Income Tax Severed Letters - 2001-07-20


2001 2001-0080891 - reorganization, change in facts

Unedited CRA Tags

Principal Issues: change of facts, no new issues




Unedited CRA Tags

Principal Issues: minor changes

Position: minor changes

Reasons: no impact on rulings

1999 1999-9927141 - Loss Utilization - XXXXXXXXXX

Unedited CRA Tags
20(1)(c) 1100(26) 55(2)

Principal Issues: Minor amendments to ruling - primarily to amounts to be borrowed - also, for regulatory reasons, transactions will be unwound on XXXXXXXXXX and reinstituted on XXXXXXXXXX

Position: OK

Reasons: Minor amendments


2001 Ruling 1999-0012963 - Allocation of taxable income earned in a prov

Unedited CRA Tags
124 reg 402

Principal Issues: (a) Whether subsection 402(7) of the Regulations would apply to deem certain fees paid by a partnership or corporation (which is a joint venturer of an oil and gas project - a Project Owner) as salary? (b) Would the agency relationship between Agentco (a wholly-owned subsidiary of the Project Operator) and the Project Owners be tainted by virtue of the fact that the Project Owners will be indemnified of any damages or losses resulting from Agentco's or the Project Operator's gross negligence or from wilful misconduct of the senior supervisory personnel of Agentco or the Project Operator? (c) XXXXXXXXXX (d) Whether the severance payments would be considered as "salaries and wages" for the purposes of subparagraph 402(3)(a)(ii) of the Regulations? (e) Whether the amounts paid to XXXXXXXXXX would be considered as "salaries and wages" of the Project Owners for the purposes of subparagraph 402(3)(a)(ii) of the Regulations?

Position: (a) No (b) No (c) Yes (d) No (e) No


2001 Ruling 2001-0077863 - EMPLOYER PROVIDED COMPUTERS

Unedited CRA Tags

Principal Issues:
Whether provision of computer and internet access to employees constitutes taxable benefit to employees

There is no taxable benefit to the employee participants in the program.

The computer equipment and internet access is provided to the employees to enable them to become more computer literate. It falls within the guidelines for General Employment-Related Training set out in Technical News 13 and is consistent with similar rulings given for comparable programs.

2001 Ruling 2000-0061673 - EMPLOYEE SAVINGS PLAN AND FUND

Unedited CRA Tags
7(1) 54

Principal Issues:
Amend ruling to include references to the guarantee provided by the bank.

Amended ruling provided.

The original rulings used wording previously used in the file noted below. The wording was provided to the representative and he did not disagree. However, he is now concerned the omission of a reference to the guarantee agreement in ruling D may be misleading. It was considered that the terms of the guarantee were detailed in the proposal and implicit in the rulings. The change does not impact on the rulings provided.

2001 Ruling 2001-0080393 - PHANTOM STOCK PLAN DIRECTORS

Unedited CRA Tags
REG 6801(d)

Principal Issues:
Will the payment of director's fees in the form of deferred share units result in an SDA?

Position: No.

Reasons: 6801(d) is satisfied.

2001 Ruling 2001-0068203 - TAXABLE BENEFITS

Unedited CRA Tags

Principal Issues: Whether the reimbursement, by an employer, of education-related expenses incurred by an employee, gives rise to a taxable benefit to the employee.

Position: Question of Fact.

Reasons: The determination of whether the employee or the employer is the "primary beneficiary" of the education-related expenses will determine whether or not there is a taxable benefit.

2001 Ruling 2001-0081133 - CEE

Unedited CRA Tags

Principal Issues:
1. Whether the proposed mine will be a new mine for purposes of the paragraph (g) of the CEE definition in 66.1(6).
2. Whether expenses will qualify for inclusion under paragraphs (f) and (g) of the definition of CEE.

Position: 1. Yes 2. Yes

1. Based upon the facts provided and the written opinion received from Natural Resources Canada, the mine will be a new mine for purposes of paragraph (g) of the definition of CEE.
2. Expenses that meet the definition of CEE would constitute CEE provided the conditions of the definition are met.

