Income Tax Severed Letters - 2001-10-26

Miscellaneous

2001 Miscellaneous 2001-0103331 - PARTNERSHIP; GAAR

Unedited CRA Tags
245(2)

Principal Issues:
whether gaar could apply

Position:
maybe, if call option is exercised and 24 month period in 110.6(2.1) avoided

Reasons:
110.6

2001 Miscellaneous 2001-0105461 - AMENDED FACTS FOR RULING

Principal Issues:
Will amendments to file 2001-008388 affect the rulings given?

Position:
No.

Reasons:
The amendments do not affect the application of the law.

Ruling

2001 Ruling 2000-0057853 - EMPLOYEE BONUS PLAN

Unedited CRA Tags
5(1) 9(1) 20(1)(c)

Position:
Favorable ruling given.

2001 Ruling 2001-0099123 - SUPPLEMENTARY UNFUNDED PENSION PLAN

Unedited CRA Tags
248(1) 6(1)(a) 56(1)(a) 12(4)

Principal Issues: Change in facts in respect of a proposed supplementary pension plan.

Position: Amended paragraph 11 of the proposed plan's description.

Reasons: The original wording was not as specific and as clear as the client wanted

2001 Ruling 2001-0089533 - Wind-up of NRO into Limited Partnership

Unedited CRA Tags
18(4) 133(1) 133(9) 248(1)

Principal Issues: Unwinding of NRO structure through amalgamation and winding-up. Whether amalgamation can occur at a specific time on a particular date. Use of limited partnership to replace NRO as investment vehicle holding shares in Canco.

Position: Ruling given with provisos noted.

Reasons: See Issue Sheet.

2001 Ruling 2000-0059543 - ASSUMPTION OF DEBT FOR ASSETS

Unedited CRA Tags
85(1)(b) 20(1)(c) 98 39(2)

Principal Issues:

1) Whether adjusted cost base in the shares of transferee may be used to offset boot for the purposes of 85(1)(b).
2) Whether interest on debt assumed by transferee was deductible under paragraph 20(1)(c) notwithstanding that the aggregate adjusted cost base of the assets transferred was less than the amount of the debt assumed.

Position:

1) Yes
2) Yes

Reasons:

2001 Ruling 2001-0089913 - XXXXXXXXXX - EXEMPT EARNING

Unedited CRA Tags
ACT 4(1) FRANCE XXXXXXXXXX REG 5907 (1) REG 5906 (1)(a)

Principal Issues:
(i) Whether the foreign affiliate of the taxpayer is a resident of France for the purposes of paragraph 1 of Article 4 of the Canada-France Income Tax Convention;
(ii) Whether XXXXXXXXXX and
(iii) Whether paragraph 5906(1)(a) and paragraph (d)(i) of the definition of "exempt earnings" in subsection 5907(1) of the Income Tax Regulations apply to the active business income earned XXXXXXXXXX by a branch of the foreign affiliate.

Position:
(i) Yes;
(ii) Yes; and
(iii) Yes.

Reasons:
(i) The foreign affiliate of the taxpayer is liable to tax as comprehensive as it is imposed by France;
(ii) XXXXXXXXXX has no policy concern with respect to the XXXXXXXXXX ; and
(iii) This will provide a meaningful interpretation of XXXXXXXXXX

2001 Ruling 2001-0073263 - LIMITED PARTNERSHIP-AT RISK

Unedited CRA Tags
96(2.2) 18.1 143.2

Principal Issues:

1. Whether 18.1 will apply to Royalty, Operating Fees and Outsourcing Fees paid by Partnership.
2. Whether 96(2.2)(d) benefit re Call Option.

Position:

1.No
2.Maybe (if exercised)

Reasons:

2001 Ruling 2001-0090193 - DEFERRED SHARE UNIT PLAN-BONUS ACCRUING

Unedited CRA Tags
6801(d)

Principal Issues:
Does the Plan Extension (as defined) meet the requirements of paragraph 6801(d) of the Regulations?

Position:
Yes

Reasons:
All of the requirements of the paragraph have been met.

2001 Ruling 2001-0079143 - DERIVATIVES FOREIGN PROPERTY

Unedited CRA Tags
206(1) 245(2)

Principal Issues: Will the use of swaps so that Canadian bank deposits earn income based on the returns earned by a XXXXXXXXXX trust that invests in foreign property result in the application of GAAR?

Position: No.

Reasons: The use of derivatives in respect of the returns on the Canadian property does not result in the property being considered foreign property for purposes of the Act.

2001 Ruling 2001-0091393 - ASSUMPTION OF DEBT

Unedited CRA Tags
54

Principal Issues: Whether the assumption of debt under a supplementary trust indenture governing the debt would represent proceeds of disposition on the transfer of assets if the transfer agreement between the transferor and the transferee explicitly provides that as between the transferor and the transferee, the transferor remains the primary obligor.

