Income Tax Severed Letters - 2002-04-26

Principal Issues:
1. Does a Canadian resident have to include stock option benefits realized on the exercising of his or her options in his or her income where the options were granted while they were non-residents?
2. Where the Canadian resident paid taxes in a previous year to the country where he or she resided at the time the stock options were granted, will there be a foreign tax credit allowed in respect of those previous taxes?

Position:
1. Yes.
2. No.

Reasons:
1. A resident has to include all of his or her income in accordance with the provisions of the Act. Paragraph 7(1)(a) would apply.
2. A taxpayer can only claim a foreign tax credit for the income taxes paid to another government in respect of the income in that same year. There is no provision that would allow the taxpayer to claim a foreign tax credit in the current year for foreign taxes paid in a previous year.

Principal Issues: Whether child support payments would continue to be deductible by a taxpayer.

Position: No.

Reasons: Since child support would have ceased under the taxpayer's first child support agreement on XXXXXXXXXX , this agreement would have to be varied or a new agreement would have to be made in order to establish child support after this date. Accordingly, there would be a "commencement day."

Principales Questions:
Est-ce que le non-paiement des taxes municipales relativement à un terrain permet au propriétaire de reconnaître la perte en capital sur ce terrain?

Position Adoptée: On doit disposer d'un bien pour être en mesure de calculer le gain ou la perte qui découle de cette disposition. Commentaires généraux.

Principales Questions:
M. A, M. B et M. C exploitent une entreprise en tant qu'associés de la société de personnes ABC qui a une fin d'exercice au 30 juin. Ils désirent s'associer avec M. D. Messieurs A, B et C vont se prévaloir des dispositions des paragraphes 98(3) et 97(2) de la Loi et ainsi transférer leur droit indivis dans les biens dans la nouvelle société de personnes ABCD. Messieurs A, B et C ont-ils cessé d'exploiter l'entreprise aux fins du paragraphe 34.1(8) de la Loi compte tenu que la société ABC a cessé d'exister ?

Position Adoptée:
Nous serions prêts à accepter que le paragraphe 34.1(1) de la Loi ne s'applique pas dans une telle situation, pourvu que la dissolution de ABC et la création de la nouvelle société de personnes ne soient pas motivées par des considérations fiscales.

Principal Issues: whether payments for driving therapy are "medical expenses"

Position: no

Reasons:
1. not paid to a medical practitioner or hospital
2. Although the payment is for training relating to a mental handicap, the payment is not for "care and training" so 118.2(2)(e) does not apply
3. 118.2(2)(l.9) does not apply because the taxpayer is not entitled to the disability tax credit
4. if conditions satisfied, tuition credit per 118.5 may be available

Principal Issues:
1. Whether a mortgage investment corporation can loan funds to a developer without losing its status as a mortgage investment corporation for the purposes of section 130.1 of the Act.130.1

2. Why mortgage investment corporations are treated differently under the Act than are banks and credit unions, with respect to impaired loans.

Position:
1. While not prohibited from investing in a developer, the terms and conditions of the specific investment must be taken into account in determining whether the requirements of subsection 130.1(6) are met.

2. Insufficient information to determine whether a mortgage investment corporation would be treated differently from a bank or credit union with respect to impaired loans. Basis in the legislation for taxpayer's perception is unclear. If the concern is one of tax policy, it should be directed to the Department of Finance.

Reasons:
1. Whether a particular investment is within the scope of permitted activities for a corporation to qualify as a mortgage investment corporation under subsection 130.1(6) is a question of fact.

Principal Issues: whether counsellors in Nova Scotia are medical practitioners

Position: no, unless a specific law authorizes them to provide counselling

Reasons: 118.4(2)

Principales Questions:
Est-ce que le paragraphe 98(5) de la Loi peut s'appliquer lorsqu'une société de personnes exploitait plusieurs entreprises distinctes et qu'une personne qui était un associé de cette société de personnes continue d'exploiter à titre de propriétaire unique une seule de ces entreprises?

Position Adoptée:
Non

Principal Issues: Whether remuneration paid on the basis of a percentage of the sales volume generated by an employee is a "commission."

Position: Yes.

Reasons: Based on the ordinary meaning of "commission."

Principal Issues: Whether an employee incentive program results in taxable benefits in the hands of the employee. Under the program, XXXXXXXXXX .

Position: Yes.

Reasons: XXXXXXXXXX , our policy with respect to non-cash awards would not apply.

Principal Issues:
Tax consequences of a guarantee payment made under a segregated fund policy.

Position:
Question of fact whether policyholder will have received or become entitled to receive the guarantee amount at the time it arises under the terms of the contract. If the policyholder has received or has become entitled to receive the guarantee benefit at a particular time, paragraph 138.1(1)(j) will apply to deem the policyholder to have received proceeds of disposition. If the guarantee amount is paid to the policyholder in cash or kind by the insurer, the insurer would be entitled to deduct the amount of the payment in computing income under section 9 of the Act. Where the insurer satisfies the guarantee by transferring assets from its general funds to the segregated fund trust, paragraph 138.1(1)(d) of the Act will apply to deem the insurer to have acquired an interest in the segregated fund trust.

Reasons: The wording of paragraphs 138.1(1)(d) and 138.1(1)(j).
XXXXXXXXXX 2001-010223

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 ISSUE:

Principal Issues:
Can early redemption charges incurred on the transfer of assets from one RRIF to another be paid by the annuitant under the plans?

Position:
No

Reasons:
An early redemption charge incurred by a RRIF in respect of the redemption of its investments is considered a cost related to the disposition of its property. Such costs are RRIF costs and they can not be paid by the annuitant.

Principal Issues: Whether a benefit is received by employees as a result of the employer paying the cost of their spouses' travel expenses. There is an expectation from the employer that spouses accompany the particular employees to meetings and, while there, participate in work-related activities.

Position: Given such employment conditions, it is likely that there would be no taxable benefit to the employees as a result of the spouses accompanying them on trips. However, each trip must be considered individually, and the facts must show that the employer requested the employee's spouse to make a particular trip, and the main purpose of the request was so that the spouse could assist in attaining the business objectives of the trip.

Reasons: Our position in IT-131R2.