Income Tax Severed Letters - 2001-11-23

Technical Interpretation - External

7 December 2001 External T.I. 2001-0092415 - EMPLOYEE EXPENSES (DAMAGES & INTEREST)

Unedited CRA Tags

Principal Issues: An individual, who is an employee and is presumably entitled to deduct expenses under paragraph 8(1)(f) of the Income Tax Act, has asked whether he is entitled to deduct (i) a damages payment and (ii) interest on borrowed money used to make the damages payment.

Position: General comments were provided.

Reasons: The information was limited.

7 December 2001 External T.I. 2001-0107765 F - RPA-ALLOCATION DE RETRAITE

Unedited CRA Tags
60(j.1)(iii)(A) 8(1)m)

Principales Questions: Un contribuable peut-il déduire la totalité d'une cotisation à un régime de pension agréé en vertu de l'alinéa 60j.1) même si une partie de la contribution peut être déductible en vertu de l'alinéa 8(1)m) de la Loi

Position Adoptée: non

7 December 2001 External T.I. 2001-0103795 - capital cost allowance

Unedited CRA Tags
13(20) 1102(19) 1100(1)

Principal Issues:
Several issues related to subparagraph (a.1)(i) of class 17, contained in Schedule II of the Income Tax Regulations:

(1) What does acquired mean?
(2) If the asset is acquired before February 28, 2000, but is not available for use until February 28, 2000 or some time thereafter, will it be included in class 1 or class 17?
(3) If capital additions were made after February 27, 2000 to eligible electrical generating equipment acquired before February 28, 2000, would the addition be included in class 1 or class 17?
(4) How will the disposition of an electrical generating unit after February 27, 2000 have to be reported for CCA purposes where part of the cost is included in Class 1 and another part is included Class 17?

(1) The date on which legal title to it is obtained, or the date on which the taxpayer has all the incidents of ownership, if legal title remains with the owner.
(2) Class 17.
(3) Class 17.
(4) Reasonable allocation of proceeds of disposition.

(1) IT-285R2.
(2) Subsection 13(26).
(3) Regulation 1102(19)
(4) IT-220R2 and section 68.

6 December 2001 External T.I. 2001-0113375 F - PLACEMENT REER NASDAQ

Unedited CRA Tags
207.1(1) 146(10) REG 4900(1)(A)

Principales Questions:
(1)Un placement non admissible auquel l'alinéa 4900(1)s) du Règlement s'applique sera-t-il considéré avoir été acquis par la fiducie de régime le 1er janvier 2002 si la fiducie continue de posséder ce placement après le 31 décembre 2001 ?
(2) Si la fiducie de régime continue de posséder le bien après le 31 décembre 2001, est-ce-que la partie XI.1 de la Loi s'appliquera ?

Position Adoptée:
(2) Oui, la partie XI.1 de la Loi s'applique et l'impôt se calcule sur la juste valeur marchande du bien au moment de son acquisition.

5 December 2001 External T.I. 2000-005561B - DISPOSITION OF A LIFE INSURANCE POLICY

Unedited CRA Tags
54 148 56(1)(j)

Principal Issues:
1.Can a policyholder claim a capital loss upon the disposition of a life insurance policy?
2. Can section 9 apply with respect to a life insurance policy which has been acquired from the terminally ill?

1. No
2. Yes

1.A capital loss is not permitted by virtue of subparagraph 39(1)(b)(ii) nor is there any provision in the Income Tax Act permitting a deduction of a loss incurred upon such a disposition by a policyholder of a life insurance policy to which section 148 applies.
2. There is an argument that section 9 and not section 148 applies where a life insurance policy is acquired for the purpose of earning a profit on the disposition thereof.

4 December 2001 External T.I. 2001-0078305 - PRIVATE HEALTH SERVICES PLAN

Unedited CRA Tags

Principal Issues: Whether employees are acting as agents of the employer where the employees directly pay the premiums to the insurer under a private health services plan and are reimbursed by the employer.

Position: Uncertain.

Reasons: Advance ruling should be requested so that all relevant facts and proposed terms of reimbursement arrangement can be considered.