Position: No

Reasons: The assumption of the debt under the supplementary trust indenture makes the transferee jointly and severally liable for the debt with the transferor. As the transfer agreement provides that the tranferor remains the primary obligor and indemnifies the transferee from obligations under the debt, the debt remains that of the transferor. Even if the assumption could be viewed as proceeds, such proceeds would be offset by the value of the indemnity given by the transferor under the transfer agreement.

2001 Ruling 2001-0081903

Unedited CRA Tags
108(2)(a)(i) 132(6) 206(1) 210.1

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 2001-008190

XXXXXXXXXX , 2001

Dear Sirs:

Re: XXXXXXXXXX . (the "Company")
XXXXXXXXXX
XXXXXXXXXX
Advance Income Tax Ruling

2001 Ruling 2001-0092683 - PHANTOM STOCK PLAN EMPLOYEE BONUSES

Unedited CRA Tags
REG 6801(d)

Principal Issues: Will the payment of employee cash awards in the form of deferred share units result in a salary deferral arrangement?

Position: No.

Reasons: The conditions of 6801(d) continue to be satisfied.

2001 Ruling 2001-0086113 - SUPPLEMENTARY UNFUNDED PENSION

Unedited CRA Tags
248(1) 6(1)(a) 56(1)(a)(i) 12(4)

Principal Issues: Is the supplemental retirement arrangement (unfunded pension plan) an SDA or an RCA?

Position: No.

Reasons: It is an unfunded arrangement to provide pension benefits that are supplementary to the benefits provided under an RPP.

2001 Ruling 2001-0093363 - post mortem planning-estate of XXXXXXXXXX

Unedited CRA Tags
88(1)(d.2) and (d.3) 164(6)

Principal Issues: Application of bump denial rules and stop loss rules to property ultimately distributed to the beneficiary of the deceased's estate. Application of subsection 164(6) to the capital loss on the redemption of certain shares owned by the estate of the deceased.

Position: Favourable rulings given.

Reasons: In accordance with tax policy and the law.

2001 Ruling 2001-0086333 - Deposit Receipts

Unedited CRA Tags
104(1) 248(1) 4900(1)(b)

Principal Issues: Whether the creation of deposit receipts evidencing ownership of shares of a corporation represents a disposition of those shares when so deposited or when the deposit agreement is cancelled.

Position: No - based on the particular facts in this situation.

Reasons: The custodian is only acting as an agent for the particular shareholders under the deposit agreement such that the arrangement is not a trust under the Act (except for certain purposes) pursuant to subsection 104(1). Beneficial ownership of the shares remains with the shareholders not the custodian.

Ministerial Correspondence

7 November 2001 Ministerial Correspondence 2001-0102594 - 150(1)(d)

Unedited CRA Tags
156.1(4) 248(1)

Principal Issues: Payment of Federal Income Tax

Position: Referred to Various Sections of the Act

Reasons: As Requested

5 November 2001 Ministerial Correspondence 2001-0106114 - LEAKY CONDOMINIUMS

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

Principal Issues: Financial assistance made available to leaky condominium homeowners in B.C. is not comparable to that offered to Quebec homeowners having pyrite related problems.

Position: No comments made.

Reasons: No interpretation of the Income Tax Act involved. Complaint forwarded to Honourable Alfonso Gagliano as involves housing issues.

16 October 2001 Ministerial Correspondence 2001-0097034 - ADVERTISING EXPENSES

Unedited CRA Tags
19

Principal Issues:
Request for information concerning application of section 19 (Limitation re advertising expense - newspapers) to a specific taxpayer.

Position TAKEN:
Specific taxpayer information is confidential. General comments provided on application of section 19.

Reasons: N/A

Technical Interpretation - External

19 November 2001 External T.I. 2001-0105145 - MEDICAL EXPENSES

Unedited CRA Tags
118.2(2)

Principal Issues: Are specific amounts medical expenses for purposes of 118.2(1) ?
1) difference in amount paid to dentist and amount reimbursed by dental plan
2) difference in amount paid for drugs and amount reimbursed by Care Plan
3) cost of disposable underpads re : incontinence
4) cost of disposable gloves - paraplegics
5) cost of repairs to a wheelchair

Position: YES to all 5

Reasons: listed under 118.2(2) of the Act or allowed in IT-519R2.

16 November 2001 External T.I. 2000-0054435 F - BIENS AGRICOLES ADMISSIBLES

Unedited CRA Tags
110.6(1) 110.6(2)

Principales Questions:
Est-ce qu'une participation dans une société de personnes qui détient principalement des actions d'une société qui exploite une entreprise agricole se qualifieraient à titre de participation dans une société de personnes agricole familiale donnant droit à la déduction pour gains en capital-biens agricoles admissibles, lors de la disposition de ladite participation ?

