Income Tax Severed Letters - 2002-01-04

Miscellaneous

2001 2001-0104811 - PARTNERSHIP; REWARD POINTS

Unedited CRA Tags
12(1)(a)

Principal Issues: although significant changes were contemplated, for business reasons the taxpayer decided to merely make minor changes

Position: n/a

Reasons: n/a

2001 2001-0106881 - cost of property

Unedited CRA Tags
54

Principal Issues: Change to facts and proposed transactions.

Position: rulings still apply

Reasons: changes not significant to positions taken

Ruling

18 January 2002 Ruling 2001-0114993 - INTER CORPORATE MANAGEMENT FEES

Unedited CRA Tags
67

Principal Issues: Whether an arrangement whereby inter-corporate management fees are paid from Opcos to Holdcos, and then paid to shareholders, is within the CCRA's policy on not challenging the reasonableness of salaries to shareholder-managers.

Position: No.

9 January 2002 Ruling 2001-0110543 - TRANSFER OF AIR MILES TO EMPLOYEES

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

Principal Issues: Whether Air Miles purchased by employer and transferred to employees to enable them to purchase tickets home for Christmas would constitute employment benefits, especially given our new policy on gifts.

Position: New policy on gifts and awards does not apply to transfers of Air Miles or other loyalty points to employees. Unless special work site exclusion applies, value of tickets is considered a taxable employment benefit.

Reasons: Gifts and Awards policy only applies to non-cash items. Since Air Miles or other loyalty points entitle employees to apply the points against the purchase of various items, the gifting of such points falls outside the policy. The policy was amended to allow employees to provide small non-cash gifts and awards to employees without facing the administrative burden of valuing the items. The provision of Air Miles or other points is outside the scope of this policy.

8 January 2002 Ruling 2001-0105023 - STOCK OPTIONS CHANGE EXCHANGE

Unedited CRA Tags
7 110(1)(d) 7(1.4)

Principal Issues: In certain situations where there is no change in the benefit associated with the option, can an employee claim a s.110(1)(d) deduction when a reduction in the option price to an amount below the fmv at the time the option was granted is made?

Position: In a comfort letter, Finance has indicated that they will recommend a change so that a s.110(1)(d) deduction may be claimed in certain situations.

Reasons: CCRA will not reassess anyone who claims such a deduction until acceptance of this recommendation is resolved.

2001 Ruling 2001-0095493 - SUPPLEMENTARY UNFUNDED PENSION

Unedited CRA Tags
248(1)

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 2001-0096983 - split up butterfly

Unedited CRA Tags
55(3)(b)

Principal Issues: Split up butterfly

Position: Standard butterfly

Reasons: N/A
XXXXXXXXXX 2001-009698
XXXXXXXXXX , 2001
Dear XXXXXXXXXX :
Re: XXXXXXXXXX
Advance Income Tax Ruling Request

2001 Ruling 2001-0110653 F - EXPLOITEE ACTIVEMENT

Unedited CRA Tags
110.6(1) 110.6(2.1)

Principales Questions:
Est-ce que le paragraphe 110.6(8) de la Loi s'appliquera à une situation où on procède à une cristallisation de la déduction pour gains en capital dans le cas d'une société détenue depuis son incorporation par des conjoints de fait ?

Position Adoptée:
Non. Le paragraphe 110.6(8) de la Loi ne s'appliquera pas.

2001 Ruling 2001-0102193 - DEFERRED SHARE UNIT PLAN - DIRECTORS

Unedited CRA Tags
REG 6801(d)

Principal Issues:
Will the creation of a Deferred Share Unit Plan result in an SDA?

Position: No.

Reasons: Requirements of Regulation 6801(d) are met.

2001 Ruling 2000-0062143 F - DEDUCTIBILITE DES INTERETS

Unedited CRA Tags
20(1)(c) 138(6)

Principales Questions:
1. Est-ce que les frais d'intérêts encourus sur la débenture seront déductibles en vertu de 20(1)c)?
2. Est-ce que la garantie en vertu du contrat de gestion pourrait empêcher, en elle-même, l'application du paragraphe 138(6)?

Position Adoptée:
1. Oui, pourvu qu'ils soient raisonnables, qu'ils soient versés conformément à une obligation légale de verser des intérêts, que le produit soit utilisé pour tirer un revenu d'une entreprise et pourvu qu'une confirmation soit reçue de l'Autorité réglementaire compétente confirmant que la débenture a pour but de permettre au contribuable d'augmenter sa capacité de souscrire de nouvelles affaires.
2. Non, pourvu qu'elle ne soit pas accordée dans le cadre d'une série de transactions qui inclurait l'émission d'une action acquise par la compagnie d'assurance.

2001 Ruling 2001-0113273 F - INTERETS DEPENSE

Unedited CRA Tags
20(1)(c) 20(1)(e)

Principales Questions:
Est-ce que les décisions rendues sont valides?

Position Adoptée: Oui.
.

2001 Ruling 2001-0104483 - PRESCRIBED PHANTOM SHARE PLAN

Unedited CRA Tags
REG 6801(d)

Principal Issues: Will a plan continue to satisfy the rules under paragraph 6801(d) after it is amended?

Position: Yes.

Reasons: The amendments will not result in any contravention of the provisions.

XXXXXXXXXX 2001-010448

2001 Ruling 2001-0090213 - Tax loss consolidation

Unedited CRA Tags
55(3)(a) 20(1)(c)

Principal Issues:
1.Where an affiliated group undergoes a tax loss consolidation and a member of the affiliated group that is deducting the interest expense incurs a non-capital loss, whether the creation of such non-capital loss that is attributable to the claiming of the interest expense by the member is abusive?

Position:
1. Yes

Reasons:

2001 Ruling 2001-0090333 - AMENDMENT TO SEGRATED FUND CONTRACT

Unedited CRA Tags
138.1 148

Principal Issues:
1. Whether proposed amendment to an existing Segregated Fund contract would be considered a disposition of the Segregated Fund contract for the purposes of subsection 138.1(1) or section 148 of the Act.
2. Whether the exercise of the a right under a Segregated Fund contract to switch from having investment tracked to one class of notional units to another class of notional units in the same fund would result in a disposition of the contract by the policyholder for the purposes of subsection 138.1(1) or section 148 of the Act.

Position:
1. No disposition for tax purposes, based on the facts.
2. No disposition for tax purposes, based on the facts.

Reasons:
1. The proposed amendments to the contract were not considered so fundamental as to go to the root of the contact, such that the existing contract would be considered to have been disposed of.
2. The exercise of the right would be the exercise of a term under the contract the effect of which would not be so fundamental as to go to the root of the contract. The only consequences of exercising the right will be a change in the amount of the management fee and the level of guarantee.

2001 Ruling 2001-0105883 - reimbursement of stock option benefit

Unedited CRA Tags
15(1)

Principal Issues: PARENT and its UK subsidiary, UKSUB, will enter into an agreement whereunder UKSUB will pay to PARENT an amount equal to the stock option benefit enjoyed by UKSUB's employees on the exercise of options to acquire shares of PARENT. The issue is whether this amount would be included in the income of PARENT under subsection 15(1) or paragraph 12(1)(x).