3 December 2001 External T.I. 2001-0096125 - LIFE INSURANCE POLICY

Unedited CRA Tags

Principal Issues:
Whether or not the substitution of the life insured under a life insurance policy would result in a disposition of the life insurance policy

A change in the life insured under a policy would likely be a sufficiently material change to result in a surrender of the original policy.

Whether or not there is an actual disposition of a life insurance policy remains a question of fact.

30 November 2001 External T.I. 2001-0092145 - PAYMENTS MADE TO MEMBER OF NPD

Unedited CRA Tags
149(1)(l) 149(12) 15(1)

Principal Issues:
Whether capital improvements are considered to be a taxable benefit to the members.

Depends on the particular facts.

Condominium Corporations are governed by provincial legislation. Such legislation details what capital improvements a corporation can undertake and what property is the responsibility of each unit holder.

29 November 2001 External T.I. 2001-0102455 - MEDICAL EXPENSES

Unedited CRA Tags
118.2 118.3 18(1)(a)

Principal Issues: whether expenses are medical expenses

Position: -no

Reasons: not listed in ITA

XXXXXXXXXX 2001-010245
Denise Dalphy, LL.B.
November 29, 2001

29 November 2001 External T.I. 2001-0104115 - DATE PROPERTY SOLD-CONTINGENT SALE

Unedited CRA Tags

Principal Issues:
What is the relevant date FMV has to be determined for purposes of the Income Tax Act in a situation where there is a sale of property to a non-arm's length person and the transaction date is contingent on a future event?

The date this contingency is met and both parties enter into an irrevocable contract of sale.

Paragraphs 18 and 19 of IT-285R2.

28 November 2001 External T.I. 2001-0104285 F - PRESTATION CONSECUTIVE AU DECES

Unedited CRA Tags
248(1) 56(1)(a)(iii)

Position Adoptée:
Application de la Loi

28 November 2001 External T.I. 2001-0094835 - EMPLOYEES-OFFICE EXPENSES

Unedited CRA Tags
8(1)(i)(ii) 6(1)(e)

Principal Issues: 1. Whether travel between an employee's home office and another work location is personal in nature (i.e., whether the other work location is a regular place of work). 2. Whether an employee is entitled to deduct work space in the home expenses.

Position: 1. and 2. - General comments were provided.

Reasons: The information provided was very limited.

27 November 2001 External T.I. 2001-0101325 - SOCIAL ASSISTANCE

Unedited CRA Tags

Principal Issues:
Tax treatment of amounts received to care for seniors with mental and/or physical handicap in taxpayer's home.

Position TAKEN:
Question of fact. General information provided.

Insufficient information provided.

26 November 2001 External T.I. 2001-0101425 - Subsection 69(11) and 245(2)69(11)

Unedited CRA Tags

Principal Issues: Additional comments on 2000-005892.

Position: No additional comments provided.

Reasons: No new information.

23 November 2001 External T.I. 2001-0104135 - PSHIP CARRIED ON AS A PROPRIETOR

Unedited CRA Tags

Principal Issues: Is the excess, described in subparagraph 98(5)(b)(ii) lost if there is no capital property to bump (per 98(5)(c))?

Position: yes

Reasons: 98(5)(c) applies only to "non-depreciable capital property" after December 4, 1985

XXXXXXXXXX 2001-010413
Shaun Harkin, CMA
November 23, 2001

22 November 2001 External T.I. 2001-0101935 - PHSP-COST PLUS PLANS

Unedited CRA Tags
20.01 248

Principal Issues: PHSP questions based on the establishment of a "cost-plus" concept.

Position: Self-employed with no employees cannot qualify

Reasons: no element of insurance

20 November 2001 External T.I. 2001-0096865 - Single Purpose Corporations

Unedited CRA Tags

Principal Issues: Current position on single purpose corporations.

Position: Administrative practice still valid as long as seven outlined conditions are met.

Reasons: Administrative practice will not be expanded to cover situations that it was not intended to cover

15 November 2001 External T.I. 2001-0088285 F - deferral of gain on involuntary dispositions

Unedited CRA Tags
44(1) 44(5)

Principal Issues: Whether subsection 44(1) of the Act would apply in a particular situation where the taxpayer would dispose of the "replacement property" before the time the taxpayer would be deemed under subsection 44(2) to have disposed of the "former property."