Position Adoptée:
Non

16 November 2001 External T.I. 2001-0107015 - PARTNERSHIP-WIND-UP

Unedited CRA Tags
98(3)

Principal Issues: Whether the "Modified Partnership" basis described in IC 73-13 would permit an investment club to transfer its assets to its members and then wind up its affairs on a tax deferred rollover basis through the initial use of subsection 98(3).

Position: No.

Reasons: Such a scenario appears to fall beyond the intent and purpose of the "modified partnership" basis described in paragraphs 5 and 8 of the Circular.

16 November 2001 External T.I. 2001-0101055 - gas station fuel tank leakage cleanup costs

Unedited CRA Tags
18(1)(a)

Principal Issues: Are the costs incurred to clean up leakage from underground fuel tank ( gas station) deductible in the current period?

Position: Depends on the Facts.

Reasons: While the nature of any cost depends upon the facts in a given situation, generally, costs incurred to remove pollutants or to modify a condition that was caused or is directly attributed to the business, and that will not contribute value to the land beyond what it would be worth in an undisturbed state, would generally, be considered to be current expenses.

16 November 2001 External T.I. 2001-0105755 - MEDICAL EXPENSE

Unedited CRA Tags
118.2(2)(m) Reg. 5700

Principal Issues: Does a hot tub qualify as an eligible medical expense?

Position: No

Reasons: not described in regulation 5700

14 November 2001 External T.I. 2001-0086765 F - FRAIS DE REPRESENTATION-EXCEPTION

Unedited CRA Tags
67.1(2)c)

Principales Questions:
Est-ce que des sociétés canadiennes peuvent bénéficier de l'exception prévue à l'alinéa 67.1(2)c) lorsque ces dernières soumettent une facture :
* à des producteurs étrangers non assujettis à l'impôt canadien lorsque la facture n'indique pas un montant précis relativement aux frais de représentation encourus par les sociétés ?
* à leur société mère non-résidente lorsque la facture indique un montant précis concernant les frais de représentation encourus par les sociétés et que lesdits frais sont, par la suite, facturés aux producteurs étrangers ?

Position Adoptée:
Non à la première question. Les montants facturés ne répondent pas à l'exception en vertu de 67.1(2)c) puisque les sociétés canadiennes n'indiquent pas de façon précise par écrit les montants pour frais de représentation que les producteurs étrangers ont à payer.
Probablement que oui à la deuxième situation si le montant est payé ou payable contre un paiement raisonnable indiqué de façon précise par écrit à la personne qui fait ce paiement.

13 November 2001 External T.I. 2001-0099065 - LIGHT THERAPY DEVICE-MEDICAL EXPENSE

Unedited CRA Tags
118.2(2)(m) 5700

Principal Issues: Does a light therapy device qualify as an eligible medical expense?

Position: No

Reasons: not described in regulation 5700

9 November 2001 External T.I. 2001-0100305 - EMPLOYER REIMBURSEMENT OF COMPUTERS

Unedited CRA Tags
6(1)(a)

Principal Issues: Whether payments under program in which employer reimburses certain employees for part of the cost of purchasing home computers and software would constitute taxable employment benefits.

Position: Payments would probably result in taxable benefits to employees.

Reasons: Generally, reimbursement of the cost of assets that an employee owns results in a taxable benefits to the employee. There is an exception where an employer provides computers to employees as part of a program to increase employees' computer literacy, if the program falls clearly within our guidelines on employer-paid education costs in Technical News 13. In order to qualify, the employer would have to establish that the principal purpose of the program was to facilitate employee training, the primary beneficially of this training was the employer, and the computers were not part of a remuneration package. This particular program would likely not fit these guidelines because it is targetted to a select group of employees, there are not restrictions placed on the transfer, sale or use of the computers, the employer is not selecting the computer to be provided to the employees, and the program appears to be a longer-term initiative extending over several years. Also, it is questionable whether the principal purpose of the program is to facilitate employee training, or make communication with employees easier.

8 November 2001 External T.I. 2001-0096075 - SR&ED - SOCIAL SCIENCES

Unedited CRA Tags
248(1)

Principal Issues: What is meant by the term "social services" in the SR&ED definition in 248(1) of the Income Tax Act?

Position: not defined in the Act - dictionary definition and some examples provided

Reasons: definition

8 November 2001 External T.I. 2001-0096435 F - Sous-alinéa 75(2)(a)(i) de la Loi

Unedited CRA Tags
75(2)(a)(i)

Principales Questions: Application du paragraphe 75(2) de la Loi de l'impôt sur le revenu lorsque des biens détenus par une fiducie sont susceptibles de revenir au constituant en raison de l'application des articles 1294 et 1296 du Code civil du Québec.

Position Adoptée: Le paragraphe 75(2) ne s'applique généralement pas lorsque les biens peuvent revenir à l'auteur de la fiducie par le seul effet de la loi et non pas en raison des termes de l'acte de fiducie.