Position: No.

Reasons: It would not be unreasonable for the subsidiary to reimburse the parent for that portion of the employment benefit that has been effectively borne by the parent on the subsidary's behalf. For an in-depth analysis, see the SPI for file 2000-003491.

XXXXXXXXXX 2001-010588

2001 Ruling 2001-0092693 - ACB of shares acquired in XXXXXXXXXX merger

Unedited CRA Tags
51 54

Principal Issues: Cost of shares acquired as a result of a foreign merger

Position: Cost of shares includes an amount equal to the fair market value of the consideration given to acquire such shares.

Reasons: Cost of property acquired is equal to what was given up to acquire the property

2001 Ruling 2001-0106033 - SETTLEMENT UNDER DISABILITY INSUR.

Unedited CRA Tags
6(1)(f)

Principal Issues:
Whether benefits paid to taxpayer under a group disability insurance policy would be taxable when received if insurer financed payments by means of the purchase of an annuity similar to a structured settlement. The taxpayer was concerned that the purchase of the annuity by the insurer to fund the payments might result in the value of the annuity being included in XXXXXXXXXX income in one year.

Position: Payments would be taxed as received.

Reasons:
The payments made to the taxpayer fell within the purview of paragraph 6(1)(f) of the Act in that they were periodic payments made pursuant to a group disability plan to which the employer contributed, and they were paid in respect of the loss of employment income. The purchase of the annuity was merely a funding vehicle to finance the periodic payments.

Ministerial Correspondence

18 January 2002 Ministerial Correspondence 2001-0113334 - Interest and Penalties

Unedited CRA Tags
161

Principal Issues: Interest, penalties and status of Harris case

Position: Overview of interest/penalties

Reasons: The law

11 January 2002 Ministerial Correspondence 2001-0110644 - 90-DAY SEPARATION PERIOD

Unedited CRA Tags
118(1)(b) 122.6(1)

Principal Issues: (1) Whether the equivalent-to-spouse personal tax credit requires married persons to be separated for at least 90 days; (2) Whether the 90 day period referred to in the definition of "cohabiting spouse" in subsection 122.6(1) of the Act is a period of 90 consecutive days.

Position: (1) No; (2) Yes.

Reasons: (1) Paragraph 118(1)(b) of the Act does not require the separation to have lasted for any period of time, the criteria is rather cohabitation and/or support; (2) The purpose of the provision is to distinguish between ongoing spousal relationships, which may include temporary separations, as opposed to more permanent separations. The criteria is therefore a continuous 90 day separation period and not the accumulation of numerous temporary separations in an ongoing relationship.

17 December 2001 Ministerial Correspondence 2001-0109684 - TAX TREATMENT OF STATUS INDIANS

Unedited CRA Tags
81(1)(a)

Principal Issues: Whether a status Indian's entire severance pay and amount in lieu of earnings would be exempt from tax because he's now living on a reserve whereas his employment income was 20% exempt.

Position: General Comments

Reasons: Based on Rulings letters and correspondence with the taxpayer.

Technical Interpretation - External

30 January 2002 External T.I. 2001-0114025 - BONUS INTEREST PAID TO RESP'S

Unedited CRA Tags
146.1 204.9

Principal Issues:
Would bonus interest payments paid directly into an RESP be considered contributions to the RESP by the subscriber for purposes of calculating the RESP annual limit for the year?

Position: No.

Reasons:
Where bonus interest on an investment held by an RESP is paid directly to the RESP, the bonus interest paid will not be considered a contribution made into the plan for purposes of sections146.1 and 204.9 of the Act.

29 January 2002 External T.I. 2001-0114425 - CHILD SUPPORT FINANCIAL DEPENDENT

Unedited CRA Tags
146(1) 146(8.8)

Principal Issues:
Will a child that lives with one parent subsequent to a divorce be considered financially dependent on the other parent where the other parent pays monthly child support payments?

Position: Question of fact.

Reasons:
All of the facts pertaining to each particular case would have to be reviewed. However, we would generally consider the existence of financial dependence where a parent is making child support payments to the other parent that has custody of the child.

29 January 2002 External T.I. 2001-0115135 - REASONABLE EXPENSE

Unedited CRA Tags
67

Principal Issues: Whether a restructure among associated corporations would successfully result in not having each of the corporations contribute to the Canada Pension Plan in respect of compensation paid to the owner/manager of the corporations.

Position: Yes. However, there may be adverse tax consequences.

Reasons: The corporations would have to show that the management fees for services provided were reasonable.

XXXXXXXXXX 2001-011513
J. E. Grisé
January 29, 2002

29 January 2002 External T.I. 2001-0113105 - SOCIAL ASSISTANCE PAYMENTS

Unedited CRA Tags
81(1)(h)

Principal Issues: Are certain payments received for providing care for a severely handicap child subject to tax?

Position: Insufficient information and completed or ongoing transaction.

Reasons: General information concerning the possible application of paragraph 81(1)(h) of the Act.

29 January 2002 External T.I. 2001-0105795 - REGISTERED PLANS FOREIGN PROPERTY

Unedited CRA Tags
206(2)

Principal Issues:
For purposes of calculating tax on excess foreign content pursuant to 206(2), should the cost amount of shares or units of a fund be recorded on the trade date, the settlement date or the transaction processing date?

Position:
Units and shares are considered to be acquired on the date the units and shares are delivered which is typically the settlement date.

Reasons:
The transaction should be recorded on the date when all of the attributes of ownership are acquired which normally occurs on the date the units or shares are delivered.

28 January 2002 External T.I. 2001-0110345 - ADVEN. OR CONCERN IN THE NATURE OF TRADE

Unedited CRA Tags
9(1) 38

Principal Issues: Whether a proposed transaction is an adventure or concern in the nature of trade.

Position: Unable to provide a ruling.

Reasons: As stated in paragraph 15(e) of IC 70-6R4, we will not to issue a ruling when the major issue is whether a transaction should be viewed as being on account of income or capital.

28 January 2002 External T.I. 2001-0105395 - canada council grants-income

Unedited CRA Tags
56(1)(n) 56(1)(o) 9

Principal Issues:
Comments with respect to receipt of a Canada Council Grant to make a short animated film.

Position:
Appears to be self-employment income
Refer to Business and Professional Guide

Reasons:
Business activities

28 January 2002 External T.I. 2002-0118855 - RRSP INVESTMENT IN CO-OP SHARES

Unedited CRA Tags
136(2) 146(1) REG 4900(12)(c) REG 4901(2)

Principal Issues: Is a share of a cooperative corporation ("co-op") a qualified investment for an RRSP?

Position: Question of fact. It could be if at the time of acquisition it is a qualifying share in respect of a specified cooperative corporation and other requirements are met.

Reasons: Provided for in paragraph 4900(12)(c).

28 January 2002 External T.I. 2001-0115515 - SALE OF A FARMING BUSINESS

Unedited CRA Tags
28(1)(d) 40(1) 12(1)(b)

Principal Issues:
(1) Whether a taxpayer that carries on a farming business and reports income on the cash basis is entitled to a reserve on the sale of a depreciable property for the proceeds that are due after the taxation year in which the disposition occurred.
(2) Does paragraph 12(1)(b) provide for such a reserve?