2001 Ruling 2001-0069703 - LOSS CONSOLIDATION

Unedited CRA Tags
20(1)(c) 112(1) 245(2)

Principal Issues: Loss Utilization. Taxpayer seeking certainty in light of the decision in C.R.B. Logging Co. Ltd. v. The Queen, 99 DTC (FCA).

Position: Favourable ruling given.

Reasons: The facts in the present case can be distinguished from the fact pattern in C.R.B. Logging Co. Ltd. v. The Queen.

XXXXXXXXXX 2001-006970


2001 Ruling 2000-0038973 - Disposition of Property

Unedited CRA Tags

Principal Issues: Does a court order which declares that a person has held property in trust since the property was acquired by that person result in a disposition of that property?

Position: Court order does not result in a disposition of property
REASON: No change of beneficial ownership

2001 Ruling 2001-0082843 - Paragraph 55(3)(a) spin-off

Unedited CRA Tags

Principal Issues: Transfer of XXXXXXXXXX business of taxpayer's subsidiary to be carried out in separate tranches

Position: Allowed to be carried out in two separate transfers.

Reasons: Ruling given for first transfer to be carried out within six months, supplementary to be applied for second transfer.

2001 Ruling 2001-0070933 - PARTNERSHIP; AT-RISK

Unedited CRA Tags
40(3.14)(b) 96(2.2)(d)

Principal Issues: whether partners are limited partners per 40(3.14)(b)

Position: if trust exercises its discretion, possibly; if not, no

Reasons: trust is discretionary

2001 Ruling 2000-0043703 F - Gen successoral

Unedited CRA Tags

Principales Questions: Est-ce que les opérations projetées feront en sorte que l'alinéa 55(3.1)c) sera applicable aux dividendes réputés résultant des opérations réalisées conformément à la décision 3-990975?

Position Adoptée: Non

2001 Ruling 2001-0085043 - LOSS UTILIZATION

Unedited CRA Tags

Position: 20(1)(c) and 245(2)

2001 Ruling 2001-0074333 - Split-up butterfly

Unedited CRA Tags

Principal Issues: Standard Split-Up Butterfly Ruling.

Position: Favourable rulings provided.

Reasons: Complies with rules in section 55.

2001 Ruling 2000-0044193 - XXXXXXXXXX - Butterfly

Unedited CRA Tags

Principal Issues: Standard Spilt-up full wing butterfly

Position: Rulings given.

Reasons: The law.

2001 Ruling 2001-0087153 - RRSP - QUALIFIED INVESTMENTS

Unedited CRA Tags
4900(1)(j) 4900(4) 146(1)

Principal Issues:

Is a mortgage on land situated in Canada a qualified investment for a Registered Retirement Savings Plan where the mortgage is held by a trust for the benefit of all investors (e.g. an RRSP) and each investor's interest in the trust is evidenced by a certificate of indebtedness (the "Certificate")?


"Yes" under current law. Will be "yes" also if proposed change to paragraph 4900(1)(j) becomes law.


2001 Ruling 2001-0077663 - RESEARCH CORPORATION

Unedited CRA Tags

Principal Issues: whether corporation qualifies under 149(1)(j)

Position: yes

Reasons: almost identical rulings provided before; see E 9600943; 932628;
Differs from E9600943 only in that 1) Corp may receive royalties, which Corp will spend on admin or R&D, and 2) 18(1) ruling requested re deduction of membership fees paid to XXXXXXXXXX


Unedited CRA Tags

Principal Issues:
Whether employees can forfeit their right to a bonus in favour of a non-taxable schooling allowance to cover board and lodging where they have children attending postsecondary school outside their community because there is no suitable school in their area.

Employees can elect to receive non-taxable schooling allowance pursuant to subparagraph 6(1)(b)(ix) of the Act.

