Income Tax Severed Letters - 2001-12-21


2001 2001-0107241 - Supplemental ruling

Unedited CRA Tags

Principal Issues:
1.Where a corporation is wound up under subsection 88(1) but is not dissolved due to an on-going litigation matter, whether we would consider the corporation to exist for the purposes of subsection 40(3.3)?
2. Where a person does not have a de jure control over a corporation, whether the person is affiliated with the corporation for the purposes of subsection 40(3.3)?
3. Where a corporation creates a capital gain in order to offset it against its anticipated capital loss, whether the payment of a capital dividend by the corporation, that represents the non-taxable portion of the capital gain in anticipation of the realization of the corporation's anticipated capital loss, is abusive?
4.Where after a butterfly reorganization, a transferee makes a cash contribution into a broker joint account with another transferee, whether such cash contribution affects the butterfly?

2.It is a question of fact as to whether the person has de facto control over the corporation. IT-64R4 sets out the factors that CCRA normally considers.
4. no.

1.Because it is not dissolved and it still legally exists.
2.As stated above.
3.It circumvents the CDA's role in the integration of corporate and shareholder levels of tax for private corporations.
4.Money is exempt under paragraph 55(3.1)(c).


2001 Ruling 2000-0054923 - internal reorganization

Unedited CRA Tags
55 (3) (a) 85 (i)

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 					2000-005492




This is in reply to your letters of XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the above-noted taxpayers.

2001 Ruling 2001-0103653 - split up butterfly

Unedited CRA Tags

Principal Issues: Standard 55(3)(b) butterfly of rental properties to shareholders on a net equity basis.

Position: Favourable ruling provided to taxpayers.

Reasons: Proposed transaction complies with section 55(3)(b)


Unedited CRA Tags
6(1)(a)(i) 12(1)(n.3) 9(1)

Principal Issues: 1. Whether a contribution in respect of an accrued obligation to provide post-retirement health and dental benefits to a trust by a former employer will result in the establishment of a RCA and will be deductible by the former employer pursuant to 20(1)(r). 2. Whether payments from the RCA to the new employer will be required to be included in come pursuant to 12(1)(n.3). 3. Whether the new employer will be entitled to deduct amounts paid to retirees and former employees of the former employer on account of post-retirement health and dental benefits. 4. Whether recipient retirees will be required to include any amount in income under paragraph 56(1)(x) of the Act by virtue of the establishment of the RCA. 5. Whether the distribution of amounts out of the RCA through the new employer to pay eligible medical and dental expenses of retirees under such circumstances are not taxable to employees by virtue of the exception in 6(1)(a)(i).

Position: 1. Yes. 2. Yes. 3. Yes. 4. No. 5. Yes.

Reasons: 1. Legislation. 2. Legislation. 3. These expenses are business outlays or expenses of the new employer and were incurred for the purpose of earning income. 4. The payment of the amount by the new employer is not a payment of an amount out of or under an RCA. 5. The payment of eligible medical and dental expenses of the retirees is a payment of an amount derived from contributions of the former employer to a PHSP.


Unedited CRA Tags
248(1) 60(j.1)

Principal Issues: Is an amount paid by a farmer to his spouse considered a reasonable retiring allowance given that the spouse worked for XXXXXXXXXX years but was only T4'D for XXXXXXXXXX years.

Position: Yes, given the facts of this case, the amount not exceeding an amount eligible for rollover under paragraph 60(j.1) of the Act to an RRSP is accepted as reasonable.

Reasons: In accordance with guideline provided in Question 10 at the 1992 Prairie Tax Conference Round Table and prior rulings given in similar circumstances.


Unedited CRA Tags

Principal Issues: Will the refinancing of money borrowed for the purpose of earning income from real property meet the requirements of paragraph 149(1)(o.2)?

Position: Yes

Reasons: Provided that the original borrowed amount met the requirements of paragraph 149(1)(o.2), we will consider that a refinancing of the borrowed amount will not, in and of itself, cause the corporation to lose its tax-exempt status under 149(1)(o.2).


