Income Tax Severed Letters - 2002-05-10

Miscellaneous

2002 2002-0133871 - Supplemental Ruling

Unedited CRA Tags
55(3)(b)

Principal Issues: Supplemental Ruling to Ruling 2001-009166. The taxpayer requested some minor changes to the facts and proposed transactions of the original ruling.

Position: N/A

Reasons: N/A

Ruling

2002 Ruling 2001-0108693 - Bump on farm land purchased by developer

Unedited CRA Tags
88(1)(c) 88(1)(d)]

Principal Issues: 88(1)(d) bump on property that loses its capital nature on acquisition of control

Position: Favourable ruling issued

Reasons: Requirement to be capital property of subsidiary at the time of acquisition of control

2002 Ruling 2002-012195A - FILM PARTNERSHIP/UK TREATY CO-PRODUCTION

Unedited CRA Tags
125.4

Principal Issues: 1.Whether there is a disposition of a film in a UK treaty co-production arrangement?

Position: 1. No

Reasons: 1. Multi-year lease; certain rights retained, including beneficial ownership of the copyright. Similar to position adopted in file 2000-003885 and 2001-007262.

2002 Ruling 2002-0123693 - Split up Butterfly

Unedited CRA Tags
55(3)(b)

Principal Issues: Split up butterfly

Position: Standard butterfly

Reasons: N/A

2002 Ruling 2002-0131133 - STOCK OPTION PLAN AMENDMENT-SAR

Unedited CRA Tags
7 110

Principal Issues: Will an amendment to provide a cash-out right, at the discretion of the employee, to a stock option plan have any immediate tax consequences?

Position: No.

Reasons: The amendment to the plan will not cause a disposition of rights under the plan.

2002 Ruling 2002-0133063 - PARTNERSHIP-INCORPORATION

Unedited CRA Tags
85(2) 85(3) 125(7)

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

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

Reasons: same as 2001-0102663 and E 9915403, with some additional reorgs (use of an holdco)

2002 Ruling 2002-0134003 - FOREIGN PROPERTY DEBTS OF A TRUST

Unedited CRA Tags
206(1) 245(2)

Principal Issues:
1) Will debts of a trust be foreign property for purposes of Part XI?
2) Will GAAR apply to the transactions?

Position:
1) No
2) No

Reasons:
1) Nothing in the Act to include debts of a trust as foreign property.
2) The GAAR committee has ruled that similar transactions do not represent a misuse or abuse of the Act.

Ministerial Correspondence

23 May 2002 Ministerial Correspondence 2002-0136764 - DISPOSITION OF PROPERTY TO AN RRSP

Unedited CRA Tags
40(2)(g)(iv)

Principal Issues: Capital gains/losses on disposition of property to an RRSP.

Position: Where a taxpayer disposes of property to their RRSP, any resulting capital gain is included in the taxpayer's income, whereas, any capital loss arising on the disposition is deemed to be nil.

Reasons: Requirement of the Income Tax Act.

Technical Interpretation - External

7 June 2002 External T.I. 2002-0138605 - RPP UNDEDUCTED CONTRIB. BANK CHARGES

Unedited CRA Tags
56(1)(a) 110(1)(f)(i)

Principal Issues:
1. Can bank charges be deducted in computing income from a pension plan?
2. Are non-deductible RPP contributions received tax-free from an RPP?

Position:
1. No.
2. Generally not.

Reasons:
1. There is no provision that allows for the deduction.
2. Unless the amount is exempted under a tax treaty, the general comments in paragraph 11 of IT-167R6 would apply.

6 June 2002 External T.I. 2002-0144165 - EAP PAYMENT LIMITATIONS

Unedited CRA Tags
146.1(2)(g.1)

Principal Issues:
Can an educational assistance payment be made to a student before the end of the 13th consecutive week of being enrolled in a qualifying educational program at a post-secondary educational institution?

Position: Yes.

Reasons:
Educational assistance payments could be made in the first 13 weeks of enrollment but the aggregate amount that can be paid in that period is capped at $5,000 unless a greater amount is approved by the Minister of Human Resources Development.

5 June 2002 External T.I. 2002-0138235 - HBP WITHDRAWAL REPAYMENT SAME YEAR

Unedited CRA Tags
146.01(3)

Principal Issues:
Can an individual withdraw an amount under the Home Buyers' Plan in a taxation year and, in that same taxation year, designate an amount as a repayment of an eligible amount under subsection 146.01(3) of the Act?

Position: Yes.

Reasons:
No provision in the Act that disallows a repayment in the same year as there is a withdrawal under the Home Buyers' Plan.

5 June 2002 External T.I. 2002-0132805 - CHANGE IN STOCK OPTION TERM EXPIRY

Unedited CRA Tags
7(1)

Principal Issues:
Does the extension of the expiry term of a stock option agreement result in a disposition of the old stock option?

Position:
Likely no.

Reasons:
The extension of the expiry date of a stock option does not significantly vary the rights, liabilities or legal position of the parties as ascertained by the original stock option agreement.

4 June 2002 External T.I. 2001-0109545 - Former Common Law Partner

Unedited CRA Tags
160(1) 160(4) 248(1)

Principal Issues: The application of section 160, including subsection 160(4), where at the time of the transfer of property the common-law partner relationship has ceased and the property is transferred pursuant to a decree, order, judgment or written separation agreement.