8 November 2001 External T.I. 2001-0103375 F - Décès du rentier

Unedited CRA Tags
60(l)(ii)(B) 70(2) 70(3)

Principales Questions: Conséquences fiscales découlant du décès d'un enfant mineur bénéficiaire d'une rente visée à la division 60(l)(ii)(B) de la Loi de l'impôt sur le revenu acquise par lui ou par une fiducie.

Position Adoptée: La valeur de la rente ou de son droit au revenu dans la fiducie, selon le cas, doit être incluse dans le calcul de son revenu.

7 November 2001 External T.I. 2001-0095785 - TAXABLE BENEFITS-VEHICLES&ALLOWANCES

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

Principal Issues:
Employment benefits with respect to the personal travel in connection with the use of an employer's vehicle, and subsistence allowances while at a work site other than the employer's place of business.

Position:
General comments provided.

Reasons:
Insufficient information provided to provide a specific opinion. Comments provided on exceptions in paragraph 6(1)(b) and subsection 6(6).

7 November 2001 External T.I. 2001-0103805 F - SENS D'ACTIFS

Unedited CRA Tags
61.3(1)

Position Adoptée:
Oui.

7 November 2001 External T.I. 2001-0096015 - REIMBURSEMENT OF PROFESSIONAL DUES

Unedited CRA Tags
6(1)(j)

Principal Issues: whether refund of professional dues by professional body is taxable

Position: yes

Reasons: 6(1)(j)

7 November 2001 External T.I. 2001-0107495 - PAY EQUITY SALARY ADJUSTMENTS

Unedited CRA Tags
110.2

Principal Issues:
Follow-up inquiry to 2001-010064, 2001-010174 and 2001-008535 regarding the interpretation of the definition of qualifying amount in subsection 110.2(1) of the Act. Specifically, whether an "arbitration award" must be the result of a process whereby the "payor and the individual terminate a legal proceeding."

Position:
XXXXXXXXXX , it is now our view that the language of the provision cannot support the interpretation that an "arbitration award" must be the result of a process whereby the "payor and the individual terminate a legal proceeding." The lump sum award, however, must be the result of a bona fide arbitration process.

The revised position will alter the view expressed in the above noted documents. As well, they may impact the view expressed in E 2000-0053225, E 2001-0066357 and
2001-008535

Reasons:
Subsection 110.2(1) definition of qualifying amount.

7 November 2001 External T.I. 2001-0104845 - Foreign Reporting Exchangeable Shares

Unedited CRA Tags
233.3

Position: The shares of the MFC are "specified foreign property".

6 November 2001 External T.I. 2001-0100255 - PARTIAL SURRENDER OF INSURANCE POLICY

Unedited CRA Tags
148(9) 148(1) 148(4)

Principal Issues: Tax treatment of a partial surrender of universal life insurance policy with a policy loan.

Position: A policy loan results in a disposition of an interest in the policy and the amount of the policy loan in excess of the adjusted cost basis of the entire policy is included in income. On a partial surrender of the policy, element A of the calculation of proceeds of disposition in 148(9) refers to the cash surrender value of the taxpayer's entire interest in the policy, not the partial interest surrendered, and the taxpayer would be required to include an amount equal to the cash surrender value of the entire policy less any outstanding policy loans into income.

Reasons: Legislation

6 November 2001 External T.I. 2001-0104525 - GST QUICK METHOD OF ACCOUNTING

Unedited CRA Tags
9(1) 12(1)(x) 248(16)

Principal Issues:
What is the correct treatment under the Income Tax Act for the GST/HST differential under the "Quick Method" of accounting where registrants collect tax at 7% or 15% and remit a lower amount without claiming input tax credits on current expenses and inventory?

Position:
The amount is taxable.

Reasons:
The difference between the GST/HST collectible or collected on taxable supplies and the amount of net tax remitted, in accordance with the "Quick Method," constitutes income subject to tax under section 9 of the Income Tax Act; since this difference is to be retained by the registrant in lieu of claiming input tax credits for the GST/HST payable or paid on current expenses and inventory.

6 November 2001 External T.I. 2001-0072335 F - CII-LOCATION

Unedited CRA Tags
127(9)

Principales Questions:
Est-ce que le fait qu'un propriétaire de bien qui a signé une convention de location avec un client cède subséquemment les droits, titres et intérêts dans la convention de location empêche le propriétaire d'avoir un bien admissible, tel que défini au paragraphe 127(9) de la Loi?

Position Adoptée:
En autant que le bien appartenait au contribuable au moment de la location et que le contribuable n'agit pas à titre de mandataire d'un autre contribuable lorsqu'elle signe la convention de location avec le client, cela ne viendrait pas modifier le fait que le contribuable a loué l'équipement à un preneur aux fins de la définition de bien admissible.

6 November 2001 External T.I. 2001-0097145 - REFUNDABLE MEDICAL EXPENSE

Unedited CRA Tags
34.2(5) 122.51(2)

Principal Issues: Will the reserve that has to be included in income per ITA 34.2(5) have to be included in "adjusted income" for the purposes of the refundable medical supplement calculation?