Unedited CRA Tags
149(1)(l) 149.1(1)

Principales Questions: (1)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. (2)L'Organisation est-elle une œuvre de bienfaisance au sens du paragraphe 149.1(1) de la Loi?

Position Adoptée: (1)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. (2) Non

2001 Ruling 2001-0097813 - Spin-off active business invested asssets

Unedited CRA Tags

Principal Issues: Standard 55(3)(a) spin-off of a company into two separate companies, XXXXXXXXXX operating company and an investment company.

Position: Favourable ruling given

Reasons: Meets conditions of 55(3)(a)

2001 Ruling 2001-0107293 - DSU PLAN DIRECTORS FEES

Unedited CRA Tags
REG 6801(d)

Principal Issues: 1) Will the payment of Director's fees in the form of deferred share units (DSUs) constitute an SDA for purposes of the Act?
2) Will the issuance of treasury shares in satisfaction of the DSUs result in the application of section 7 of the Act?

Position: 1) No 2) Yes

Reasons: 1) The provisions of Regulation 6801(d) are satisfied. 2) Where treasury shares are issued, section 7 would clearly apply.

2001 Ruling 2001-0099853 F - papillon de fractionnement

Unedited CRA Tags

Principal Issues: Split-up butterfly

Position: Ruling given

Reasons: Complies with law

2001 Ruling 2001-0107603 - Back-to-back loans thin cap

Unedited CRA Tags

Principal Issues: Whether subsection 18(6) applies to proposed back-to-back loans.

Position: No

Reasons: The proposed transactions meet the requirements as set out in our administrative position.

2001 Ruling 2001-0101633 - DSU PLAN AMENDMENT DIRECTORS

Unedited CRA Tags
REG 6801(d)

Principal Issues: Will a 6801(d) plan continue to qualify as a prescribed plan under Regulation 6801(d), where certain amendments are made to the plan, e.g. an alternative method of calculating the fair market value of shares where the shares are no longer publicly traded?

Position: Yes

Reasons: The amendments to the plan do not offend the requirements of paragraph 6801(d).

2001 Ruling 2001-0111973 F - affiliated group loss utilization scheme

Unedited CRA Tags
85(5) 20(1)(a) 1102(1)(c)reg 1102(14)reg

Principal Issues: Whether assets transferred to a wholly-owned subsidiary of a sister corporation (C Inc.) were depreciable property to C Inc. and, more specifically, whether such assets were acquired by C Inc. for the purpose of gaining or producing income.

Position: Yes.

Reasons: The assets were transferred as part of an affiliated group loss utilization scheme and were held for a period of 10 days to earn income.

XXXXXXXXXX 2001-011197



Unedited CRA Tags
85(1)(B) 125(7)

Principal Issues: whether incorporation of partnership as professional corporation is a personal services business

Position: no - if Principal carrying out services through a Contracting Company does not provide services to Amalco in his/her capacity as an employee or officer of Amalco

Reasons: same as 2000-0034813 and E 9915403, with some additional reorgs

Ministerial Correspondence

10 December 2001 Ministerial Correspondence 2001-0110284 - FORMAL CONSULTATIONS WITH JUSTICE

Unedited CRA Tags

Principal Issues:
Questions raised regarding the circumstances in which a formal consultation with the Department of Justice is pursued.

Reply provides general comments on the mandate of the Income Tax Rulings Directorate and under what circumstances formal consultations with the Departments of Justice and Finance will be pursued.

Where an issue appears to conflict with tax policy or where tax policy is unclear, consultations with the Department of Finance will be pursued. Where issues involve uncertainty over questions of law, consultations with the Department of Justice will be pursued.

Technical Interpretation - External

16 January 2002 External T.I. 2001-0094005 - QUALIFIED FARM PROPERTY

Unedited CRA Tags
110.6(1) 110.6(2)(d) 3(b)

Principal Issues:
Where an individual disposes of "qualified farm property," is the taxpayer's inclusion rate for the entire 2000 taxation year (as calculated under section 38 of the Act when there are dispositions in periods where the capital gain inclusion rates differ) used to determine the appropriate rate to calculate the capital gains deduction for "qualified farm property," assuming paragraph 110.6(2)(d) were the applicable provision to determine the exemption.

