique?

Position Adoptée: Aucune réponse définitive.

Principal Issues: Whether the transfer of title of wholly owned property to joint ownership constitutes a disposition.

Position: It depends on whether there has been a change in beneficial ownership.

Reasons: By virtue of paragraph (e) of the definition of "disposition" in section 54 of the Income Tax Act, a disposition does not include a transfer of property in which there is a change in the legal ownership without any change in the beneficial ownership. However, in a transfer to a true joint tenancy arrangement, there is a disposition.

Position Adoptée:
Oui.

Principales Questions:
Est-ce que les activités de développement, de design et de conception d'un produit, effectuées au Canada par une société qui vend les produits mais qui les fait confectionner à l'étranger par un tiers sont des activités exercées dans le cadre d'opérations de fabrication au Canada?

Position Adoptée:
Si la société exerce un contrôle étendu du début à la fin sur le contenu, la conception et les qualités physiques des biens et qu'elle s'implique considérablement en rapport à ces aspects, les activités de développement, de design et de conception des produits sont des activités exercées dans le cadre d'opérations de fabrication mais elles ne seraient pas exercées dans le cadre d'opérations de fabrication au Canada puisqu'une partie très importante des activités de fabrication et de transformation des produits est effectuée à l'étranger.