Position:
(1) Even though the taxpayer may report income on the cash basis under subsection 28(1) of the Act, paragraph (d) of the provision specifically requires that amounts determined under subsection 13(1) are to be included in calculating income for the farming business. With respect to the recapture of capital cost allowance, there is no provision in the Act that provides for a reserve on proceeds due after the end of the taxation year of disposition. However, if there is a capital gain on the disposition of the property, the taxpayer may be eligible for a reserve on that gain under paragraph 40(1)(a) of the Act.
(2) No. While the income inclusion required by paragraph 12(1)(b) for amounts that are receivable is not applicable when the method regularly followed by the taxpayer provides otherwise, the cash basis of reporting income from a farming business in subsection 28(1) requires the inclusion of recaptured CCA in income by virtue of paragraph 28(1)(d).

Reasons:
(1) Subsection 13(1), paragraph 28(1)(d) and paragraph 40(1)(a).
(2) Paragraph 12(1)(b) & 28(1)(d)

25 January 2002 External T.I. 2001-0110925 - TEI QUESTION-NEW GIFTS&AWARDS

Unedited CRA Tags
6(1)(a)

Principal Issues: Request for changes to the new policy on employer-provided gifts and awards to allow employers to give more than 2 awards per year if they forego deducting the cost of the award.

Position: The policy will not be revised in this manner.

Reasons: The limit of two awards per year is reasonable since the awards must not be a form of disguised remuneration. New policy is consistent with reasonable positions taken on other privileges provided to employees. Policy is not meant to allow an employer to channel nontaxable remuneration to employees.

25 January 2002 External T.I. 2002-0117645 - UNIT TRUST CAPITAL DISTRIBUTION ACB

Unedited CRA Tags
53(2)(h)(i.1)

Principal Issues:
1. Will capital distributions by a unit trust reduce the adjusted cost base of the units of the trust?
2. Will a capital distribution by a unit trust affect the foreign content limits imposed under Part XI of the Act?
3. Will the transfer of property from a RRSP to a RRIF result in the property being transferred at cost or fair market value?

Position:
1. Probably yes.
2. Yes.
3. Generally cost.

Reasons:
1. See subparagraph 53(2)(h)(i.1) and IT-456R.
2. A reduction in the ACB would result in a reduction in the cost amount used to compute Part XI taxes under subsection 206(2) of the Act.
3. This results from the amendments made to the definition of disposition in subsection 248(1) and the inclusion of subsections 107.4(1) and 248(25.1) in June 2000.

25 January 2002 External T.I. 2001-0112845 - DEDUCTIBILITY OF AMOUNT NON-RESIDENTS

Unedited CRA Tags
18(1)(a) 67 REG 6801(d)

Principal Issues: Are amounts paid by a corporation to non-resident directors, in respect of deferred share units, for services rendered outside Canada, deductible in computing the corporation's income?

Position: Yes.

Reasons: Subject to paragraph 18(1)(a) and section 67 of the Act, the amounts paid, in respect of the deferred share units, are deductible by a corporation in accordance with section 9 of the Act.
XXXXXXXXXX 2001-011284

25 January 2002 External T.I. 2001-0110625 - FINES & PENALTIES (TEI)

Unedited CRA Tags
18(1)(a)

Principal Issues:
2001 TEI Question 2 Fines and Penalties - CCRA's comments on its process for disseminating information about current jurisprudence to field staff in order to ensure that significant decisions are taken into account in audits that are underway when a case such as the Supreme Court decision in 65302 British Columbia Limited. v. The Queen, 99 D.T.C. 5799, which addressed the deductibility of fines and penalties, is decided.

Position:
See below.

Reasons:
See below.

25 January 2002 External T.I. 2001-0112985 - EBP

Unedited CRA Tags
7(1)(a) 7(3)(b)
EBP purchasing treasury shares of related corp

Principal Issues:
Will the acquisition of treasury shares by an employee benefit plan result in the application section 7 of the Act?

Position: Question of fact.

Reasons:
We have concluded that section 7 of the Act will override the general EBP provisions. To conclude in a specific case, we would have to review all of the facts.

24 January 2002 External T.I. 2002-0117105 - $100,000 CAPITAL GAINS EXEMPTION

Unedited CRA Tags
110.6(19) 110.6(26)

Principal Issues: An individual, who has indicated that he will be disposing of a partnership interest in the near future, has asked whether he can now avail himself of the $100,000 capital gains election under subsection 110.6(19) of the Income Tax Act (the "Act"). POSITION: No

Reasons: The time limit for a late filed election under subsection 110.6(26) of the Act has expired and the fairness provisions (section 220(3.2) of the Act and section 600 of the Income Tax Regulations) are not applicable.

24 January 2002 External T.I. 2001-0106895 - TAXABLE BENEFIT - DISABILITY PREMIUMS

Principal Issues: Is the taxable benefit for premiums on a group long term disability insurance policy paid for by the employer on behalf of an employee considered a non-cash taxable benefit and therefore not insurable for EI purposes?

Position: generally yes

Reasons: feedback from CPP\EI division

24 January 2002 External T.I. 2001-0109455 - JOINT TENANCY - INVESTMENTS

Unedited CRA Tags
248(1)

Principal Issues: Whether a change in the legal title of a parent's investment account to joint tenancy of the parent and the parent's adult daughter constitutes a disposition.

Position: It depends on whether there has been a change in beneficial ownership.

Reasons: By virtue of paragraph (e) of the definition of "disposition" in subsection 248(1) of the Income Tax Act, a disposition does not include a transfer of property in which there is a change in the legal ownership without any change in the beneficial ownership.

24 January 2002 External T.I. 2001-0107335 - RESPITE CARE

Unedited CRA Tags
81(1)(h)

Principal Issues:
Tax treatment under paragraph 81(1)(h) of the Act of payments received for respite care.

Position TAKEN:
Generally taxable as business income.

Reasons:
The situations do not meet the requirement that the cared-for individual must live in the caregiver's principal place of residence; or the caregiver's principal place of residence must be maintained for use as the cared-for individual's residence during the period for which the payments are made.

23 January 2002 External T.I. 2001-0106815 - PHSP - REASONABLE AMOUNT

Unedited CRA Tags
20.01 15(1) 18(1)(a)

Principal Issues:
PHSP for a employee/shareholder and reasonable amount

Position:
Provided general comments

Reasons:
Question of fact

23 January 2002 External T.I. 2001-0099055 - Joint Spousal Trust

Unedited CRA Tags
73(1) 73(1.01)

Principal Issues: Whether it is possible for 2 spouses to settle a trust and comply with 73(1.01)?

Position: Yes.

Reasons: Provided that all of the conditions in 73(1), (1.01) and (1.02) are met.

23 January 2002 External T.I. 2001-0092005 - TRUST & CAPITAL GAINS EXEMPTION

Unedited CRA Tags
110.6(2) 104(21.2)

Principal Issues:
1. Can beneficiaries under a trust claim an enhanced capital gains deduction on the amount of the capital gain designated to them by the trust in respect of the sale of farmland?