The requirements of 6(1)(b)(ix) are met in that the allowance is reasonable, there is no school suitable for the child in the community, the child attends the closest suitable school (operating in his or her official language) with suitable boarding facilities, and the employees are required to live in the community in order to perform their duties of employment. The employee forfeits his or her right to the bonus before its quantum is established, and before the school year begins. The choice is irrevocable except in certain conditions. Therefore, it falls within the guidelines set out in IT-529 Flexible Benefit Plans

2000 Ruling 2000-0022943 - shares of credit union

Unedited CRA Tags

Principal Issues: Whether shares of a credit union are considered as shares for purposes of the Act.

Position: Yes.

Reasons: It is represented that they are equity shares.

2000 Ruling 2000-0038133 - GROUP SAVINGS PLAN

Unedited CRA Tags

Principal Issues:
The arrangement is an employees' share purchase plan where shares will be acquired with employee contributions and funds obtained through bank financing. Tax issues concerning the various components of the arrangement are:
1. Does the arrangement constitute a trust?
2 Does section 7 apply?
3. Will the shares be capital property for the purposes of the Act and as a consequence, will the financing be treated on capital account?
4. The arrangement requires a payment of an amount equal to the dividends paid on the shares to the financial institution. Will the Dividends be taxable to the employees? Will other income be taxable to the employees?
5. The employer will pay certain costs for the operation of the plan. Will this result in a taxable benefit to the employees?
6. Can the financing arrangement be characterized as a loan?

1. No. Individual employees hold the property under the arrangement.
2. Section 7 of the Act applies to the transactions but a benefit will only arise if the cost to the employee of the shares is less than the value of the shares at the time of their acquisition.
3. The nature of the gains or losses on the shares is a question of fact. There will be a linkage between the shares and the financing.
4. The dividends and other income will be income to the employee/shareholders.
5. Payment of the expenses of the arrangement by the employer are taxable benefits.
6. No.

1. There is no intention to hold property in trust and under French law it is not a trust.
2. The arrangement encompasses an agreement by the employer or related company to sell shares to employees.
3. Normally an employee acquires shares of an employer as capital property but there could be circumstances where an employee acquires the shares on income account. It is generally considered that the treatment of the financing costs will be on the same basis.
4. The right to the dividends rests with the shareholders. The near cash investments of the arrangement are also owned by the employees.
5. The arrangement is designed to facilitate the employees acquisition and holding of shares. Employer payment of these amounts will be taxable benefits. This is consistent with our position on group RRSPs and similar plans.
6. The necessary elements for a swap/hedge exist.

1999 Ruling 1999-9914603 - Interest deductibility

Unedited CRA Tags
20(1)(c) 1100(26)(a) 55(2)

Principal Issues:
1. Interest deductibility on (i) funds borrowed to make capital contribution to partnership; (ii) to return share capital; and (iii) repay existing debt.
2. Loss consolidation with related corporation.
3. Will the holding of note re: loss consolidation arrangement disqualify corporation from being a "principal business corporation" as described in reg. 1100(26)(a).
4. Partnership will repurchase an option previously granted to a third-party to purchase depreciable property. Cost of repurchase will be added to the UCC of the property.

Position: OK

1. (i) T/P will earn income from partnership in excess of interest expense; (ii) not in excess of stated capital; and (iii) ss 20(3)
2. Dividends received are in excess of interest expense.
3. Referred to Partnership group for consideration - they concluded that a loss consolidation arrangement should not disqualify the corporation from being a "principal business corporation".
4. OK - Referral to XXXXXXXXXX to Policy Review Committee.

Technical Interpretation - External

9 July 2001 External T.I. 2001-0084765 - CONTRIBUTION FOR PRE-1990 SERVICE

Unedited CRA Tags
8(1)(m) 147.2(4)(b) 147.2(4)(c)

Principal Issues:
1) Can a period of pre-1990 past service being purchased under an RPP be considered as being "while not a contributor" if the benefit accrual was previously forfeited for a return of contributions?
2) Does the deductibility of the pre-1990 past service contributions depend upon the individual's Earned Income?

