Income Tax Severed Letters - 2001-09-14

Principal Issues:
What is a "similar vehicle" for the purposes of the definition of automobile in subsection 248(1) of the Act.

Position:
The determination of whether a particular motor vehicle is a "similar vehicle" for the purposes of this definition is a question of fact. Such a determination can only be made taking into consideration factors such as the function and design of the motor vehicle. For example, the cargo capacity, both in terms of volume and weight, would be important in determining if the motor vehicle in question is indeed similar to a motor vehicle of a type commonly called a van or pick-up truck.

Reasons:
Definition of automobile in subsection 248(1) of the Act.

Principal Issues:
Are
(1) reflexologists
(2) Registered Massage Therapist (RMT) who perform therapy, reflexology, and aromatherapy
(3) Certified Natural Health Practitioners
(4) Aromatherapists
considered medical practioners for the purposes of paragraph 118.2(2)(a) of the Act?

Principal Issues:
Taxation of payments to athletes pursuant to XXXXXXXXXX incentive programs.

Position TAKEN:
Taxable.

Reasons:
Awards are taxable under paragraph 56(1)(n) unless taxable as business or employment income.

Principal Issues: Whether Canadian subsidiary T/P must retain some rights to exploit the results arising from SR&ED to claim SR&ED expenditures

Position: no - the fact that the subsidiary does not have the right to exploit the results of SR&ED that it carries out does not, in and by itself, affect its ability to deduct SR&ED expenditures incurred

Reasons: ITA 37(1)

Principal Issues: Whether amounts paid to attend XXXXXXXXXX to control obesity, qualifies as medical expense, tuition credit, and/or education credit.

Position: - no for education and tuition credit
- possible in extraordinary cases, if provisions of Act are met, to be
considered a medical expense

Reasons: ITA 118.5, ITA 118.6(1) (def. of "qualifying educational program" and "designated educational institution"), and ITA 118.2(2)(e),

Principales Questions:

Une société de personnes était la détentrice d'actions d'une société. Cette société de personnes cesse d'exister et tous ses biens sont attribués aux associés de la société de personnes conformément au paragraphe 98(3) de la Loi de l'impôt sur le revenu (ci-après la " Loi ") de sorte que les associés possèdent, sur chacune des actions de la société, un droit indivis. Suite à un partage, les associés désirent obtenir un droit divis dans les actions. Peut-on partager les actions sans conséquences fiscales?

Position Adoptée:

Principal Issues:
Does adding a doctorate degree in order to enhance book sales and speaking engagement revenue result in a current or capital expenditure?

Principal Issues: Is a French société en nom collectif ("SNC") considered a person and/or a corporate body for the purposes of the Canada-France Income Tax Convention (the "Treaty")? More specifically, should dividends paid by a Canadian resident corporation to a SNC be subject to the 5% reduced rate of withholding under subparagraph 2(a) of Article X of the Treaty.

Position: No. Our position is that the election by an SNC to be taxed in the same manner as French domestic corporations does not make the SNC a body corporate for tax purposes.

Reasons: The law.

Principal Issues: Whether certain payments are "contract payments:, "government assistance", or "non-government assistance" for purposes of 127(18).

Position: Appears not, but question of fact.

Reasons: There is no "taxable supplier" (contract payment); appears to be ordinary business transaction (government assistance); otherwise included in income (non-government assistance).

Principal Issues: Can a structured settlement annuity be transferred to another insurance company. The insurance company has not consented to the transfer.

Position: Cannot rule until there is consent.

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). Short of a court order, once annuity is purchased from an issuer it would be difficult, if not impossible to fund the personal injury liability again without tax consequences. If the claimant wishes to withdraw any funds, the new annuity would be considered a regular annuity.

Principal Issues:
Tax planning for associated corporation and small business deduction rules.

Position:
General comments provided.

Reasons:
Tax planning is outside the purview of opinions given by the Directorate.

Principal Issues:
Clarification of opinion E 2000-005400. Where grape growing and wine making is a single business:
(1) Is it farming?
(2) How is inventory valued?

Position:
(1) The business is wine-making.
(2) Inventory is valued at cost.

Reasons:
(1) IT-206R; the purpose of the grape-growing activity is to supply raw materials used in the wine-making business.
(2) Subsection 10(1).

Principal Issues:
Where an employee decides to take work from the place of employment to his or her home is the travel considered to be business related or personal?

Position:
Personal.

Reasons:
In situations where travel includes personal and employment elements, one must look at the primary purpose of the trip to determine if it is personal or employment related. Where an employee decides to take work from the place of employment to his or her home, the primary purpose of the travel is considered to be for personal reasons.