Position:
1. If certain conditions are met, generally they can.

Reasons:
1. Reading of the particular legislation in section 110.6 and section 104 of the Act.

23 January 2002 External T.I. 2001-0107065 - NON-PROFIT ORGANIZATION

Unedited CRA Tags
138(a) 149(1)(l)

Principal Issues:
Is an entity which enters into insurance contracts precluded from qualifying as a non-profit organization pursuant to paragraph 149(1)(l) by virtue of subsection 138(1)?

Position: It is a question of fact

Reasons:
An entity organized and operated exclusively for non-profit purposes which enters into insurance contracts on a cost recovery basis could qualify as a non-profit organization for purposes of paragraph 149(1)(l) if the other requirements of that provision are satisfied

22 January 2002 External T.I. 2001-0096445 - SPECIFIED INVESTMENT BUSINESS

Unedited CRA Tags
123(7)

Principal Issues: What constitutes "throughout the year" in context of paragraph (a) of the definition "specified business income" in subsection 125(7) of the Income Tax Act.

Position: The period commencing at the beginning of the year and ending at the end of the year.

Reasons: The word "throughout" in context of the expression "throughout the year" means, "from beginning to end". (see Webster's Seventh New Collegiate Dictionary).

22 January 2002 External T.I. 2001-0103315 - CONTRIB. TO CORPORATE CAPITAL

Unedited CRA Tags
69(1)(c)

Principal Issues: Can the receipt of a property that is not considered a "gift" to the transferor be a property acquired "by way of gift" to the transferee.

Position: No

Reasons: By definition (i.e., the voluntary transfer of property...) the term "gift" must be looked at from the point of view of the person transferring the property.

XXXXXXXXXX 2001-010331
J. E. Grisé
January 22, 2002

21 January 2002 External T.I. 2001-0080325 F - FRAIS DE VOYAGE-BIENS LOCATIFS

Unedited CRA Tags
18(1)a) 18(1)h) 67

Principales Questions:
Est-ce que les frais de voyage, notamment pour des billets d'avion, encourus par un résident canadien pour aller s'occuper de ses biens locatifs situés en Espagne sont déductibles dans le calcul de son revenu locatif.

Position Adoptée:
Question de faits

21 January 2002 External T.I. 2001-0113515 - SPONSOR PAID FEES GROUP RRSP

Unedited CRA Tags
146(8)

Principal Issues: Can certain costs incurred by a group RRSP sponsor be paid by the group RRSP trust?

Position: Question of fact.

Reasons: Only the costs that belong to the group RRSP may be paid from the funds held by the group RRSP. Without any information, we could not make this determination.

21 January 2002 External T.I. 2001-0097295 - Spousal Trust

Unedited CRA Tags
70(6)

Principal Issues: Whether a particular testamentary trust will qualify as a spousal trust, thereby enabling 70(6) to apply on the taxpayer's death?

Position: Question of fact.

Reasons: Provided that all of the criteria of 70(6) are met, the trust will qualify.

21 January 2002 External T.I. 2001-0078735 F - Droit de recevoir une somme

Unedited CRA Tags
15(1) 12(1)(g)

Principales Questions:
Quel traitement fiscal serait approprié à l'égard d'une somme payée à certains actionnaires d'une société publique donnée en raison du fait que la valeur en bourse des actions de la société publique donnée n'a pas atteint un certain niveau, un an après la vente d'actions d'une autre société par ces actionnaires en faveur de la société publique donnée?

Position Adoptée:

18 January 2002 External T.I. 2001-0092665 F - AUTOMOBILE-VEHICULE PUBLICITAIRE

Unedited CRA Tags
248(1)

Principales Questions:
Est-ce qu'un véhicule à moteur qui est repeint ou modifié esthétiquement sur la base de concepts publicitaires et qui circule à des fins publicitaires serait une voiture de tourisme, telle que définie au paragraphe 248(1) de la Loi? Si oui, est-ce qu'un tel véhicule de type pick-up ou fourgonnette ou d'un type analogue serait une voiture de tourisme?

Position Adoptée:
Si le véhicule à moteur est conçu principalement pour transporter des particuliers sur les routes et dans les rues, qu'il compte au maximum neuf places assises y compris celle du conducteur et ne fait pas partie des exceptions mentionnées aux alinéas a) à d) de la définition du mot " automobile ", le véhicule à moteur serait une voiture de tourisme et ce, quelle que soit son utilisation.

18 January 2002 External T.I. 2001-0108215 - SHARES OF A QUAL. FARM PROPERTY

Unedited CRA Tags
70(10) 110.6(1) 73(6)

Principal Issues: 1. Does the asset test in the definition of "share of the capital stock of a family farm corporation" in 110.6(1) include assets used by a corporation related to the corporation under consideration?

Position: 1. No

Reasons: 1. Unlike the definition for the purposes of section 70 (see 70(10)) and section 73 (see 73(6)), the wording of the definition in 110.6 does not support the same meaning.
2001-010821
XXXXXXXXXX Lena Holloway, CA
613-957-2104
January 18, 2002

18 January 2002 External T.I. 2001-0116185 - ERRORS & OMISSIONS INSURANCE

Unedited CRA Tags
9(1)

Principal Issues:
Tax planning - whether it is beneficial to purchase errors and omissions insurance.

Position:
No comments provided.

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

18 January 2002 External T.I. 2001-0118105 - BUS. INCOME - STATUS INDIAN

Unedited CRA Tags
81(1)(a)

Principal Issues: Taxation of business income received by status Indians.

Position: Consulting business income should be allocated between exempt and non-exempt portions based primarily on the location of where the services are provided, whether on reserve or off-reserve and the location of the customers.

Reasons: The location where services are rendered is the major connecting factor because services are the revenue generating activities. The customers' location, as a factor, is reflected in the income allocation between exempt and non-exempt portions because of its influence over the location where the services are rendered.

17 January 2002 External T.I. 2001-0118615 - INVESTMENT INCOME EARNED BY STATUS INDIAN

Unedited CRA Tags
81(1)(a)

Principal Issues: Is the interest earned on a GIC taxable

Position: None, question of fact

Reasons: not enough information provided

16 January 2002 External T.I. 2001-0110155 - REIMBURSEMENT OF TUITION FEES

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

Principal Issues:
Whether the CCRA's position on the application of 6(1)(a) of the Act with respect to employer-paid education costs, outlined in Income Tax Technical News No.13 would apply where an employee receives an amount from the employer to reimburse education costs incurred prior to commencing employment.

Position:
No

Reasons:
The employee was not in the employ of the company prior to incurring the education costs. Moreover, the facts of this case indicate that subsection 6(3) of the Act may apply to deem the amount to be remuneration under section 5.

16 January 2002 External T.I. 2001-0116045 - TRUSTS/FIRST NATIONS/T3 RETURNS

Unedited CRA Tags
149(1)(c) 75(2) 150(1)(c)

Principal Issues: Is a trust required to file a T3 return when subsection 75(2) applies to deem the income/loss or capital gains/capital losses of the trust to be income of a Band which is exempt from tax pursuant to paragraph 149(1)(c)?