1) NO
2) NO

1) The legislation is clear in differentiating based on whether or not the taxpayer contributed to a registered pension plan. Nothing in the Act would alter that differentiation based on whether the member has left the plan before vesting.
2) The amount is deductible under 8(1)(m) in computing the taxpayer's income from an office or employment, subject to 147.2(4).

9 July 2001 External T.I. 2001-0090445 - TAX ON NON-QUAL. INVESTMENTS

Unedited CRA Tags
146(10.1) 146.1(2.1)(b) 207.1 4900(1)(s)

Principal Issues: What are the tax consequences where a non-qualified investment which was deemed by new paragraph 4900(1)(s) of the Regulations to be a qualified investment for a transitional period, is still held by a deferred plan on and after January 1, 2002?

Position: Does not create an income inclusion for the plan annuitant of an RRSP or RRIF, nor does it invoke a tax under 198(1) for a DPSP. Will generate Part X1.1 tax for RRSP, DPSP, RESP or RRIF if held at any month-end from January 2002 onward. May render RESP revocable. For RRSP or RRIF, there may be tax payable on earnings generated by the non-qualified investment.

Reasons: Factual acquisition must have occurred before September, 2000 for Regulation 4900(1)(s) to apply and the law does not deem an acquisition to occur at the later date.

9 July 2001 External T.I. 2001-0086725 - PROGRAM DIRECTED GIFTS

Unedited CRA Tags

Principal Issues: Whether it is appropriate for a charity to issue receipts in respect of gifts directed to programs of the charity that benefit specified persons or families.

Position: It will depend upon the facts. A charity may adopt a program that benefits a specified person or family where the program is consistent with the charity's mandate. Gifts directed to such a program may be receipted. In order for a transfer of property to constitute a gift, however, no benefit may accrue to the donor directly or indirectly.

Reasons: A gift at law includes only transfers of property without consideration. Where the donor benefits from the transfer of property either directly or indirectly (e.g. by arranging to have the benefit accrue to a designated person), there is not gift. Whether or not such a benefit exists depends upon the facts.

9 July 2001 External T.I. 2001-0081775 - MOTOR VEH. ALLOW-HOME TO WORKPLACE

Unedited CRA Tags
6(1)(b)(vii.1) 6(6)(b)

Principal Issues:
Whether a motor vehicle allowance received from an employer would be considered a taxable benefit where the allowance is in respect of the use of a personal motor vehicle for travel from the employee's principal residence to a particular job site of the employer.

Travelling between the employee's home and the place of employment is personal travel. The allowance is included in the employee's income in the year received.

Paragraph 6(1)(b) of the Income Tax Act.

XXXXXXXXXX 2001-008177
Randy Hewlett
July 9, 2001

6 July 2001 External T.I. 2001-0073385 - CHILD SUPPORT

Unedited CRA Tags
56(1)(b) 60(b) 56.1

Principal Issues:
1. Deductibility of legal fees incurred to obtain spousal support, to obtain or vary an agreement or court order for child support, or to make child support fall under the Federal Child Support Guidelines.
2. Eligibility to claim the equivalent-to-spouse amount for a child in a variety of custody and child support arrangements.
3. Determination of existence of 'commencement day' (defined in ITA 56.1(4)) when a variation agreement or order to vary a pre-May 1997 arrangement keeps the pre-May 1997 child support amount the same but adds a reimbursement provision for specific child expenses such as medical expenses.

1. Referred to position in paragraph 17 of IT-99R5
2. Comment on the application of ITA 118(5).
3. Discussion of ITA 60.1 and of application of 'commencement day' in ITA 56.1(4).

IT-99R5, IT-530; E9824397; E9825676; E9926375; E9828805; E9719215; E9733435; F2000-0058152; F2001-0076157; E2001-0080252; F2000-0014412; E2000-0061574; E2000-0014955

6 July 2001 External T.I. 2001-0085535 - DEFINITION OF ANNUITANT UNDER RRIF

Unedited CRA Tags

Principal Issues: Can the annuitant under an RRIF change the annuitant designation, to reflect their spouse as the new annuitant?

Position: No, this is not possible.