Position: Technically no if it is reasonable to consider that Building no. 3 was acquired by OPCO solely to replace Building no. 2. However, subsection 44(1) could apply in the circumstances if it is reasonable to consider that Building no. 3 was also acquired by OPCO to replace Building no. 1.

Reasons: One of the requirements under subsection 44(1) of the Act is that the "replacement property" may not be disposed of by the taxpayer before the time the taxpayer disposes of the "former property". Paragraph 44(5)a) also provides that a particular capital property is a "replacement property" if it is reasonable to conclude that the property was acquired by the taxpayer to replace the "former property."

7 November 2001 External T.I. 2001-0086195 - deferral of gain on involuntary disposition

Unedited CRA Tags
13(4) 13(4.1) 44(1) 44(5)

Principal Issues: Whether, subsections 13(4) and 44(1) of the Act would apply in a particular situation where the taxpayer would only owned the "replacement property" for a short period of time, would dispose of such "replacement property" in favour of its parent corporation and the parent corporation would lease the "replacement property" back to the taxpayer.

Position: Depends on the facts and circumstances in each case.

Reasons: Application of subsections 13(4) and 44(1) of the Act conditional to various conditions being met. Replacement property acquired must be capital property to the taxpayer. Replacement property must not be disposed of by the taxpayer before the time the taxpayer is deemed to dispose of the former property by virtue of subsection 44(2). Conditions in paragraphs 13(4.1)(a) to (b) and 44(5)(a) to (b) must also be met. Considering the short holding period, one would have to determine, among other things, if is reasonable to conclude that the property was acquired by the taxpayer to replace the former property (paragraph 44(5)a) of the Act).

6 November 2001 External T.I. 2000-0029615 F - revenu protégé en main

Unedited CRA Tags
55(2) 111(5.1) 55(5)

Principales Questions: Dans la situation donnée, est-ce qu'il faut tenir compte de la déduction prévue au paragraphe 111(5.1) dans le calcul du revenu protégé en main d'une société?

Position Adoptée: Oui

6 November 2001 External T.I. 2001-0105945 F - INTERETS LUDCO SINGLETON

Unedited CRA Tags

Principales Questions: Quelle est l'incidence des arrêts Ludco et Singleton sur les politiques et pratiques administratives de l'ADRC en matière de déductibilité des intérêts?

Position Adoptée: Nous maintenons les pratiques actuelles quant à la déductibilité des intérêts en attendant les résultats d'une étude interne sur ce sujet.

1 November 2001 External T.I. 2001-0073025 - Residency Status-Individuals Relocating

Unedited CRA Tags

Principal Issues: Canadian residency status of individuals who leave Canada and relocate to another country that has remittance, territory or worldwide income based taxation systems.

Position: Question of fact

Reasons: Decision must be made on a case by case basis.

5 October 2001 External T.I. 2001-0093245 F - OSBL-DETENTION D'ACTION D'UNE FILIALE

Unedited CRA Tags

Principales Questions: Une organisation sans but lucratif visée à l'alinéa 149(1)l) de la Loi peut-elle détenir 100% des actions d'une filiale à but lucratif.

Position Adoptée: La détention des actions, en elle-même, n'empêchera pas l'organisation de respecter les dispositions de l'alinéa 149(1)l) de la Loi.

5 October 2001 External T.I. 2001-0093285 F - ASSURANCE-VIE CEDES EN GARANTIE

Unedited CRA Tags

Principales Questions: Pour les fins de 20(1)e.2) de la Loi, pour que les primes d'assurance soient déductibles en totalité ou en partie, un intérêt dans la police doit être " cédé " à l'institution financière. Quelle interprétation doit-on donner au terme " cédé "?

Position Adoptée: Question de fait. Le créancier doit avoir un droit de recevoir une partie ou la totalité du produit de la police d'assurance advenant un événement futur.