Position: A T3 may be required.

Reasons: Subsection 150(1) and regulation 204(1) require a trust to file a T3 return. The T3 guide suggests that the CCRA will not require a T3 return to be filed when certain conditions have been met. The fact that a Band would be the beneficial owner of the property held by the trust will not, in and by itself, exempt the trust from filing a T3 return.

16 January 2002 External T.I. 2001-0108275 - QUALIFIED DISPOSITIONS

Unedited CRA Tags
107.4

Principal Issues:
Rulings opinion E2000-0032685 discussed the draft version of section 107.4 of the Act, as set out in the notice of ways and means motion of June 5, 2000, ("the motion") which introduced rules providing for tax-deferred "qualified dispositions" of property under certain circumstances. Section 107.4, as enacted, differs somewhat from the draft provisions set out in the motion. We are asked whether the comments in opinion E2000-0032685 would be equally applicable to the enacted legislation as it was to the draft version.

Position:
The comments in opinion E2000-0032685 are limited to the motion and do not apply to the enacted legislation.

Reasons:
The draft provisions set out in the motion limit qualifying dispositions to certain dispositions not resulting in a change in beneficial ownership of property, except in cases where trust beneficiaries retain their proportionate interest in "each particular property" of the trust. Section 107.4, as enacted, deems there to be no change in beneficial ownership where the value of a beneficiary's interest in a property, or in a group of two of more identical properties, is the same both before and after the disposition.

15 January 2002 External T.I. 2001-0107565 - AWARD-UNIVERSITY

Unedited CRA Tags
6(1)(a)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues

Is the recipient of the XXXXXXXXXX taxable?

POSTION
Yes under 6(1)(a) of the Act

Reasons

Award is given on basis of achievements while employed with the university.

15 January 2002 External T.I. 2001-0106845 - DIVISION OF PENSION SURPLUS

Unedited CRA Tags
56(1)(a)(i) 6(1)(a)

Principal Issues:

Follow-up to 2001-008352. A group of employees was transferred from one employer to another resulting in the employees no longer being members of the former employer's pension plan. The pension plan paid the surplus in the plan to the municipality on the condition that the municipality and the Police Association agreeing on the disposal of the excess funds. It is proposed that the surplus in the pension plan relating to these former employees be divided between the former employer and the former employees. Is the payment of the surplus as a lump sum to the former employees taxable?

Position TAKEN:

Yes.

Reasons:

15 January 2002 External T.I. 2002-0118145 - Acquisition of control

Unedited CRA Tags
249(4)

Principal Issues: Whether there is an acquisition of control when "shelf" corporation issues shares

Position: Generally yes

Reasons: Incorporator is considered to control shelf corporation prior to the issuance of shares

15 January 2002 External T.I. 2001-0104085 - GAINS-SALES OF RESIDENCES

Unedited CRA Tags
9(1)

Principal Issues: An individual has asked whether the principal residence exemption can be claimed in respect of gains on the sales of residences that were renovated by the individual and his son.

Position: No (the gains would presumably be on account of income). General comments were also provided since, in an actual situation, it is a question of fact whether a gain is on account of capital or income.

Reasons: See Position

14 January 2002 External T.I. 2001-0107785 - TRAVEL COSTS-EMPLOYEES

Unedited CRA Tags
8(1)(h) 8(1)(h.1)

Principal Issues:
Whether a substitute teacher, who is on call, can deduct transportation costs for travel between the home and the school at which they are asked to teach.

Position: No.

Reasons:
Travel between home and the place of work, being the school at which the substitute is teaching, is a personal expense and therefore not deductible in computing income from employment.

14 January 2002 External T.I. 2001-0101845 - CHARITABLE REMAINDER TRUST

Unedited CRA Tags
110.1(1) 118.1(3)

Principal Issues:

Whether a gift has been made to a charity when additional property is transferred to an existing charitable remainder trust.

Position: No.

Reasons:

14 January 2002 External T.I. 2001-0109435 - DONATION IN LIEU OF TAXES

Unedited CRA Tags
110.1 118.1

Principal Issues:
Whether the payment of a portion of an annual municipal tax levy to a registered chartiable foundation in exchange for a reduction of the tax levy is a "gift" for purposes of the Act.

Position: No

Reasons:
1. A gift must be a voluntary transfer of property made without expectation of return or benefit, and the donee must have unfettered discretion as to the use of the property.
2. Depending on the facts, the donee may simply be acting as an agent of the municipality and not the recipient of the funds.

14 January 2002 External T.I. 2001-0113465 - LUMP SUM LEASE PAYMENT

Unedited CRA Tags
67.3 18(9)

Principal Issues: How is a lump sum lease payment made at the beginning of a three-year lease treated for purposes of the limitation on the cost of leasing a passenger vehicle in section 67.3 of the Act?

Position: If the lump sum payment is made or incurred as consideration for rent in respect of a period after the end of the year, subsection 18(9) of the Act would apply to deduct a portion of the payment in the year or years subsequent to its payment. Section 67.3 of the Act would then apply to the monthly rental charges and the portion of the lump sum payment deductible in each of the years.

Reasons: This position is supported by the provisions indicated and is consistent with the treatment accorded to such lump sum payments made by employees who lease automobiles that are used to earn employment income. In this respect, please refer to paragraph 9 of IT-522.

XXXXXXXXXX 2001-011346
J. E. Grisé
January 14, 2002

14 January 2002 External T.I. 2001-0104335 - CCA CLASS OF GAS, HYDRO & WATER METERS

Unedited CRA Tags
Class 1

Principal Issues:
CCA classification of gas, hydro and water meters used in the normal business of the distribution of the gas, hydro and water.

Position TAKEN:
Class 1.

Reasons:
Distribution equipment used by distributors of the commodities.

11 January 2002 External T.I. 2001-0106745 - MFI CLASS OF UNITS QUALIFIED INVESTMENT

Unedited CRA Tags
REG 4900(1)(d)

Principal Issues: Can a class of units of a mutual fund trust that do not satisfy the conditions in section 4801 of the Regulations qualify as a qualified investment under paragraph 4900(1)(d) of the Regulations?

Position: Yes.

Reasons: The only requirement in 4900(1)(d) is that the investment be a unit of a mutual fund trust. There is no restriction on the class of units acquired.

11 January 2002 External T.I. 2001-0115545 - UNPAID LEAVE UNION OFFICIAL EMPLOYMENT

Unedited CRA Tags
60(j.1)

Principal Issues:
Would a person on unpaid leave that is an official with a union (being paid by the union and participating in the union's pension) be considered an employee of his former employer where he has a right, under the collective agreement, to re-employment at what his current seniority would be had he continued to be with the employer?

Position: No.

Reasons:
There is no evidence of an employment relationship while the employee is on leave.

11 January 2002 External T.I. 2001-0104975 - WARRANT CONNECTED SHAREHOLDER

Unedited CRA Tags
REG 4901(2.2)

Principal Issues:
Will paragraph 4901(2.2) of the Regulations apply in a particular scenario to deem a person to be a connected shareholder of a corporation?

Position: Question of fact.