Position: yes

Reasons: 34.2(5) states the amount must be included in income (the section 3 income) and there is no noted exception for the 34.2(5) reserve

XXXXXXXXXX 2001-009714
Shaun Harkin, CMA
November 6, 2001

6 November 2001 External T.I. 2001-0095735 - TRACKING REFUNDABLE TAX IN A GROUP RCA

Unedited CRA Tags
207.5(1) 207.7(1) 207.7(2) 248(1)

Principal Issues: Can a group RCA track refundable tax by each member for the purpose of computing a refund of Part XI.3 tax?

Position: No.

Reasons: The law clearly defines refundable tax in respect of the RCA arrangement as a whole; it does not contemplate tracking the refundable tax in respect of each member.

5 November 2001 External T.I. 2001-0107275 - XXXXXXXXXX

Unedited CRA Tags
56(1)(n) 56(3)

Principal Issues:
Income inclusion of taxable prizes pursuant to paragraph 56(1)(n) received by athletes.

Position TAKEN:
Clarification of reduction under subsection 56(3).

Reasons:
Error in original letter.

5 November 2001 External T.I. 2001-0087565 - paragraph 88(1)(d)

Unedited CRA Tags
84.1 88(1)(d) 110.6

Principal Issues: Whether Cco can avail itself of the bump under paragraph 88(1)(d) in respect of shares owned by Aco?

Position: Shares are likely eligible for the "bump".

Reasons: Provided that the shares of Bco are capital property and are not "ineligible property" as defined in subparagraphs 88(1)(c)(iii) through (vi).

2 November 2001 External T.I. 2000-0032475 - Transfer of Farm Property on Death

Unedited CRA Tags
70(6.2) 70(9)

Principal Issues:
1. When farm land is bequeathed to a spouse can an election be made under ss.70(6.2) on less than the full parcel of land?
2.When a parcel of farm land is bequeathed to several children so to create separate percentage interests in the land (ie. 1/3 of the land to each of 3 children) can the legal representative elect to have an interest in the farm land disposed of at a value between fmv and acb per ss. 70(9) to the exclusion of another interest? (ie. 1/3 elected disposed of at fmv and 1/3 on a rollover basis?)

Position:
1. No
2. Yes- provided other conditions are met

Reasons:
1.70(6.2) election cannot be made wrt an arbitrary portion of the entire parcel bequeathed.
2.provided separate interests have been created by testamentary instrument & provided property (interest in land) vests indefeasibly within 36 month period & beneficiary is Cdn resident before death of the parent.

2 November 2001 External T.I. 2001-0075305 - T5008 REPORTING FOR TRANSFER TO RRSP

Unedited CRA Tags
230(1) 230(2) 248(1)

Principal Issues: Does the transfer of shares from an Employee Share Purchase Plan to an RRSP constitute a sale for purposes of T5008 reporting under Regulation 230(2)?

Position: No.

Reasons: This position is confirmed in 94-110 Handbook on Securities Transactions.

2 November 2001 External T.I. 2001-0107425 F - FONDS RESERVES ET BIENS ETRANGERS

Unedited CRA Tags
206

Position Adoptée:
À compter de la deuxième année suivant l'année où les propositions seront finalisées.

2 November 2001 External T.I. 2000-0033785 - Distributions from a Personal Trust

Unedited CRA Tags
107(2) 248(1)

Principal Issues: 1. Does subsection 107(2) apply to a specific scenario?107(2)

Position: 1. Yes

Reasons: 1. provided election under 107(2.001), 107(2.002) or 107(4) to 107(5) is not applicable; 107(2) will apply as amts are being paid out of original trust in satisfaction of beneficiaries (new trusts) capital interests

2 November 2001 External T.I. 2001-0079225 - EXEMPTION TEST POLICY

Unedited CRA Tags
REG 306 REG 310

Principal Issues: Meaning of benefit on death in Reg. 306(3)

Position: Depends on particular life insurance policy, but may include the face amount of the policy plus any accumulated funds.

Reasons: Definition of benefit on death.

31 October 2001 External T.I. 2001-0104595 - ELIGIBLE CAPITAL EXPENDITURE

Unedited CRA Tags
54 14(1) 14(5)

Principal Issues: We were asked to rule that certain dispositions in XXXXXXXXXX would dispositions of eligible capital property.

Position: Cannot rule. Provided general comments.

Reasons: The transactions upon which we were asked to rule are already completed. Provided general comments only, an audit of the XXXXXXXXXX property transfers from the Partnership to the Corporation is required to confirm whether the Corporation or the Partnership has beneficial ownership of certain properties at the time of their disposition to an arm's length purchaser.

31 October 2001 External T.I. 2001-0096765 - MEDICAL EXPENSE

Unedited CRA Tags
118.4(2)

Principal Issues: Whether registered clinical counsellors of BC are medical practitioners?