5 October 2001 External T.I. 2001-0093315 F - GIFFORD INTERET

Unedited CRA Tags
20(1)(c) 8(1)(f)

Principales Questions:
1. Est-ce que l'ADRC est d'accord avec le jugement de la Cour canadienne de l'impôt dans l'affaire Gifford à l'effet que l'achat d'un droit de fournir des services de courtage à des clients, lorsque le vendeur n'est pas propriétaire de la "clientèle", constitue une dépense courante?
2. Est que l'ADRC accepte le jugement de la Cour canadienne qu'une dépense d'intérêts peut, selon les faits, être une dépense en capital déductible selon l'alinéa 20(1)c) ou une dépense courante déductible en vertu de l'article 9?

Position Adoptée:
1. Non.
2. Non.

5 October 2001 External T.I. 2001-0093165 F - BAIL DISPOSITION

Unedited CRA Tags

Principales Questions: Comment devront être traités les contrats de bail et les contrats de crédit-bail par les contribuables qui ont suivi les directives du Bulletin d'interprétation IT-233R avant son annulation? Il y aura-t-il des règles transitoires?

Position Adoptée: Cette détermination dépendra des faits particuliers d'une situation donnée. On encourage les contribuables à contacter le bureau des services fiscaux de leur localité.

5 October 2001 External T.I. 2001-0093355 F - PART INDIVISE SUPPLEMENTAIRE - RAJOUT

Unedited CRA Tags
ANNEXE II REG. 1100(2) 20(1)(B)

Principales Questions:
1. Est-ce que l'acquisition d'une part indivise supplémentaire dans un immeuble fera partie de la catégorie 1 comme bien distinct ou si l'alinéa k) de la catégorie 3 pourrait s'appliquer parce que l'on considère le bien comme un rajout à la part de l'immeuble déjà détenue qui fait partie de la catégorie 3?
2. Est-ce que le rajout à l'immeuble serait sujet à la règle de demi-taux prévue au paragraphe 1100(2) du Règlement?
3. Est-ce qu'aux fins du paragraphe 1101(1ac) du Règlement, l'ensemble des parts de l'immeuble sera considéré comme étant un seul bien locatif?

Position Adoptée:
1. Nous sommes d'avis qu'il s'agit d'un rajout à la part de l'immeuble déjà détenue et que l'alinéa k) de la catégorie 3 pourrait s'appliquer.
2. Nous sommes d'avis qu'il y a acquisition de biens dans une année même s'il s'agit du rajout à un bien.
3. La totalité de la part détenue dans l'immeuble sera considérée comme étant un seul bien locatif.

5 October 2001 External T.I. 2001-0093185 F - ATR-66

Unedited CRA Tags
80 245(2)

Principales Questions:
On nous demande d'élaborer sur l'abus des dispositions de la Loi dans une série d'opérations impliquant une société mère non-résidente et une filiale canadienne (lettre E9518785) afin d'éviter l'application de l'article 80.

Position Adoptée: Commentaires généraux

5 October 2001 External T.I. 2001-0093215 F - impot grandes societes

Unedited CRA Tags
181.4(1) 181.1(1)

Principales Questions: Si une société qui ne réside pas au Canada établit un chantier de construction au Canada pour une période de six mois et qu'elle y utilise des machines ou du matériel substantiel, l'ADRC considère-elle que cette société sera exonérée du paiement de l'impôt de la Partie I.3 de la Loi ?

Position Adoptée: Non, sauf si une convention fiscale prévoit une disposition pour alléger cet impôt.

5 October 2001 External T.I. 2001-0093225 F - EFFET RETROACTIF

Unedited CRA Tags

Principales Questions:
De quelle façon l'Agence appliquera l'alinéa 110(1)d) de la Loi compte tenu de son effet rétroactif?

Position Adoptée:
On accepte de procéder à des nouvelles cotisations à la demande des contribuables.


10 September 2001 External T.I. 2001-0089205 - PARTNERSHIP;CDA;CAPITAL GAINS

Unedited CRA Tags

Principal Issues: computation of partner's taxable capital gain

Position: formula in 96(1.7)

Reasons: formula in 96(1.7)

Technical Interpretation - Internal

7 December 2001 Internal T.I. 2001-0099547 - BUS PASSES MUNICIPAL EMPLOYEES

Unedited CRA Tags

Principal Issues:
Whether bus passes for a municipal operated transit system, which are made available to all employees of the municipality, would be a taxable benefit pursuant to paragraph 6(1)(a) of the Act.