Reasons:
We would need to review the rights to determine the number of shares that the person has a right to acquire and any restrictions on acquisition that may exist.

11 January 2002 External T.I. 2001-0115485 - TRANSFER OF IRA TO RRSP

Unedited CRA Tags
60(j)

Principal Issues: Can an amount that was transferred from a U.S. 401(k) plan to a U.S. IRA be subsequently transferred to an RRSP under paragraph 60(j)(ii) of the Act?

Position: Where conditions are satisfied, yes.

Reasons: An IRA is a foreign retirement arrangement that may be transferred to an RRSP

10 January 2002 External T.I. 2001-0090325 F - UTILISATION DES VEHICULES

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

Principales Questions:

1. Est-ce que la distance parcourue par des employés municipaux entre leur domicile et leur lieu de travail peut être considérée comme un déplacement lié aux opérations courantes de la municipalité XYZ puisqu'ils sont tenus d'utiliser des véhicules que la municipalité met à leur disposition après les heures normales de travail pour être en mesure de faire face à certaines situations d'urgence?

2. Est-ce que notre réponse varie si ces véhicules sont munis d'équipements de première intervention tels que gyrophares amovibles, extincteur, radio en constante fonction, trousses de premiers soins...etc. ?

Position Adoptée:

10 January 2002 External T.I. 2001-0116175 - GIFTS&AWARDS TO SHAREHOLDERS

Unedited CRA Tags
6(1)(a)

Principal Issues:
1. Whether new policy on gifts and awards applies to gifts and awards given by closely held corporations to their shareholders.
2. Whether there are any other considerations with respect to the application of the new policy.

Position:
1. Policy does not apply to gifts and awards given to shareholders of closely held corporations.
2. Policy does not apply where gifts or awards are given as a form of extra remuneration, or given in lieu of taxable remuneration or benefits.

Reasons:
1. Only applies in employment situations, and not individuals receiving items in their capacity as shareholders.
2. Overall policy on nontaxable privileges in paragraph 2 of IT-470R.

10 January 2002 External T.I. 2001-0107325 - COST OF AN AUTOMOBILE

Unedited CRA Tags
6(2) 6(1)(e)(ii) 13(21)

Principal Issues:

(1) What is the meaning to be given to the expression "cost of the automobile" for purposes of element "C" of the formula in subsection 6(2) of the Act where an employee (or shareholder) reimburses a corporation for a portion of the capital cost of the automobile, since this will be the "cost" used to compute the automobile standby charge?

(2) Will this amount also be the capital cost of the automobile for purposes of determining the CCA classification of the vehicle?

Position:
(1) If all the facts indicate that an employee (or shareholder) and a corporation intend on jointly owning an automobile, whereby the amount paid by the employee (or shareholder) to the corporation does not represent a reimbursement for actual use of the automobile as described in subparagraph 6(1)(e)(ii) of the Act, the cost of the automobile to the corporation for purposes of calculating a standby charge will be the amount paid by the corporation less the amount reimbursed by the employee (or shareholder).

(2) This "net amount" will also be considered the capital cost of the automobile to the corporation in determining whether it will be classified as a passenger vehicle included in class 10.1.

Reasons:

10 January 2002 External T.I. 2001-0106265 - UNFUNDED SUP PEN PLAN

Unedited CRA Tags
60(j)

Principal Issues:
1. Can a foreign unfunded supplemental pension plan be a superannuation or pension plan for purposes of the Act?
2. If it is determined that an unfunded supplemental pension plan is a superannuation or pension plan for purposes of the Act, can the amount be transferred under paragraph 60(j) of the Act?

Position:
1. Question of fact.
2. Yes.

Reasons:
1. We would have to determine whether the amount would be a pension plan payment or a retiring allowance for purpose of the Act. There is no limit on pension plan transfers whereas there is for retiring allowance transfers.
2. There is nothing in the Act that would prevent the transfer.

9 January 2002 External T.I. 2001-0104825 - PROPERTY INCOME CAPITAL GAINS OF NPO

Unedited CRA Tags
149(1)(l) 149(5) 3

Principal Issues:
1. Is interest income from GIC's and term deposits taxable income of a non-profit organization.
2. Is a capital gain realized on the disposition of vacant property by a non-profit organization taxable.

Position:
1. No
2. No

Reasons:
1. Non-profit organization is operated in accordance with its established not-for-profit purpose.
2. No tax payable on the taxable income of the NPO. Income of the NPO includes capital gains.

9 January 2002 External T.I. 2001-0089655 F - AVANTAGE AUTOMOBILE

Unedited CRA Tags
248(1) 6(1)(e) 6(1)(k)

Principales Questions:
1. Quel est le montant prescrit par l'article 7305.1 du Règlement pour le calcul de l'avantage relatif au fonctionnement d'une automobile ?
2. Est-ce qu'un véhicule à moteur de type " pick-up " est visé par une des exclusions de la définition du terme " automobile " au paragraphe 248(1) ?
3. Est-ce que le calcul de l'avantage imposable d'un représentant de service est modifié lorsque celui-ci bénéficie d'un véhicule mis à sa disposition par son employeur entre autres parce qu'il doit être disponible 24 heures sur 24 pour répondre à des urgences ?

Position Adoptée:
1. En 2001 et 2002 : 0,16 $
2. Aucune.
3. Non

9 January 2002 External T.I. 2001-0105125 - M&P - PROCESSING OF TAILINGS

Unedited CRA Tags
125.1(3)

Principal Issues: Whether the processing of a slag bi-product (tailings) from a nickel mine could be considered manufacturing or processing as defined in subsection 125.1(3) of the Act?

Position: no

Reasons: The prime metal stage is the line of demarcation between the mining and manufacturing industries. The resource profits determined under subsection 1204 of the Regulations would be deducted in computing Canadian M&P profits under Part LII of the Regulations.

9 January 2002 External T.I. 2001-0095765 - DEDUCTION OF GENERAL EXPENSES

Unedited CRA Tags
40 9

Principal Issues:
The deduction of general expenses for capital transactions.

Position:
The Act does not provide for the deduction of general expenses in the calculation of capital gains or losses. The only expenses that are deductible in the calculation of a gain or loss from a capital transaction are outlays and expenses to the extent that they were made or incurred for the purpose of making the disposition of the property. While the Act does generally provide for the deduction of expenses incurred to earn business or property income, these provisions do not apply for a gain or loss on a capital property.

Reasons:
Subdivision B

9 January 2002 External T.I. 2001-0099915 - DERIVITIVE CONTRACT

Unedited CRA Tags
9

Principal Issues:
Clarification requested regarding the income tax consequences of a particular business transaction related to a derivative contract

9 January 2002 External T.I. 2001-0113505 - PHSP

Unedited CRA Tags
248(1)

Principal Issues: Do the plans described qualify as phsp's?

Position: general comments provided

Reasons: can only confirm via an advance tax ruling

8 January 2002 External T.I. 2001-0109525 - NON-QUALIFIED INVESTMENTS

Unedited CRA Tags
146(9) 146.3(4) 207.1

Principal Issues:
1. How is a non-qualified investment removed from an RRSP or RRIF?
2. What steps are required to value an asset that has been de-listed?