No - The appropriate rate for determining the capital gains deduction for "qualified farm property" would be the same rate at which the capital gain of the property is determined

Paragraph 110.6(2)(d) of the Act indicates that the deduction for the capital gains deduction should be the "amount that would be determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified farm properties."

11 January 2002 External T.I. 2001-0086895 - CAPITAL GAINS EXEMPTION

Unedited CRA Tags

Principal Issues: (1) Whether shares must be held for a minimum period of time to be considered QSBCS under ss. 110.6(1). (2) Whether such period begins at the time the corporation is created or at the time an active business commences. (3) When is a corporation considered to be carrying on a business. (4) Where overburden is sold in order to access gravel deposits as part of preparing a site for production, would the proceeds be considered on account of income or capital. (5) If on account of capital, can the proceeds be applied to reduce the cost of the property.

Position: (1) Yes. (2) Period is throughout the 24 months immediately preceding the determination time. (3) Question of fact. (4) Question of fact (5) No.

Reasons: (1) The intention of par. (b) of the definition of QSBCS in ss. 110.6(1), in light of par. 110.6(14)(f), is to ensure that treasury shares issued for cash are held for a period of at least 24 months before being sold. (2) Par. (b) of the definition of QSBCS in ss. 110.6(1) requires only ownership throughout the 24 months immediately preceding the determination time, whether a business is carried on by the corporation is not relevant for those purposes. (3) IT-364 provides the CCRA's position based on relevant case law. (4) Whether sale on account of income or capital is a question of fact, as outlined in IT-423. (5) Subsection 43(1) of the Act would apply to the computation of the gain or loss, allowing a reasonable allocation of the ACB.

9 January 2002 External T.I. 2001-0087675 - LEGAL FEES - DEPENDANT'S RELIEF

Unedited CRA Tags

Principal Issues: Whether legal fees to obtain support amounts from the estate of the person previously paying child support (dependant's relief) can be deductible.

Position: No.

Reasons: The payments do not constitute support amounts as defined in ss. 56.1(4). Moreover, no other provision of the Act allows a deduction for such expenses.

9 January 2002 External T.I. 2001-0075825 F - CII-LIQUIDATION

Unedited CRA Tags
127(5) 12(1)(t) 88(1)

Principales Questions:

Est-ce que c'est la filiale ou la société mère qui devra inclure dans ses revenus les CII réclamés par la filiale dans l'année du commencement de la liquidation et de l'attribution des actifs et passifs à la société mère?

De plus, advenant une inclusion dans les revenus de la filiale, est-ce que la filiale pourrait utiliser ses CII restants afin de réduire les impôts résultant de cette inclusion dans l'année qui suit celle du commencement de la liquidation et de l'attribution de ses actifs et passifs à la société mère?

Position Adoptée:

8 January 2002 External T.I. 2001-0084115 F - SOMMES RECUES D'UN SYNDICAT

Unedited CRA Tags

Principales Questions:

Est-ce que les sommes reçues par les membres d'un syndicat dans le cas où ils réfèrent un employé d'une société non syndiquée et que cette référence mène au dépôt d'une requête en accréditation ou à une accréditation sont imposables?

Est-ce que la somme gagnée lors d'un tirage parmi les membres ayant fait une référence est imposable?

Position Adoptée:

7 January 2002 External T.I. 2000-0038695 - Status of a CCPC

Unedited CRA Tags

Principal Issues:
Whether certain amendments to the articles of incorporation of a CCPC would cause the corporation to lose its status as a CCPC.
Whether these amendments would result in a disposition of the existing issued shares.

It should not.

Reasons: Application of the relevant provisions of the Act.

7 January 2002 External T.I. 2001-0064945 - Acquisition of control

Unedited CRA Tags
256(7)(b) 256(7)(c)

Principal Issues: Whether a particular triangular amalgamation will be subject to the provisions of paragraph 256(7)(c) or subparagraph 256(7)(b)(i)?

Position: Paragraph 256(7)(c) will apply to deem an acquisition of control.

