Income Tax Severed Letters - 2001-08-17

Ruling

2001 Ruling 1999-0013123 - Distribution of Property From Trust

Unedited CRA Tags
105(1) 110.1(1)(a) 245(2)

Principal Issues:

1. Where the terms of the testator's Last Will name a specific charity as a residual beneficiary of the testator's estate, can the executor of the estate cause a corporation that is wholly owned by the estate to make a donation to the charity and claim a tax credit under 110.1(1)(a)?
2. Will GAAR apply to the proposed transactions?
3. Will the payments pursuant to the settlement agreement by the estate to the child of the deceased be considered benefits as described in subsection 105(1)?
4. Since a payment made by the charity pursuant to the terms of the settlement agreement to a potential beneficiary of the estate would not constitute a proper use of the charity's resources, is it appropriate to amend the settlement agreement?

Position:

1. Yes.
2. No.
3. No.
4. Yes.

Reasons:

1. The executor was given broad powers by the Last Will, including the power to take any action in relation to the corporation that he considered to be in the best interests of the estate.
2. This issue was considered by the GAAR Committee.
3. The recipient of payments from the estate had launched legal suits in challenge of the Last Will. The claims were viewed by the charity, the named beneficiary of the estate, as having merit and accordingly an out-of-court settlement was concluded. As the child will receive payments as compensation for settlement of the legal action she had commenced against the estate, the payments are not benefits pursuant to subsection 105(1).
4. Although the settlement agreement committed the charity to making a certain payment, the charity would not be misusing its resources until an actual payment was made. It is appropriate to permit an alternative arrangement that does not offend the rules governing charities.

2001 Ruling 2001-0075693 - REIT Voting/Income Rights

Unedited CRA Tags
104(7.1) 75(2) 108(2)

Principal Issues:
1. Does 107(4.1) apply to the REIT given that to compensate unitholders that are not party to the unique voting feature in the declaration of trust that will extend to a certain group of unitholders, they will have enhanced income entitlements?
2. Does the operation of parking lots by the REIT meet 108(2)(b)?
3. Are the interests in the REIT described by reference to units given the unique voting feature?

Position:
1. No
2. Yes
3. Yes

Reasons:
1. Reasoning similar to published ATR-65;
2. Operation of the parking lots is part of the leasing and managing of the properties owned by the REIT.
3. The voting feature by itself does not detract from the fact that the interest in the REIT are described by reference to units.

2001 Ruling 2001-0085693 - REFINANCING OF CANSUB

Unedited CRA Tags
20(1)(c) 18(4)

Principal Issues: Whether transfer of debt of wholly owned Canco from US Parentco to a limited partnership (established in XXXXXXXXXX but managed out of the US), where US Parentco was the general partner and US Subco was the limited partner, allowed:

(a) the application of the 10% treaty withholding rate on the interest paid from Canco to the limited partnership; and

(b) Canco to continue deducting the interest paid on the debt.

Position: Yes to both.

Reasons: See our document # 2000-0054593 XXXXXXXXXX .

1998 Ruling 9819593 - XXXXXXXXXX PROJECT, PARTNERSHIP V. JOINT VENTURE

Unedited CRA Tags
96

Principal Issues:
(A) Whether F Co. is the agent of the "joint venturers" of the Project (the "Participants") and whether the revenue received and expenses and expenditures incurred by F Co. could be considered as amounts received or incurred by the Participants, as the case may be?
(B) Whether several "joint ventures" formed to operate an oil and gas project (the "Project") would be considered as one or more partnership(s)?

Position:
(A) Provided that no one or more of the joint ventures of the Project will constitute one or more partnership(s) in law, and that F Co. will be acting solely in the capacity of an agent for the Participants in the Project in law, it is our view that the revenue received, expenses and expenditures incurred by F Co. will be considered as received or incurred by the Participants, as the case may be, in proportion to their interests in the Project.
(B) We do not rule on this issue. (We also do not rule that subdivision j in Division B under Part I of the Act would not apply to these joint ventures of the Project as such a ruling has not been specifically requested by the representative of the taxpayers.)

Reasons:
(A) Unlike other energy projects, the Project contemplates future regional development, as such, the Project agreements provide for future subdivision of the Project interests into functional units and third-party processing for fees and/or charges (i.e. which include imputed rate-of-return/profits). Sharing profits is the prima facie evidence of a partnership, so such processing may taint the relationship of the Participants as a partnership. However, since there are no definite creation of functional units and third-party processing in larger quantity within next few years, it has been agreed by the representative of the taxpayers that a separate ruling request would be made in the future, if necessary, to deal with the issue of functional units and third-party-processing. On the other hand, we are also concerned that by virtue of those provisions of functional units and third-party processing in the Project agreements, the relationship among the Participants might have been considered a partnership in law. We will request a written legal opinion on this matter upon receiving further information and representations from the representative of the taxpayers. In light of the above-noted discussion, a caveat in respect of partnership is provided in the ruling.