Position:
1. Non-qualified investments do not have to be removed from an RRSP or RRIF.
2. CCRA does not provide valuation services or give rulings concerning the value of properties.

Reasons:
1. No section of the Act requires that a non-qualified investment be removed from an RRSP or RRIF, although the trust may be subject to Part XI.1 tax.
2. Refer to IC 89-3 and Valuations Section of the tax services office.

8 January 2002 External T.I. 2001-0115775 - FIRST NATIONS-ISSUING CHARITABLE DONATIONS

Unedited CRA Tags
149(1)(c) 110.1 118.1

Principal Issues: Whether an Indian band meets the prerequisites in order to be able to issue receipts for gifts under sections 110.1 and 118.1 of the Income Tax Act.

Position: General comments provided. Insufficient information provided to make a definite determination.

Reasons: The Agency's administrative position is to consider a band to be a municipality for purposes of section 110.1 and 118.1 and therefore be able to issue official receipts for gifts if it qualifies for exemption under paragraph 149(1)(c) of the Act.

8 January 2002 External T.I. 2001-0094485 F - EMPLOI SUR UN CHANTIER PARTICULIER

Unedited CRA Tags
6(6)

Principales Questions:
Est-ce que le paragraphe 6(6) de la Loi pourrait s'appliquer à un citoyen d'un autre pays qui est considéré par l'effet de la Loi et la convention fiscale, s'il y a lieu, comme étant un résident canadien et non pas un résident de cet autre pays?

Position Adoptée:
Si toutes les conditions mentionnées au paragraphe 6(6) de la Loi sont respectées, ce paragraphe pourrait s'appliquer. À cette fin, " lieu principal de résidence " est défini comme étant un endroit où l'employé tient un établissement domestique autonome. Si un employé tient deux établissements domestiques autonomes, il faudrait déterminer le lieu principal.

8 January 2002 External T.I. 2001-0102765 - IMMIGRANT LUMP-SUM PENSION

Unedited CRA Tags
60(j.1) 56(1)(a)(i)

Principal Issues:

1. Will a payment received by a Hong Kong civil servant before immigrating to Canada be taxable in Canada?
2. Can a lump-sum payment from a Hong Kong pension plan be rolled to an RRSP?

Position:

1. No.
2. Provided that the amount is received as a pension benefit, yes.

Reasons:

8 January 2002 External T.I. 2001-0096005 - BAD DEBTS AND CARRYING ON A BUSINESS

Unedited CRA Tags
50(1) 39(1)(c) 40(2)(g)(ii) 248(1)

Principal Issues:
In a hypothetical situation:
(1) Whether a shareholder debt is a bad debt and qualifies for the election under subsection 50(1) of the Act?
(2) Whether a capital loss incurred by one corporation on a debt owed to it by another corporation would be deemed by subparagraph 40(2)(g)(ii) of the Act to be nil?
(3) Are there any further administrative positions to IT-239R2 with respect to the application of subparagraph 40(2)(g)(ii) of the Act?
(4) Whether a company would be a small business corporation within the meaning assigned by subsection 248(1) of the Act for the purposes of paragraph 39(1)(c) if the "only assets during the past 12 months were a reasonable amount of accounts receivable" that is being collected?

Position:
(1) No.
(2) Yes.
(3) No.
(4) No.

Reasons:
(1) The situation described does not meet the position outlined in paragraph 10 of IT-159R3. The amount of the debt owing to the shareholder would not be eligible for the election under subsection 50(1) of the Act.
(2) In the situation described, the corporation experiencing the loss is not the parent of the other corporation, therefore subparagraph 40(2)(g)(ii) applies since the administration position in paragraph 6 of Interpretation Bulletin IT-239R2 is not met.
(3) Interpretation Bulletin IT-239R2 contains the only exceptions to the application of subparagraph 40(2)(g)(ii). XXXXXXXXXX
(4) Trade account receivables, which are held to meet current cash flow or current working capital requirements, generally would be considered used in an active business. Although trade receivables are generated by the business, the test is whether they were used in the business. In the situation described, the trade receivables remained outstanding for an extended period of time, therefore they are not used in carrying on an active business. Unless the company was a SBC within any time in the preceding 12 months, this fact alone would exclude it from being eligible for a business investment loss under paragraph 39(1)(c) of the Act.

8 January 2002 External T.I. 2001-0100145 - TERMINATION CASH FOR STOCK OPTIONS

Unedited CRA Tags
7(1)(b)

Principal Issues:
Can an amount paid by an employer for unvested stock option rights held by a terminated employee qualify for the deduction under paragraph 110(1)(d) of the Act?

Position: Yes.

Reasons:
Subject to the conditions in paragraph 110(1)(d) being satisfied, the proceeds received in respect of the disposition of unvested stock option rights may qualify for the deduction under paragraph 110(1)(d) of the Act.

7 January 2002 External T.I. 2001-0100155 - TRANSFER OF CAPITAL LOSSES

Unedited CRA Tags
73(1) 73(1) 53(1)(f)

Principal Issues:
Whether a taxpayer can transfer unrealized capital losses to the taxpayer's spouse by way of a sale at fair market value.

Position TAKEN:
Yes, subject to application of superficial loss rules.

Reasons:
If the sale occurs at fair market value and the transferee still holds the capital property or substitute property at end of 30 days, the superficial loss rules deny the taxpayer's capital loss and the denied loss is added to adjusted cost base of the spouse's capital property. The subsection 73(1) of the Act election prevents the transfer at adjusted cost base and section 74.5 of the Act prevents the attribution of the future capital loss back to transferor.

7 January 2002 External T.I. 2001-0101105 - EQUIV. TO SPOUSE TAX CREDIT

Unedited CRA Tags
118(1)(b)

Principal Issues: Following a marriage breakdown where parents are awarded joint custody of their two children, can both parents claim the equivalent-to-spouse credit?

Position: Yes

Reasons: If both parents have custody of the children, at different times throughout the year, the children would be "wholly dependent" on each parent.

XXXXXXXXXX 2001-010110
J. E. Grisé
January 7, 2002

7 January 2002 External T.I. 2001-0099275 - INTEREST INCOME ON STRIP BONDS

Unedited CRA Tags
12(9) 12(4) 52(1)

Principal Issues:
Tax treatment of strip bonds

3 January 2002 External T.I. 2001-0096095 - TRANSFER OF FARM PROPERTY

Unedited CRA Tags
73(3) 110.6(1) 110.6(2)

Principal Issues:
(a) Whether a transfer of a family farm to children occurs at fair market value.
(b) Whether the property is "qualified farm property."

Position:
(a) Question of fact - Subsection 73(3) may apply; general comments provided.
(b) Question of fact; general comments provided.

Reasons:
(a) Subsection 73(3).
(b) Subsection 110.6(1), 110.6(2).

2 January 2002 External T.I. 2001-0094555 F - Subsidies and Assistance Payments

Unedited CRA Tags
13(7.1) 12(2.2)

Principal Issues: Whether a financial assistance provided by a government in a particular situation and taking the form of a reimbursement of interest expenses paid by a taxpayer with respect to loans contracted for the purposes of a particular project should reduce the capital cost of depreciable property acquired in the course of the said project under subsection 13(7.1) of the Act.