Reasons: Subparagraph 256(7)(b)(i) will not apply since it cannot be said that control was acquired solely because of the amalgamation.

7 January 2002 External T.I. 2001-0089585 F - AUTOMOBILE DETENUE EN COPROPRIETE

Unedited CRA Tags
6(2) 6(1)e)

Principales Questions:
Est-ce qu'on devrait calculer un avantage automobile relatif aux frais pour droit d'usage pour un employé lorsqu'une automobile est détenue à 75% par sa société et 25% par l'employé en question? Ce pourcentage est représentatif de l'utilisation pour des fins affaires (75%) et pour des fins personnelles (25%).

Position Adoptée:

3 January 2002 External T.I. 2001-0067955 - Application of 75(2) & 107(4.1) to a trust

Unedited CRA Tags
75(2) 107(4.1)

Principal Issues: When property is transferred from a trust which held the property under any of the conditions described in 75(2) to a trust which is not subject to any of the conditions described in 75(2), will 75(2) or 107(4.1) apply to the income or distributions from the second trust?

Position: 1. 75(2) will not apply to the second trust solely by reason of the fact that 75(2) applied to the first trust.
2. If the property was rolled to the second trust under 107.4(3), 107(4.1) will apply to a distribution from the second trust to a beneficiary unless at least one of the conditions in 107(4.1)(c) and (d) are not met.

Reasons: 1. There is no provision to extend the application of 75(2) to the second trust.
2. 107(4.1) was amended by S.C. 2001, c.17 to ensure that a trust could not avoid the application of 107(4.1) by transferring the property to be distributed from the trust to which 75(2) did apply to one to which it didn't.

3 January 2002 External T.I. 2001-0109425 F - REER TITE D'UNE SOCIETE EN FAILLITE

Unedited CRA Tags
146 207.1(1) 207.1(4)

Position Adoptée: Oui, tant que la société continue d'exister.

2 January 2002 External T.I. 2001-0111755 - MEDICAL EXPENSE-HOT TUB

Unedited CRA Tags
118.2(2)(m) 118.2(2)(1.2) Reg. 5700

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

Position: No - but the cost of the renovation to the t/p's dwelling required to install the hot tub may qualify as a medical expense under 118.2(2)(l.2) if certain conditions are met

Reasons: not described in regulation 5700 - allowed under 118.2(2) solely with respect to installation costs of a hot tub for persons having a severe and prolonged mobility impairment.

XXXXXXXXXX 2001-011175
Shaun Harkin, CMA
January 2, 2002

2 January 2002 External T.I. 2001-0115005 - PENSION TAX CREDIT

Unedited CRA Tags
118(3) 118(7)

Principal Issues: Will a payment from a LIF received by a taxpayer under the age of 65 that is not as a consequence of the death of the taxpayer's spouse or CLP qualify for the pension credit under subsection 118(3) of the Act?

Position: No.

Reasons: Payments from a RRIF are not payments in respect of a life annuity out of or under a superannuation or pension plan.

28 December 2001 External T.I. 2001-0101085 - TRUSTEE LIABLE FOR PART XI TAX

Unedited CRA Tags

Principal Issues: What is the trustee required to do where an RRSP trust has tax exigible in respect of excess foreign property which exceeds the assets of the trust?

Position: The trustee is liable for any shortfall.

Reasons: Subsection 207(2) is clear.

27 December 2001 External T.I. 2001-0115745 - Distrib. of TCP to non-resident benefic.

Unedited CRA Tags
107(2.1) 107(2.11) 210.2(1) 212(1)(c)

Principal Issues: (1) Tax consequences on a distribution of taxable Canadian property by a Canadian resident trust to a non-resident beneficiary where the trust makes an election under 107(2.11) and there are no other beneficiaries of the trust. Specifically, whether there will be tax payable under Parts XII.2 and Part XIII. (2) Postponement of payment of taxes owing by the trust.

Position: (1) There will be no tax payable under Parts XII.2 and Part XIII with respect to the taxable capital gain that is the subject of the election. (2) Taxes may be postponed.

Reasons: (1) If the taxable capital gain is included in the trust's income, there is no 104(6) deduction to the trust and no potential 104(13) inclusion to the beneficiary. (2) Postponement of taxes is provided for in subsection 220(4.6).