Reasons: Definitions of "RIF" and "annuitant" only permit the spouse to become the annuitant, after death of the first annuitant.

6 July 2001 External T.I. 2001-0081575 - GENERAL INFORMATION TAX EXEMPT ENTITIES

Unedited CRA Tags
149(1)(d) 149(1)(l) 149(10) 149(1.1)

Principal Issues: General information on a number of provisions in section 149. In particular, paragraphs (d)-(d.6), and (l). Also general information on implications of asset transfers between tax exempt entities and other exempt entities or non-exempt entities and on the implications of ceasing to be exempt under subsection 149(10).

Position: General information provided.

Reasons: The Act and IT-496

6 July 2001 External T.I. 2001-0086775 F - SOCIETE A CAPITAL DE RISQUE

Unedited CRA Tags
204.81 127.4

Principales Questions:
1. Est-ce que les conditions d'agrément d'une société à capital de risque permettent le transfert d'une action, détenue par un particulier, au REER au profit de son conjoint.
2. Suite au transfert, l'individu doit-il rembourser le crédit d'impôt qu'il a reçu?

Position Adoptée:
1. Oui.
2. Non.

6 July 2001 External T.I. 2001-0082525 - RRSP WITHDRAWALS & CONTRIBUTIONS

Unedited CRA Tags
146(1) 146(5) 146(8)

Principal Issues: Can a withdrawal from an RRSP be repaid to the RRSP in the same year and therefore have no tax consequences?

Position: No

Reasons: The provisions of the Income Tax Act do not permit a withdrawal to be repaid to an RRSP without tax consequences.

5 July 2001 External T.I. 2001-0089105 F - ECHANGE D"OPTIONS - COUT INDIQUE

Unedited CRA Tags

Position Adoptée:
Commentaires généraux.


5 July 2001 External T.I. 2001-0081075 - SINGAPORE PENSION TAX EXEMPTION

Unedited CRA Tags
56(1)(a)(i) 110(1)(f)(i)

Principal Issues: Will a lump-sum withdrawal from the Singapore Central Provident Fund be excluded from income taxes in Canada?

Position: Provided that the amount is received as a pension benefit, yes.

Reasons: Article XVII of the Canada-Singapore Income Tax Convention provides that pensions and annuities arising in a Contracting State shall only be taxable in that State.

4 July 2001 External T.I. 2001-0068885 F - Entreprise Exploitée Activement

Unedited CRA Tags

Principales Questions: Est-ce que l'activité de location de véhicules constitue une entreprise exploitée activement?

Position Adoptée: Question de faits.

4 July 2001 External T.I. 2001-0088155 - Subsection 40(3.4)

Unedited CRA Tags
40(3.4) 54

Principal Issues:
Will a previous administrative position concerning the application of the superficial loss rules contained in section 54 be extended to subsection 40(3.4)?

Position: Yes.

Since the wording and intent of both the superficial loss rules contained in section 54 and the suspended loss rules contained in subsection 40(3.4) are very similar, the administrative practice should be extended to subsection 40(3.4).

3 July 2001 External T.I. 2001-0083935 - DAMAGES-HUMAN RIGHTS

Unedited CRA Tags

Principal Issues: Is an amount received involving a claim before the Canadian Human Rights Commission in a situation where an employee/employer relationship never began, taxable?

Position: No

Reasons: section 3 - source cannot be linked to employment, office, business or property.

2 July 2001 External T.I. 2001-0086705 - STRUCTURED SETTLEMENT

Unedited CRA Tags
56(1)(d) 12.2

Principal Issues: Can a structured settlement annuity be transferred to another insurance company. It appears that the claimant wishes a more favourable rate thus his legal representative is asking whether a casualty insurer can transfer an annuity to another casualty insurer such that the monthly payments are improved to the claimant.

Position: Will only consider request by way of advance ruling

Reasons: Casualty insurer is the owner of the annuity and can probably transfer that annuity where the claimant and the casualty insurer agree (as well in cases of bankruptcy of the casualty insurer) however once annuity is purchased from an issuer it would be difficult, if not impossible to fund the personal injury liability again without tax consequences.