Position: not presently

Reasons: 118.4(2) defines medical practitioner as one who is authorized to practice as such under the laws of the relevant jurisdiction

30 October 2001 External T.I. 2000-0052765 F - CAISSE D'ENTRAIDE DE DIOCESE

Unedited CRA Tags
6(1) 56(1) 248(1)

Principales Questions:
1. Est-ce que les sommes versées aux prêtres par un fonds du diocèse constitué principalement de dons provenant de quêtes spéciales et de dons des prêtres sont imposables?
2. Est-ce que les sommes versées aux prêtres par le fonds d'appoint du diocèse constitué de revenus du diocèse dans le but de bonifier le régime de retraite sont imposables?
3. Est-ce que les montants versés par les prêtres et affectés à ce fonds d'entraide sont des dons de bienfaisance aux fins du paragraphe 118.1(3) de la Loi?

Position Adoptée:
1. Selon les renseignements reçus, les sommes versées aux prêtres ne sont pas des sommes versées afin de bonifier le régime de retraite. Il se pourrait que certaines de ces sommes soient des prestations d'assistance sociale ajoutées au revenu net conformément à l'alinéa 56(1)u) et déduites dans le calcul du revenu imposable par l'alinéa 110(1)f). Le Bureau des services fiscaux a conclu qu'il ne s'agissait pas d'avantages imposables aux fins du revenu d'emploi.
2. Les sommes provenant du fonds d'appoint ainsi que du fonds dans le but de bonifier le régime de retraite du prêtre seraient des prestations de retraite ou de pension incluses au revenu par l'alinéa 56(1)a) de la Loi.
3. Aucune

29 October 2001 External T.I. 2001-0075565 F - FRAIS DE SEJOUR ET ALLOCATIONS POUR REPAS

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

Principales Questions:
Est-ce que les montants versés aux employés à titre de frais de séjour et d'allocation pour frais de repas sont imposables et doivent-ils être inclus dans la rémunération totale sur le formulaire T4 ?

Position Adoptée:
Aucune. Commentaires généraux.

29 October 2001 External T.I. 2000-005230A F - INDEMNITE DE TEMPS DE TRANSPORT

Unedited CRA Tags
6(1) 5(1)

Principales Questions:
1. Est-ce que l'indemnité versée à titre de temps de transport, à un employé de l'industrie de la construction qui se déplace vers un chantier éloigné, est imposable ?
2. Est-ce que cette indemnité fait partie de la rémunération assurable aux fins de la Loi sur l'assurance-emploi ?
3. Est-ce que le temps calculé selon la convention aux fins de cette indemnité de temps de transport fait partie des heures assurables aux fins de cette même loi ?

Position Adoptée:
1. Oui, elle serait imposable à titre de revenu provenant d'une charge ou d'un emploi.
2. L'indemnité de temps de transport serait incluse dans la rémunération assurable.
3. Par contre, aux fins de la détermination des heures d'emploi assurable, nous sommes d'avis qu'aucune heure n'est effectivement travaillée ou réputée avoir été travaillée lorsqu'en contrepartie du temps de transport effectué pour se rendre au travail avant et/ou après la journée normale de travail prévue par convention collective, une indemnité de temps de transport fixe ou calculée selon le taux horaire de salaire est versée à un employé (autres que frigoristes).

26 October 2001 External T.I. 2001-0088805 - EMPLOYEE WELLNESS PROGRAM

Unedited CRA Tags
6(1)(a)

Principal Issues:
Does an employer reimbursement of employee membership in a recreational facility used for physical fitness give rise to a taxable benefit?

Position:
Yes.

Reasons:
The primary beneficiary of the membership is the employee, notwithstanding that the employer may receive incidental benefits from overall employee fitness and well being.

25 October 2001 External T.I. 2001-0084095 - FLEXIBLE BENEFIT PLANS

Unedited CRA Tags
6(1)(a)

Principal Issues:
1. Where employee's salary increases during the plan year, can the employer give the employee cash in lieu of additional flex credits during the year, and include the amount in the employee's income.
2. Can the employer calculate the flex credits bases on estimated salary at the beginning of the plan year, as opposed to salary levels when the flex credits are allocated?
3. Can employer award flex credits based, in part, on employee performance?
4. Can the employer calculate the flex credits as a percentage of total compensation including fringe benefits?
5. Can the employer set total compensation levels, with a certain percentage being flex credits, so that flex credits would automatically increase as total compensation increases?
6. Can a flex plan have only two options with one being cash and the other being a health spending account?

Position:
1. The plan would not be affected by the payment of cash to the employees.
2. As long as flex credits are notional, allocated prior to the plan year, and the benefits are selected prior to the plan year, calculation of the benefits based on a reasonable estimate of compensation would probably not, by itself, affect the plan's status. We would need to consider the plan in its entirety.
3. Entire plan must be reviewed in order to determine consequences.
4. Same as 2
5. Where salary levels increase during the year, additional flex credits cannot normally be allocated during the plan year unless the increase in salary was due to a change in employment status. However, all the facts must be reviewed in order to make definitive comments.
6. Can only be determined after reviewing all of the facts.