24 December 2001 External T.I. 2001-0106185 - GOLF COURSE CONSTRUCTION

Unedited CRA Tags
6(6) 122.3

Principal Issues: 1 - Can the location where a golf course is being built qualify as a "special work site" for purposes of subsection 6(6) of the Income Tax Act?
2 - Is the activity of building a golf course (other than the buildings relating to such a course) a construction activity for purposes of section 122.3 of the Act?

Position: 1 - Yes
2 - Likely will qualify.

Reasons: 1 - The only requirement for a location to be a "special work site" is that the location must be one at which the duties performed by a taxpayer were of a temporary nature.
2 - We have accepted (see Technical News No. 20) that the building of a golf course is "surface construction" for purposes of capital cost allowance.

21 December 2001 External T.I. 2001-0106805 - CAPITAL COST ALLOWANCE

Unedited CRA Tags
Reg. 1101(1ac)

Principal Issues: Whether re-purchase of a Class 3 property is added to Class 3 or Class 1 of Schedule II of the Regulations.

Position: In this situation, Class 3.

Reasons: All condominium units in the same building are considered to be the same "rental property".

21 December 2001 External T.I. 2001-0091615 F - PART-SOCIETE DE PERSONNES AGRICOLE

Unedited CRA Tags

Principales Questions:
Un fonds de terre appartenant à une société de personnes et qui est vendu un an après la création de la société de personnes peut-il être un bien agricole admissible d'un associé?

Position Adoptée:

20 December 2001 External T.I. 2001-0097805 - PHSP

Unedited CRA Tags

Principal Issues: Are the plans described, plans in the nature of insurance as set out under paragraph 3 of Interpretation Bulletin IT-339R2?

Position: generally yes

Reasons: elements under paragraph 3 of Interpretation Bulletin IT-339R2 satisfied

19 December 2001 External T.I. 2001-0112535 - NON-PROFIT ORGANIZATION

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

Principal Issues:
Whether a certain corporation was organized for non-profit purposes.

Position: Yes

The corporation was organized for purposes similar to that of a condominium corporation having as its only purpose the management and administration of an apartment complex including the collection of fees for common expenses. Therefore, it would appear that the corporation was organized for non-profit purposes.

19 December 2001 External T.I. 2001-0077175 F - FRAIS ENCOURUS POUR UNE INVENTION

Unedited CRA Tags
20(1)c) 13(12) 37(1) 18(1)a)

Principales Questions:
Est-ce que les frais encourus pour mettre au point une invention ainsi que pour l'obtention d'un brevet temporaire à l'égard de cette invention sont déductibles en vertu de la Loi de l'impôt sur le revenu (ci-après la " Loi ")?

Position Adoptée:
Sous réserve de la détermination de l'existence d'une entreprise, les frais pour l'obtention du brevet temporaire pourraient être déductibles en vertu de l'alinéa 20(1)cc) de la Loi à la condition qu'ils aient été encourus à un moment où on estimait que l'entreprise avait commencé son exploitation. Les frais de matériel pour la fabrication du prototype pourraient être déductibles à la condition qu'ils se qualifient à titre de frais de recherche scientifique et développement expérimental et si l'entreprise avait commencé son exploitation à ce moment-là.

18 December 2001 External T.I. 2001-0084775 - Canada Netherlands Income Tax Convention

Unedited CRA Tags

Principal Issues:
Where a Canadian resident who is a former citizen of the Netherlands, has an immovable property situated in the Netherlands and has received rental income therefrom, whether such rental income will be subject to the Canadian tax?


Paragraph 1 of Article 6 of the Canada- Netherlands Income Tax Convention (the "Netherlands Tax Treaty") does not preclude Canada from taxing the rental income from the immovable property that is sourced from the Netherlands.

18 December 2001 External T.I. 2001-0114795 - Dividends received by an estate

Unedited CRA Tags

Principal Issues: Whether 70(6) applies to shares transferred to a surviving spouse within 36 months of the death of the taxpayer if the estate receives dividends on the shares prior to the transfer and the dividends are distributed to beneficiaries other than the spouse.