Technical Interpretation - Internal

3 July 2001 Internal T.I. 2001-0078917 - PARTNERSHIPS AND OVERDRAFTS PART 1.3

Unedited CRA Tags

Principal Issues:

1. On what basis are partnership earnings to be included in the capital tax base of corporate partners where the partnership and partner have different fiscal period ends.
2. When can amounts be netted in determining the amount of bank overdrafts to be included in computing a taxpayer's capital?


1. The corporate partner's share of partnership earnings for the fiscal period of the partnership that ended in the corporate partner's taxation year, whether distributed or not, should be included in the corporate partner's capital for Part I.3. Additionally, in certain circumstances amounts distributed by the partnership during the "stub period" may also be included in the capital of the corporate partner.
2. Generally, where the netting is in accordance with GAAP because of a legal right to offset the amounts. It is important to distinguish between netting or offsetting balances and the aggregation of accounts for balance sheet presentation purposes.


19 June 2001 Internal T.I. 2000-0062787 F - FRAIS JURIDIQUES-GARANTIE

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

Principales Questions:
Les frais juridiques encourus par le contribuable sont-ils déductibles dans le calcul de son revenu?

Position Adoptée:

29 May 2001 Internal T.I. 2000-0053257 F - COOPERATIVE

Unedited CRA Tags

Principales Questions:

25 May 2001 Internal T.I. 2001-0085000 - Bituminous sands in-situ projects

Unedited CRA Tags
1104(7) 1107(1)

Principal Issues: (a) Are there any guidelines for determining whether certain wells constitute one in-situ project for the purposes of subsection 1104(7) of the Regulations? (b) Could there be more than one deposit involved in an in-situ project? (c) How would the viscosity or density of hydrocarbons be determined under subsection 1107(1) of the Regulations?

Position: (a) No (b) No (c) "Dead Oil" Basis

(a) CCRA and NR Can have not yet come up with the formal general guidelines in determining whether certain wells would constitute one in-situ project for the purposes of subsection 1104(7) of the Regulations. Nevertheless, such a determination could only be made based on the circumstances of the situation. The auditors are encouraged to refer the matter to us for review on a case-by-case basis. Based on certain recent cases, we provide our general comments on the matter as follows: (i) both Finance and NR Can have agreed that an in-situ project for the purpose of subsection 1104(7) of the Regulations has never been intended as an "economic unit" or "business unit", rather, it is considered as an "extractive unit" based on the concept of a mine as an "integrated system for the extraction of ore" in the mining industry; and (ii) in a situation where there is a high degree of integration of the extractive processes, it could constitute one project and therefore be deemed to be one mine.

25 May 2001 Internal T.I. 2001-008500A - Damage/Compensation Receipts

Unedited CRA Tags
5, 9 13, 14 38

Principal Issues: (a) Would the damage/compensation receipts be taxable for income tax purposes? (b) Would these receipts be included in computing resource profits if they are on account of income?

Position: (a) Generally Yes (depending on the facts of the situation) (b) Generally No (depending on the facts of the situation)

(a) It is always a question of fact as whether a damage/compensation receipt, either pursuant to a court judgment or an out-of-court settlement, would be considered as on account of income, capital or windfall to the recipient and whether it would be taxable. It is necessary to look at the true nature of both the purpose and the effect of the receipt. A damage/compensation receipt could be considered as on account of income under section 9 of the Act if such receipt is intended to compensate the recipient for its loss of profits. However, a damage/compensation receipt which is intended to compensate the recipient for its loss of profits resulting from destruction or materially crippling the whole structure of the recipient's profit-making apparatus, such a receipt would be considered as a price paid for the loss or sterilization of a capital asset and would therefore be a capital and not an income receipt. A damage/compensation receipt which is on account of capital would be taxable if it could be considered as "eligible capital amount" for the purpose of section 14 of the Act or if there would be "disposition" and "proceeds of disposition" of "property" for the purposes of sections 13, 38, 39, 40 and 54 and subsection 248(1) of the Act. It is our view that a damage/compensation receipt would not be taxable for the income tax purposes only if it is considered as true "windfall" within the criteria as stated in the case of Cranswick, including a receipt in respect of personal injury, exemplary or punitive damage.