Position: No.

Reasons: The financial assistance provided in the particular situation should be considered first and foremost as amounts received in respect of an outlay or expense (i.e. interest) and consequently should not be considered as an assistance received in respect of or for the acquisition of, depreciable property. Furthermore, the Department does not accept the conclusions reached by the Québec Court of Appeal in S.M.R.Q. v. Alex Couture Inc., 2001 DTC 5072 and considers that such decision is not binding upon the Department.

4 December 2001 External T.I. 2001-0110915 - TEI-LERRIC INVESTMENTS

Unedited CRA Tags
125(7)

Principal Issues: TEI Round Table 2001; (1) Basis for the Lerric Investments Corp. assessment as it seems contrary to published position in par. 16 of IT-73R5; (2) Whether CCRA has an early warning system to inform public of revised positions.

Position: (1) Basis found in par. 15 of IT-73R5 and previous case law; (2) System already in place

Reasons: (1) Paragraph 15 of IT-73R5 clearly states that "more than five full time employees" means at least six full time employees. This position was upheld in the decision of Hughes & Co. Holdings Limited, 94 DTC 6511 (FCTD); (2) Revised positions are announced through revised Interpretation Bulletins and Income Tax Technical News releases, as mentioned in Index to IT and TN, in addition to publishing every ruling and interpretation issued.

4 December 2001 External T.I. 2001-0110935 - WITHHOLDING ON TRANSFER OF BONUS TO RRSP

Unedited CRA Tags
REG 100(3)(c) 146(5) 146(5.1)

Principal Issues:
1) Where a bonus is paid early in the calendar year, will the deduction in paragraph 100(3)(c) of the Regulations, from the amount on which tax must be withheld, depend on the current year or previous year RRSP deduction limit?

2) What does CCRA define as "reasonable grounds" for the employer for purposes of applying paragraph 100(3)(c) of the Regulations?

Position:
1) Current year RRSP deduction limit.

2) Written confirmation from the employee that the amount will be deductible, or a copy of the employee's RRSP deduction limit statement.

Reasons:
1) The regulation is unambiguous. Paragraph 100(3)(c) of the Regulations specifically requires that the employer have reasonable grounds to believe that the premium will be deductible for the same taxation year in which the remuneration is paid.

4 December 2001 External T.I. 2001-0110895 - PROVISION OF SERVICES (TEI)

Unedited CRA Tags
12(1)(a) 18(1)(e) 20(1)(m) 20(7)

Principal Issues: Would CCRA consider permitting the taxpayer to prorate the payments received, based on the length of a maintenance contract, and include in income only the portion of the payments that relates to the contract period that pertains to the current taxation year?

Position: No

Reasons: If the payments received are included in income under subparagraph 12(1)(a)(i), no reserve can be taken in respect of a portion of the amount included because of the combined effects of subsection 20(7) and paragraph 20(1)(m) considering the indemnity nature of the maintenance contract. If the amount received is included in income under section 9, paragraph 18(1)(e) would not permit a reserve because of the contingent nature of the obligation.

4 December 2001 External T.I. 2001-0110905 - PARTNERSHIP INFORMATION RETURNS

Unedited CRA Tags
220(2.1) 152(1.4)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

TEI Conference
December 4, 2001

Question 10 Reassessment Period

9 November 2001 External T.I. 2001-0092515 - SHAREHOLDER-MANAGER REMUNERATION

Unedited CRA Tags
67 18(1)(a)

Principal Issues:
What criteria must be met relative to ownership and management structure of a CCPC before reasonableness of an owner manager bonus/salary would be challenged?

Position:
Clarified position on reasonableness of remuneration to shareholder-managers.

Reasons:
See below.

16 October 2001 External T.I. 2001-0092215 - COLLECTION OF TAX-LIMITATIONS

Unedited CRA Tags
225.1

Principal Issues: CTF Round Table 2001 - Markevich

Position: General comments.

Reasons: Case under appeal.

19 September 2001 External T.I. 2001-0092085 - Transfer of Obligation under Short Position

Unedited CRA Tags
9(1)

Principal Issues: Whether the transfer of an obligation under the short sale is a taxable event.

Position: Yes

Reasons: The short position is closed out in respect of the transferor. A gain or loss may be recognized on the transfer of the obligation.

19 April 2001 External T.I. 2001-0067665 - LEGAL AND BENEFICIAL OWNERSHIP

Unedited CRA Tags
54

Principal Issues: Whether a loan agreement between XXXXXXXXXX and an individual for the purchase of an automobile is considered a Lease Agreement?

Position: No

Reasons: Individual has legal and beneficial ownership of property.

9 November 2001 External T.I. 2001-0092495 - CTF ROUND TABLE-PROFESSIONAL CORPs

Unedited CRA Tags
9(1)

Principal Issues: CTF Round Table Discussion on Professional Corporations in light of Wallsten Decision.

Position: Existing policy maintained.

Reasons: Wallsten was an informal decision. Our position is consistent with decision of Supreme Court in Campbell.

Technical Interpretation - Internal

28 January 2002 Internal T.I. 2001-0104237 - LEGAL EXPENSES FOR CHILD SUPPORT

Unedited CRA Tags
3

Principal Issues: Whether legal fees incurred to defend child support rights are deductible where outcome of procedures is that no child support is payable to the taxpayer.

Position: No.

Reasons: No provision of the Act allows for a deduction in this case.

7 January 2002 Internal T.I. 2001-0101777 - MOVING EXPENSES

Unedited CRA Tags
62(3)(a) 62(3)(c)

Principal Issues:
Can a taxpayer use a simplified method to calculate meal expenses described in the definition of "moving expenses" under paragraph 62(3)(c) of the Income Tax Act (the Act), since a simplified method is permitted to calculate meal expenses described in paragraph 62(3)(a) of the definition?

Position: Yes

Reasons: Paragraph 13 of IT-178R3 (Consolidated)

22 August 2001 Internal T.I. 2000-004778A - SUBVENTION PAYMENTS

Unedited CRA Tags
9 REG 1100(15)

Principal Issues:
1. Is the subvention payment considered to be income and not a capital payment.
2. Is the subvention payment considered to be leasing income.

Position:
1. Yes, the payment is on account of income.
2. Yes, the subvention payment is leasing income.

Reasons:
The positions are consistent with jurisprudence. We reconsidered our previous opinion as expressed in 990387.

22 March 2001 Internal T.I. 2000-0049167 - NON RESIDENT INSURER CIF

Unedited CRA Tags
REG 2400 PART XIV

Principal Issues:
1. Is a Reserve for Unregistered Reinsurance ("RFUR")included in computing CIF for a non-resident non-life insurer?
2. Does the Branch have a RFUR?
3. Does Canadian tax law provide for the designation, by the Minister of assets of a non-resident insurer that are not reported in the annual report to OSFI?
4. Is such a designation described in (3) contrary to Article VII of the Canada-US Income Tax Treaty?

Position:
1. Yes
2. Yes, based on the facts
3. Yes
4. No

Reasons: Please refer to the analysis in the document