Position: Question of fact as to whether the taxpayer has, under the terms of a particular will, made a specific bequest, residual bequest, charge, or personal obligation, the finding of which may be relevant in determining whether 70(6) applies to a particular situation.

Reasons: As stated in paragraph 26(c) of IT305R4, the fact that an estate uses or distributes income from property bequeathed to a spouse pursuant to a residual bequest does not preclude a rollover under 70(6); however, a specific bequest would normally vest with the spouse immediately after the taxpayer's death.

12 December 2001 External T.I. 2001-0084375 - XXXXXXXXXX

Unedited CRA Tags

Principal Issues:
Whether XXXXXXXXXX are entitled to the 8(1)(c) deduction?

12 December 2001 External T.I. 2001-0112955 - RRSP EARNED INCOME SAR

Unedited CRA Tags
146(1) 5

Principal Issues: Is income from a Stock Appreciation Rights plan "earned income" for the purpose of calculating the contribution limit for an RRSP?

Position: Yes.

Reasons: Income from a SAR is income from an office or employment in the year of receipt within the meaning of "earned income" contained in subsection 146(1).

12 December 2001 External T.I. 2001-0104095 - CAPITAL GAIN OF NPO

Unedited CRA Tags
149(1)(l) 149(5)

Principal Issues:
Is a capital gain realized on the disposition of property by a non-profit organization taxable.

Position: No

Subsection 149(5) of the Act is not applicable. No tax is payable on the taxable income of the NPO. Income of the NPO includes capital gains.

7 December 2001 External T.I. 2001-0095095 - INTEREST ON A GIC

Unedited CRA Tags
12(1)(c) 12(4) REG 7000 20(21)

Principal Issues:
Discussion of the application of paragraph 7000(1)(c) of the Regulations to Guaranteed Investment Certificates (GICs).

5 October 2001 External T.I. 2001-0093255 F - Distributions d'actions de l'étranger

Unedited CRA Tags

Principales Questions: 1) L'actionnaire canadien d'une société étrangère peut-il effectuer lui-même les démarches prévues à l'alinéa 86.1(2)e) si la société ne les fait pas? 2) L'actionnaire canadien peut-il contacter l'ADRC pour savoir si la société étrangère effectue ces démarches?

Position Adoptée: 1) Non. 2) Non, il doit contacter la société étrangère ou consulter la liste des distributions admissibles approuvées par l'ADRC, laquelle liste est publiée sur le site internet de l'ADRC.

5 October 2001 External T.I. 2001-0093265 F - Division 212(1)b)(iii)(E)

Unedited CRA Tags

Principales Questions: L'exception prévue à la division 212(1)b)(iii)(E) s'applique-t-elle lorsque l'emprunt est utilisé dans une entreprise située à l'étranger qui n'est pas exploitée par le payeur mais par une filiale du payeur?

Position Adoptée: Non.

5 October 2001 External T.I. 2001-0093305 F - Modification du choix prévu à 104(13.1)

Unedited CRA Tags

Principales Questions: Est-il possible de modifier un choix effectué en vertu du paragraphe 104(13.1) L.I.R.?

Position Adoptée: Oui, un tel choix peut être modifié lorsque le ou les fiduciaires peuvent établir qu'une erreur de bonne foi a été commise. Toutefois nous ne procéderons pas à l'émission d'une nouvelle cotisation visant à réduire le revenu du bénéficiaire lorsqu'un ajustement corrélatif de la déclaration de revenus de la fiducie ne peut être effectué parce que l'année d'imposition est prescrite.

5 October 2001 External T.I. 2001-0093345 F - Déduction prévue à 91(5)

Unedited CRA Tags
recognition of s. 92(1)(a) increase lost on s. 85.1(3) exchange

Principales Questions: Application du paragraphe 91(5) de la Loi de l'impôt sur le revenu à l'égard d'une situation hypothétique.

Position Adoptée: Commentaires généraux.

5 October 2001 External T.I. 2001-0093405 F - Personne affiliée à une fiducie

Unedited CRA Tags

Principales Questions: Dans quelles circonstances une personne est-elle affiliée à une fiducie?