16 May 2001 Internal T.I. 2001-0065277 F - FRAIS DE DÉPLACEMENT D'UN EMPLOYÉ

Unedited CRA Tags
8(1)(h) 8(1)(h.1)

Principales Questions:
Doit-on refuser la déduction des frais de déplacement et des frais afférents à un véhicule à moteur engagés par des employés (actionnaires de l'employeur) qui ne sont pas remboursés et qui ne reçoivent aucune allocation de l'employeur uniquement parce que les dépenses servent à gagner du revenu de cette société et non pour eux-mêmes?

Position Adoptée:
Nous sommes d'avis que même si des dépenses engagées par l'employé ont pu servir à gagner du revenu pour la société, elles ont pu être engagées dans l'accomplissement des fonctions de la charge ou de l'emploi de l'employé ce qui fait partie de l'une des conditions prévues aux alinéas 8(1)h) et h.1) de la Loi. Si les autres conditions énoncées à l'alinéa 8(1)h) ou à l'alinéa 8(1)h.1), selon le cas, sont remplies, l'employé aurait droit à une déduction. Le formulaire T2200 doit être joint à la déclaration de revenu de l'employé.

4 May 2001 Internal T.I. 2001-0080967 - INCORP. MUTUAL FUND SALESPERSONS

Unedited CRA Tags
9(1) 56(4)

Principal Issues: Whether the income from the sale of mutual funds may be reported by a corporation set up by a registered salesperson as a result of the recent decisions of the Tax Court in Wallsten and Lakeside Properties Limited

Position: Our position continues to be that only the individual salesperson may report this income based on IT-189R2.

Reasons: As we understand it, the Ontario Securities Act only permits the sale of securities by "salespersons" if they are registered, and it further provides that only individuals may be "salespersons."
May 4, 2001

2 May 2001 Internal T.I. 2001-0065497 F - COMMANDITAIRE-RS&DE

Unedited CRA Tags
127(8) 96(1)g)

Principales Questions:
Est-ce qu'un commanditaire d'une société de personnes en commandite a droit à une perte causée par des dépenses de RS&DE de la société de personnes et à un crédit d'impôt à l'investissement à l'égard de ces dépenses de RS&DE?

Position Adoptée:
Un commanditaire n'a droit ni au crédit d'impôt à l'investissement sur la recherche scientifique ni à une perte d'entreprise causée par des dépenses de recherches scientifiques.

26 April 2001 Internal T.I. 2001-0070307 - CHILD MAINTENANCE

Unedited CRA Tags

Principal Issues: Two Individuals (Individual A and Individual B) became divorced in XXXXXXXXXX . At the time of the divorce, Individual A and Individual B each held a 50% interest in the matrimonial home (the "Home"). Commencing on XXXXXXXXXX , Individual B was required to pay monthly child maintenance ($XXXXXXXXXX per month) to Individual A with respect to the four children of the marriage (Individual A had custody and control of them). Individual B's monthly payments were increased to $XXXXXXXXXX per month pursuant to a XXXXXXXXXX court order. Over the years, Individual B paid Individual A negligible child support. On XXXXXXXXXX , Individual B agreed to transfer his 50% interest in the Home to Individual in satisfaction of the full amount of the arrears outstanding at the end of XXXXXXXXXX . As the value of the 50% interest in the Home is less than the amount of the arrears at that time, are they deductible?

Position: No

Reasons: It is our general position that where arrears are settled for an amount which is less than the total periodic amounts that had fallen into arrears, the amount paid and received pursuant to the settlement, whether as a lump sum or by way of instalments, would not be deductible to the payer or required to be included in the recipient's income (See paragraph 22 of IT-530).