Ministerial Correspondence

26 July 2001 Ministerial Correspondence 2001-0089704 - TAXATION OF PROPERTY ON LEAVING CANADA

Unedited CRA Tags
248(1)

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.

XXXXXXXXXX

Dear XXXXXXXXXX:

18 July 2001 Ministerial Correspondence 2001-0087644 - TAXATION OF NON-RESIDENT PROF. ATHLETES

Unedited CRA Tags
2 115

Principal Issues: General information on taxation of non-resident professional athletes.

Position: Non-resident athletes generally taxed like other non-resident employees; in particular, US athletes playing for US teams usually not taxable in Canada.

Reasons: Sections 2 and 115 of the Act; Canada-US Income Tax Convention; 2IT-168R3

Technical Interpretation - External

16 August 2001 External T.I. 2001-0085275 - IMMIGRATION; CND TAXATION

Unedited CRA Tags
128.1(1)

Principal Issues: Is there any information on the taxation of immigrants to Canada?

Position: Yes.

Reasons: Provided general information including reference material available over the internet.

10 August 2001 External T.I. 2001-0084945 F - application des para. 73(1.01) et (1.02)

Unedited CRA Tags
73(1.01) 73(1.02)

Principales Questions: Application des paragraphes 73(1.01) et (1.02) de la Loi de l'impôt sur le revenu.

Position Adoptée: Aucun commentaire.

9 August 2001 External T.I. 2001-0071215 - BECOMING RESIDENT IN CANADA

Unedited CRA Tags
2(1) CHINA TREATY

Principal Issues: Whether a person would be considered a resident of Canada by purchasing a house in Canada for the occupancy of his family members?

Position: A question of fact

Reasons: See details in the letter

18 July 2001 External T.I. 2000-0047355 - FOREIGN PROPERTY REPORTING

Unedited CRA Tags
233.1 233.6 20(11) 126(1)

Principal Issues: Income of a Canadian resident beneficiary from a U.S. and testamentary trust and foreign reporting requirements

Position: General comments

Reasons: N/A

11 July 2001 External T.I. 2001-0078365 F - APPLICATION DE 75(2) ET 104(4)

Unedited CRA Tags
75(2) 104(4) 248(5) 248(25)

Principales Questions: Application des paragraphes 75(2) et 104(4) de la Loi de l'impôt sur le revenu.

Position Adoptée: Commentaires généraux.

11 July 2001 External T.I. 2001-0083435 - ATRICLE XIII OF THE CANADA-US TAX CONVENTION

Unedited CRA Tags
116 245

Principal Issues: Application of Article XIII of the Canada-U.S. Income Tax Convention and sections 116 and 245 of the Income Tax Act.

Position: Gain exempt under Article XIII of the Canada-U.S. Tax Income Convention. No certificate under section 116 of the Income Tax Act necessary.

Reasons: Technical Explanations regarding Article XIII of the Canada-U.S. Income Tax Convention and paragraph 2 of Interpretation Bulletin IT-173R2. Paragraph 50 of Interpretation Bulletin IT-474R, paragraph 64 of Information Circular IC 72-17R4 and documents # E 2000-0016667 and E 9606195.

4 July 2001 External T.I. 2001-0084025 - Foreign Spin-offs (General)

Unedited CRA Tags
86.1

Principal Issues:
General information requested on new foreign spin-off rules. Inquiry subsequently withdrawn.

Position:
Files closed. Taxpayer notified. General comments given.

Reasons: Taxpayer received the information he needed subsequent to his initial contact with us.

Technical Interpretation - Internal

12 July 2001 Internal T.I. 2001-0089347 F - PRESTATION DE DÉCES

Unedited CRA Tags
56(1)(a.1) 56(1)(a)(i)(F)

Principales Questions: Traitement fiscal applicable aux prestations de décès versées en vertu de la Loi sur le Régime des rentes du Québec.

Position Adoptée: En vertu de la division 56(1)a)(i)(F) et de l'alinéa 56(1)a.1) de la Loi de l'impôt sur le revenu, seul le récipiendaire d'un tel paiement qui est également une succession doit l'inclure dans le calcul de son revenu.