Reasons:
1. Since the amount received is included in income, it would not cause the plan to fall outside the guidelines in IT-529.
2 & 4. IT-529 does not set out a formula for calculating the allocation of benefits. If the conditions set our in the bulletin are satisfied, and the calculation of the number of flex credits is based on a reasonable estimate of compensation, the plan would likely not fall outside the IT-529 guidelines.
3. Flex credits must be notional, credits must be allocated prior to the plan year, and benefits must be selected before the beginning of the plan year. Credits can vary from year to year, but, in this case, all the facts must be considered to determine if the plan falls within the guidelines of IT-529.
5. Question of fact.
6. The plan may meet the conditions set our in IT-529 but more information is required.

24 October 2001 External T.I. 2000-0014095 - Clause 95(2)(a)(ii)(A)

Unedited CRA Tags
95(2)(a)(ii)(A)

Principal Issues: Whether the amount paid or payable for expenditures is deductible in computing the amount prescribed to be earnings or loss from an active business pursuant to clause 95(2)(a)(ii)(A) of the Income Tax Act in the specific situation outlined in the letter.

Position: Yes.

Reasons: Based on our interpretation of clause 95(2)(a)(ii)(A).

24 October 2001 External T.I. 2001-0103555 - Withholding Commission Payment Non-resident

Unedited CRA Tags
153(1)(a) Reg 105(1)

Position:
Taxpayer should withhold or obtain a Treaty-Based Waiver.

23 October 2001 External T.I. 2001-0104625 - refund interest

Unedited CRA Tags
164(3) 164(3.2) 152(4.2)

Principal Issues: Calculation of interest paid on refunds.

Position: General comments provided.

Reasons: General comments provided.

23 October 2001 External T.I. 2001-0101455 - CCA CLASS. - RACING BOATS

Unedited CRA Tags
13(21) Class 7

Principal Issues:
CCA classification of racing boats. Boats were manufactured in the United States. The taxpayer's representative has asked that the boats be included in Class 16.

Position TAKEN:
Class 7. Not eligible for accelerated CCA under regulation 1100(1)(v).

Reasons:
Class 7 includes, among other things, a vessel and furniture, fittings or other equipment attached to the vessel.

5 October 2001 External T.I. 2000-0044865 - para 4 of article VII Canada US treaty

Principal Issues:
Whether paragraph 4 of Article VII of the Canada-U.S. tax convention would afford an exclusion from the attribution of business profits to the permanent establishment?

Position: Likely no.

Reasons:
Where the managerial or executive services provided by the partnerships Canadian parent corporation (or a Canadian corporation related to its parent) resulted in a finding that the partnership was carrying business through a permanent establishment in Canada within the meaning of Article V of the Treaty, then provisions of paragraph 4 of Article VII would not prevent the attribution to the permanent establishment of the profits from these services.

17 September 2001 External T.I. 2001-0087185 - EVENT OF FAILURE OR DEFAULT

Unedited CRA Tags
212(a)(b)(vii)

Principal Issues:
Subparagraph 212(1)(b)(vii) and events of default description

12 September 2001 External T.I. 2001-0085245 - INTEREST DEDUCTION

Unedited CRA Tags
20(1)(c)

Principal Issues:
Interest deductibility where borrowed money was originally used to acquire investments and a portion of the investments are subsequently disposed of.

11 September 2001 External T.I. 2001-0087365 - SHORT SALES

Unedited CRA Tags
260 9(1) 39(4)

Principal Issues:
1) The characterization for income tax purposes of a hedge transaction, which includes the purchase of exchangeable securities and the short sale of other securities.
2) The tax treatment of fees paid to short lender as compensation for distributions paid on trust units.

Position:
1) A short sale is generally on account of income. However, where shares are borrowed in order to hedge a taxpayer's position with respect to property held on account of capital, the gain or loss on the short sale would also be on account of capital.
2) Compensation payments in respect of a short sale on capital account are not a cost of the securities sold short.

Reasons: See IT-479R

Technical Interpretation - Internal

16 November 2001 Internal T.I. 2001-0099927 F - INTERETS PAYES SUR PRET POUR ORDINATEUR

Unedited CRA Tags
118.62

Principales Questions:
Les intérêts payés sur un prêt pour l'achat d'un micro-ordinateur obtenu dans le cadre du programme de garantie de prêt administré par l'Aide financière aux études (AFE) du gouvernement du Québec sont-ils admissibles pour le crédit d'impôt pour intérêts sur les prêts aux étudiants?