Position Adoptée: Commentaires généraux.

14 September 2000 External T.I. 1999-0014955 - Liability of Legal Representative

Unedited CRA Tags

Principal Issues:
liability of legal representative under 159(3) in light of Debou case

primary taxpayer's liability must be estatblished first within parameters of section 152

comments in Debou somewhat misleading wrt phrase "at any time" ; liability must be established within parameters of 152(4) first

Technical Interpretation - Internal

8 January 2002 Internal T.I. 2001-0114147 - EQUIV. TO SPOUSE TAX CREDIT

Unedited CRA Tags

Principal Issues: Is a married individual who is separated from the individual's spouse for other than a breakdown of their marriage entitled to a deduction under paragraph (b) of the description of B in subsection 118(1) of the Income Tax Act providing the individual otherwise meets the requirements of that paragraph?

Position: Yes

Reasons: There is no requirement in clause (b)(i)(B) of the description of B in subsection 118(1) of the Act that the separation (as in "nor lived with their spouse") need be "by reason of a breakdown of their marriage."

January 8, 2002

19 December 2001 Internal T.I. 2001-0097167 - FILM TAX CREDIT - MEALS

Unedited CRA Tags
125.4 67.1

Principal Issues:
1. Would the exception in paragraph 67.1(2)(c) apply so as not to limit 100% of the cost of meals included in a corporation's qualified Canadian labour expenditure?

1. Yes, in the particular situation.

1. Reading of the legislation.

19 December 2001 Internal T.I. 2001-0109417 - TAXABLE BENEFITS

Unedited CRA Tags
80.4(1) 80.4(3) 6(1)(a) 6(23)

Principal Issues: Whether a mortgage interest subsidy is subject to the application of subsection 80.4(1) of the Act or paragraph 6(1)(a) of the Act.

Position: In this particular situation, paragraph 6(1)(a) applies.

Reasons: Paragraph 80.4(1) of the Act does not apply by virtue of subsection 80.4(3) of the Act. Paragraph 6(1)(a) of the Act applies and, for greater certainty, subsection 6(23) of the Act applies.

4 December 2001 Internal T.I. 2001-0109617 - REPRESENTATION EXPENSE

Unedited CRA Tags

Principal Issues: Are certain legal fees incurred and paid in the application for patents deductible pursuant to paragraph 20(1)(cc) of the Act?

Position: Yes.

Reasons: The term "in making any representation" in paragraph 20(1)(cc) is broad enough to include an application to a government or public body or a regulatory agency thereof. Our bulletins IT-99R5 and IT-477 both state that paragraph 20(1)(cc) applies to representation for the purpose of obtaining a patent.

December 4, 2001

3 December 2001 Internal T.I. 2001-0075027 - Alberta crude oil royalty

Unedited CRA Tags

Principal Issues: Does the Alberta Westcoast Pipeline Royalty Adjustment (the R-factor) meets the condition in paragraph 12(1)(o) of being a royalty "that can reasonably be regarded as being in relation to ... the production ... of petroleum ... ."

Position: Yes.

Reasons: The Westcoast Adjustment factor is part of the royalty formula as determined by the Royalty Regulations. The royalty as a whole is computed by reference to the volume of oil produced and that in itself brings the entire royalty within the scope of the phrase "can reasonably be regarded as being in relation to."
December 3, 2001

21 November 2001 Internal T.I. 2001-0098297 - TAXABLE BENEFITS

Unedited CRA Tags
15(1) 6(1)(a) 246(1)

Principal Issues: Whether the sale of a residential property, at a discount, by a construction company, to a shareholder, an employee or a relative of either, would result in a taxable benefit.

Position: Yes.

Reasons: For shareholders, subsection 15(1) of the Act would apply.
For employees, paragraph 6(1)(a) of the Act would apply.
For relatives of either, subsection 246(1) of the Act would apply.
Where the discount is offered to a shareholder or an employee, and they transfer the offer to a relative, subsection 56(2) of the Act would apply to include the benefit in the income of the shareholder or employee, as the case may be.