Principales Questions:
Est-ce qu'un particulier qui a la garde partagée de ses enfants pourrait réclamer le crédit équivalent pour personne entièrement à charge lorsqu'une ordonnance de la cour prévoit que ce particulier est tenu de payer une pension alimentaire pour le bénéficie de ses deux enfants ?

Position Adoptée:
Non

Principal Issues: Can a psychoeducational consultant who has recommended that a high school student receive tutoring services satisfy the requirement of 118.2(2)(l.91) for eligible medical expenses

Position: NO

Reasons: The requirement is that the remuneration paid for tutoring services qualify for eligible medical expenses is that the need for the tutoring services be certified in writing by a medical practitioner and the tutor must not be related to the individual requiring the services.

Principal Issues:
(1) Whether an arrangement whereby a resolution is passed by the board of directors of a company to reimburse employees for medical expenses would qualify as a PHSP under the Act, where the gross salary entitlements of the employee are reduced by the amount of the reimbursement.
(2) Whether the reimbursement of the medical expenses to an employee who is also a shareholder constitutes a subsection 15(1) benefit.
(3) Whether the reimbursement of the medical expenses is deductible by the employer.

Position:
(1) No.
(2) Question of fact.
(3) If paid to an employee the amount is deductible. However, if the amount is paid to a shareholder, it is not deductible.

Reasons:
(1) Definition of PHSP subsection 248(1) and IT-339R2
(2) Paragraph 6(1)(a) and subsection 15(1).
(3) Paragraph 18(1)(a).

Principales Questions: Possibilité d'appliquer les dispositions de la Loi pour imposer des prestations versées en vertu du RRQ à des bénéficiaires non-résidents

Position Adoptée: Interprétation de l'article 18 de différentes conventions fiscales

Principal Issues:
Do long-term disability payments qualify for the pension income tax credit under subsection 118(3) of the Act?

Position:
Question of fact - depends on whether the payments are in respect of a life annuity. If the long-term disability benefits form part of early retirement benefits provided because of disability, they may be "in respect of a life annuity." However, if the payments are income to replace salary or wages, and retirement benefits continue to accrue that will fund a pension commencing at retirement, they may not be payments "in respect of a life annuity."

Reasons:
The definition of pension income provided under subsection 118(7) of the Act / Previous opinion.

Principal Issues:
1. Application of grandfathering of shares for the purpose of the stop loss rules of subsection 112(3) to (3.2) of the Act.

2. Whether a change in ownership and a change to the shareholders' agreement will affect the application of the grandfathering provisions.

Position:
1. Not necessarily grandfathered.
2. Likely no effect on grandfathered status.

Reasons:
1. No documentary evidence provided to suggest that the redemption, cancellation or acquisition of the specific shares was contemplated.

Principal Issues:
Whether a certain association qualifies as a non-profit organization and if it does not, whether the taxable capital gain realized by the association is taxable in the association or in the hands of the members.

Position: Depends on the particular facts.

Reasons:
The constitution of the Association permits the distribution of income for the personal benefit of members. Therefore, it would appear that the Association is not and never was a non-profit organization for the purposes of paragraph 149(1)(l) of the Act. However, this determination can only be made after the end of the particular taxation year, having regard to all the facts and as such falls within the purview of the TSO. It appears that Association may be a bare trust in which the individual members will be taxable on any capital gains realized on the disposition of the property.

Principales Questions:
1. Est-ce qu'après 2000, un contribuable/locateur peut vendre un bien en vertu d'un contrat de bail (selon la position de l'Agence au Bulletin d'interprétation IT-233R et selon le traitement comptable)?
2. Est-ce que les critères énoncés dans le Bulletin d'interprétation IT-233R continuent de s'appliquer afin de continuer à traiter un bail conclu avant 2001 comme un contrat de location-financement?
3. Pourquoi un preneur doit-il inclure un bâtiment qu'il a construit sur un terrain loué dans le cadre d'un bail emphytéotique (voir paragraphe 5, IT-324) dans la catégorie 1 plutôt que la catégorie 13?

Position Adoptée:
1. Non, s'il s'agit d'une convention de bail en droit. Le Bulletin d'interprétation IT-233R a été annulé en date du 14 juin 2001 (voir le bulletin de Nouvelles techniques no 21).
2. Non. La caractérisation dépendra des faits particuliers d'une situation donnée.
3. Pour être conforme au paragraphe 1102(5) du Règlement.

Principal Issues: Whether Canadian subsidiary T/P must retain some rights to exploit the results arising from SR&ED to claim ITC's (assuming requirements of subparagraph 37(1)(a)(i) are met)

Position: no - the fact that the subsidiary does not have the right to exploit the results of SR&ED that it carries out does not, in and by itself, affect its ability to deduct SR&ED expenditures incurred by it and claim the related ITC in computing income

Reasons: ITA 37(1) and 127(9) (ITC definition),