Position Adoptée:
Non

16 November 2001 Internal T.I. 2001-0097587 F - COPRODUCTION-DROIT D'AUTEUR

Unedited CRA Tags
125.4

Principales Questions:

Position de l'ADRC prise par le passé concernant la disposition du droit d'auteur dans des situations particulières.

Position Adoptée:
Énoncé des faits antérieurement étudiés par l'ADRC pour lesquels il n'y avait pas de disposition de droit d'auteur.

6 November 2001 Internal T.I. 2001-0081267 - APPROPRIATIONS

Unedited CRA Tags
181

Principal Issues: The purpose of this memorandum is to reconsider the comments provided in document # 982474 with regard to whether amounts that have been appropriated in the notes to the financial statements prepared for OSFI constitute reserves or continue to be part of retained earnings.

Position: It is our opinion that such appropriations not required by OSFI will have the dual character of reserves and retained earnings. The taxpayer may choose which characterization they prefer for purposes of calculating capital for Part I.3 purposes. Where the appropriation is required by OSFI it is our view that such amounts will constitute reserves.

Reasons: After reconsideration which included taking into account further representations.

6 November 2001 Internal T.I. 2001-0105827 - SUPPORT PAYMENTS-ARREARS

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

Principal Issues: As of XXXXXXXXXX , Individual B owed Individual A the amount of $XXXXXXXXXX (the "Arrears") in respect of monthly spousal support that he was required to pay under several agreements. Under an amending agreement (the "Amending Agreement") dated XXXXXXXXXX , Individual B paid Individual A the amount of $XXXXXXXXXX (the "Amount") in full settlement of the Arrears. Is the Amount deductible by Individual B under paragraph 60(b) of the Income Tax Act (the "Act") and required to be included in Individual A's income under paragraph 56(1)(b) of he Act?

Position: No

Reasons: As indicated in paragraph 22 of IT-530, a lump sum payment made to obtain a release from a liability imposed by an order or agreement whether such liability be in respect of arrears of maintenance payments, future payments or both, does not qualify as an amount payable on a periodic basis under the order or agreement.

1 November 2001 Internal T.I. 2001-0071747 - Dual Residency

Unedited CRA Tags
250(5)

Principal Issues: Clarification requested in respect of the last sentence of the last paragraph in the TN's example of the application rule of subsection 250(5) of the Act published by the Department of Finance Canada on October 27, 1998.

Position: Example provided to explain that what is important for the application rule is the continuity of a person's residence from February 24, 1998, under the Canada-Treatyland treaty, in Treatyland.

Reasons: Wording of the disposition et 1999-0014055

26 October 2001 Internal T.I. 2001-0099777 - employer-provided computers

Unedited CRA Tags
6(1)(a)

Principal Issues: Whether purchase of computers with professional development funds of administrative officers of XXXXXXXXXX would give rise to taxable benefits when employer retains ownership of computers, and they are purchased fro work-related purposes.

Position: Question of fact. Where there is only incidental personal use, then there would be no employment benefit. Where personal use is more than just incidental, then there would be an employment benefit based on the amount of personal use.

Reasons: Personal use of equipment provided by employer falls within ambit of 6(1)(a).

25 October 2001 Internal T.I. 2001-0097897 - NF SR&ED TAX CREDIT

Principal Issues: Does SR&ED performed in the Newfoundland Offshore area qualify for the Newfoundland SR&ED tax credit?

Position: ordinarily no, but the Canada-Newfoundland Atlantic Accord Implementation Act (CNAAIA) deems any reference to province in the NF ITA to include the offshore area therefore to those whom the CNAAIA applies the answer would be yes

Reasons: N/A

24 October 2001 Internal T.I. 2001-0098757 - MATCHABLE EXPENDITURES

Unedited CRA Tags
18.1(1) 18.1(15)

Principal Issues: Whether expenditures under a deferred sales charge plan are "matchable expenditures".

Position: possibly yes but excluded from section 18.1 application by 18.1(15)(a)

Reasons: 18.1(1) "matchable expenditure" definition and 18.1(15)(a)

23 October 2001 Internal T.I. 2001-0096877 - LOSSES FROM FARMING ACTIVITIES

Unedited CRA Tags
9 31

Principal Issues:
1 - Must the expected profit from a tree farm materialise within a taxpayer's life expectancy. 2 - If there is a reasonable expectation of profit will the loss restrictions apply in a particular fact situation?
3 - A clarification of "source of income" used in IT-322R.
4 - What should be considered in determining whether or not there is a reasonable expectation of profit in a particular situation?

Position:
1 - Yes
2 - Likely would.
3 - General discussion on tax cases.
4 - General discussion.

Reasons:
1 - See Agency's position in paragraph 7(g) of IT-373R2 and document #9919195.
2 - See the Federal Court of Appeal decision in The Queen v. Andrew Donnelly, 97 DTC 5499.
3 - The bulletin was mainly based on the Supreme Court decision in Moldowan v. The Queen, 77 DTC 5213.
4 - Question of fact.