18 April 2001 Internal T.I. 2001-0069467 - RETRO. AGREEMENT-FILM TAX CREDIT

Unedited CRA Tags
125.4 Reg. 1106(1)

Principal Issues:
1. Can we accept that an amended distribution agreement retroactively causes a film to no longer be an excluded production?

1. No.

The original agreement was legal and binding and caused the film to be an excluded production. Generally, we do not accept retroactive amendments, for tax purposes. This position is consistent with jurisprudence [e.g., see Sussex Square Apartments Limited 2000 DTC 6548, Mendel 65 DTC 114, Amelia Rose 73 DTC 5083, and Abrahams (No. 2) 66 DTC 5453].

17 April 2001 Internal T.I. 2001-0064567 F - SPCC-PARTHENON

Unedited CRA Tags
125(7) 127(10.1)

Principales Questions:

1. Pour l'exercice se terminant le XXXXXXXXXX , est-ce qu'une société contrôlée par une société publique qui est elle-même contrôlée par une société privée sous contrôle canadien est une société privée sous contrôle canadien?

Is a corporation a Canadian controlled private corporation throughout its taxation year ending on XXXXXXXXXX where the corporation is controlled by a public corporation that is controlled by a Canadian controlled private corporation?

2. Pour l'exercice se terminant le XXXXXXXXXX , est-ce qu'une société contrôlée par une société non-résidente qui est contrôlée par un groupe de sociétés de gestion non-résidentes qui sont elles-mêmes contrôlées par un résident canadien est une société privée sous contrôle canadien?

Is a corporation a Canadian controlled private corporation throughout its taxation year ending on XXXXXXXXXX where the corporation is controlled by a non-resident corporation that is controlled by a group of non-resident corporations, each of which being controlled by a Canadian resident?

Position Adoptée:

17 April 2001 Internal T.I. 2001-0071097 - Resource Allowance - Tailings

Unedited CRA Tags
20(1)(v.1) 1204(1)(b)(iii)

Principal Issues: Whether the processing of tailings from a potash mine constitute the processing of ore from a mineral resource that is not beyond the prime metal stage or its equivalent.

Position: Yes, provided the tailings are not processed beyond the prime metal stage or equivalent.

Reasons: Although mine tailings are not a mineral resource as defined in the Act, mine tailings constitute ore as the word is defined in subsection 1206(1) of the Regulations. Since the tailings are ore from a mineral resource, and provided the tailings are not processed beyond the prime metal stage or its equivalent, mine tailings meet the requirement of paragraph 20(1)(v.1) of the Act as being in respect of a mineral resource.

6 April 2001 Internal T.I. 2001-0071797 - INDIANS-CONSULTING INCOME

Unedited CRA Tags

Principal Issues: Taxation of consulting business income of a status Indian.

Position: Consulting business income allocated between the exempt and non-exempt portions based primarily on the location, whether on reserve or off-reserve, where the services are rendered and the location of the customers.

Reasons: The location where services are rendered is the major connecting factor because services are the revenue generating activities. The customers' location, as a factor, is reflected in the income allocation between exempt and non-exempt portions because of its influence over the location where the services are rendered.

20 March 2001 Internal T.I. 2001-0074067 - DISABILITY PAYMENTS REC. FROM EMPLOYER

Unedited CRA Tags

Principal Issues: Whether payments made to disabled worker by former employer who is not covered by workers' compensation legislation can be taxed under paragraph 56(1)(v).

Position: Paragraph 56(1)(v) does not apply.

Reasons: The amounts were not paid under a workers compensation law of a province or Canada.

16 February 2001 Internal T.I. 2001-0067027 - SAR replaced by ESOP

Unedited CRA Tags

Principal Issues:
Can a Section 7 employee stock option plan be implemented in substitution for an existing SAR plan without any immediate tax consequences.


Paragraph 7(3)(a) has broad application to limit taxation that results from the implementation of an employee stock option plan. The employer is issuing an option in substitution for future rights under the SAR so 7(3)(a) should apply. Furthermore if the employee is merely substituting one expectation for another, it may be said that the employee does not receive any economic gain at the time of the conversion.
February 16, 2001