Subsection 6(1)(a) & IT-470R - While passes offered to employees directly employed by the municipal transit company fit within the administrative position outlined in paragraph 43 of IT-470R, this position would not extend to all employees of the municipality since they are not considered to be "employees of bus and rail companies."

29 November 2001 Internal T.I. 2001-0092267 - REGISTERED SECURITIES DEALER

Unedited CRA Tags

Principal Issues: Where a corporation is restricted in its dealings with respect to securities in certain provinces, but is not so restricted other provinces, is the company a "registered securities dealer" for the purposes of the ITA.

Position: Yes.

Reasons: Legislation
November 29, 2001

29 November 2001 Internal T.I. 2001-009687A - REASONABLE EXPECTATION OF PROFIT

Unedited CRA Tags
3 4

Principal Issues: Must the expected profit from a tree farm materialise within a taxpayer's life expectancy

Position: Yes

28 November 2001 Internal T.I. 2001-0102437 - FARM ASSISTANCE PROGRAMS

Unedited CRA Tags
Reg. 234

Principal Issues:
Whether AGR-1 slips must be issued for payments under two farm assistance programs.


Both programs meet definition of farm support payment in subsection 234(2) of the Income Tax Regulations.

23 November 2001 Internal T.I. 2001-0094157 - non-reseident shareholder

Unedited CRA Tags
2(3) 215(3)(a)

Principal Issues: Does a non-resident shareholder who receives a benefit from a Canadian corporation have to include an amount in income under subsection 15(1) in respect of the benefit?

Position: No, since not subject to tax under Part I by virtue of subsection 2(3) and 214(3)


21 November 2001 Internal T.I. 2001-0094527 F - PERTE REPUTEE NULLE-BRYAN

Unedited CRA Tags
50(1) 40(2)g)(ii)

Principales Questions:

1) Est-ce que l'application de l'alinéa 50(1)a) est valide ?
2) Si oui, est-ce que le contribuable peut réclamer une perte au titre d'un placement d'entreprise compte tenu du sous-alinéa 40(2)g)(ii) lorsque la société a cessé ces activités de XXXXXXXXXX mais qu'elle loue l'immeuble dans lequel l'entreprise était située?

Position Adoptée:

16 November 2001 Internal T.I. 2001-0095617 F - ACCORD ECRIT RETROACTIF GARDE D'ENFANTS

Unedited CRA Tags
118(1)b) 118(5) 56.1(4)

Principales Questions:
Est-ce qu'un particulier qui avait la garde partagée de ses deux enfants pourrait réclamer le crédit équivalent pour personne entièrement à charge pour un de ses enfants lorsqu'initialement une ordonnance de la Cour prévoyait que ce particulier devait payer une pension alimentaire pour ses deux enfants et que, par la suite, une lettre signée par les deux conjoints indique que le particulier a versé une pension alimentaire à l'égard du premier enfant et qu'il avait la garde de l'autre enfant ?

Position Adoptée:

7 November 2001 Internal T.I. 2001-0103567 - DISPOSITION OF UNITS IN MUTUAL FUND TRUST

Unedited CRA Tags

Principal Issues: Tax consequences of transferring units in a mutual fund trust for units in another mutual fund trust in the same family of funds.

Position: There is a disposition.

Reasons: No roll-over is available in this situation.

22 June 2001 Internal T.I. 2001-0065467 - AMORTIZATION OF BROADCAST LICENSES

Unedited CRA Tags
1100(1)(c)(i) Class 14

Principal Issues: How should the cost of a broadcast licence be apportioned over the remaining life of the property.

Position: Question of fact, like income/capital issues.

Reasons: The term "apportioning" in subparagraph 1100(1)(c)(i) of the Income Tax Regulations does not necessarily mandate an equal apportionment. Parliament has not indicated how the cost should be apportioned over the life of the property.
June 22, 2001