Position: In this situation, it section 160 and subsection 160(4) would not apply unless the common-law partner relationship resumes.

Reasons: The application of the law based on the specific facts.

4 June 2002 External T.I. 2002-0131455 - SMALL BUSINESS CAPITAL GAINS

Unedited CRA Tags
44.1 7

Principal Issues:
CCPC stock options exercised by employee after CCPC purchased by US publicly traded firm & CCPC options were exchanged for options in US co; Employee now wishing to dispose of US co shares and wants to know if section 44.1 capital gains deferral is available

Position: No

Reasons: US co shares are not eligible small business corporation shares and ss.44.1 (6) & ss.44.1 (7) are only available for shares not options.

4 June 2002 External T.I. 2002-0125715 - SR & ED - RELATED TO A BUSINESS

Unedited CRA Tags
37(1)(a)(i) 37(8)(b) 37(8)(c)

Principal Issues: Does there need to be a link or interconnection between the SR&ED expenditures and the taxpayer's business in order to meet the term "SR&ED related to a business"?

Position: yes

Reasons: 37(1)(a)(i) states, "related to the business of the taxpayer" - this link can be met if there is an interconnection between the SR&ED and the type of business of the t/p so that, if the results of the SR&ED lead to commercial exploitation, the direct use of these results will benefit or enhance the taxpayer's business, such that the requirement in paragraph 37(8)(b) of the Act could be met.

3 June 2002 External T.I. 2002-0128335 - RECOGNITION OF SERVICE

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

Principal Issues:
Is pensionable service with a former employer which can be bought back under a reciprocal agreement included for purposes of subparagraph 60(j.1)(v) and therefore the employers are related for purposes of 60(j.1)?

Position: No.

Reasons:
The fact that past service with a former employer is eligible for recognition under a reciprocal agreement does not satisfy the requirements of 60(j.1)(v) that the service with the former employer be recognized in determining the retiree's pension benefits. The past service with the former employer must actually be recognized (included) in determining the retiree's pension benefits for the purposes of 60(j.1)(v).

31 May 2002 External T.I. 2002-0125445 - TRAVEL EXPENSES

Unedited CRA Tags
8(10) 8(1)(h) 8(1)(g)

Principal Issues: Employer's obligation to complete forms T2200 and TL2

Position: General comments

Reasons: Inadequate information about expenses

XXXXXXXXXX 2002-012544
S. Parnanzone
May 31, 2002

31 May 2002 External T.I. 2001-0110095 F - ALLOCATIONS NON IMPOSABLES

Unedited CRA Tags
6(16)

Principales Questions:
Comment fonctionne, de manière générale, le paragraphe 6(16) de la Loi ?

Position Adoptée:
Aucune

29 May 2002 External T.I. 2001-0071495 - PARTNERSHIP ONE CORPORATION ROLLOVER

Unedited CRA Tags
85(2) 85(3) 85(1)(e)(i)

Principal Issues:
1. Can 85(2) apply where a partnership transfers assets to more than one corporation
2. Can property be apportioned per 85(1)(e)(i) where a partnership rolls property to 2 corporations
3. Will 85(3) apply?

PositionS:
1. Yes
2. Generally no
3. No

Reasons:
1. Wording of 85(2)
2. Wording of 85(1)(e)(i), however it may be possible to demonstrate reasons for apportioning
3. 85(3)(c) will not apply

29 May 2002 External T.I. 2002-0131485 - SPECIFIED VALUE BENEFIT DEFERRAL

Unedited CRA Tags
7(11)

Principal Issues:
1. For purposes of subsection 7(11), is the specified value based on the market value of the shares on a subsequent date when the option is re-priced?

Position:
No

Reasons:
The provision is clear that the fair market value at the date of granting the option must be used.

28 May 2002 External T.I. 2002-0131535 - incorporation-professional

Unedited CRA Tags
125 256(2.1)

Principal Issues:
1. Would a lawyer's newly incorporated professional corporation be eligible for the small business deduction?
2. Would the lawyers' management corporation be eligible for the small business deduction?
3. Would any of the corporations be associated and have to share the "business limit" for ``the year?

Position:
1. Yes, as long as the corporation is not carrying on a "personal services business", as defined in subsection 125(7) of the Act.
2. Not enough information to comment.
3. Subject to the possible application of subsection 256(2.1), they do not appear to be associated and therefore would not have to share the business limit.

Reasons:
1. If it carried on a personal services business, income earned would not be from an active business. Consequently it would not have any "specified partnership income" and it would not have any income subject to the small business deduction in subsection 125(1) of the Act.
2. Insufficient information to provide comments, other than our comments with respect to issue 3.
3. Reading of sections 125 and 256 of the Act.

27 May 2002 External T.I. 2002-0129035 - PHSP MEDICAL EXPENSES

Unedited CRA Tags
118.2(2)

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

Are certain expenses not described under medical expenses under 118.2(2) allowed for those covered under a PHSP.

POSTION

NO, only medical expenses described under 118.2(2) are allowed.

Reasons

27 May 2002 External T.I. 2002-0136955 - SPOUSAL RRSP PROPERTY

Unedited CRA Tags
160(1)

Principal Issues:
Whether paragraph 160(1) of the Act is applicable to a spousal RRSP contribution?

Position: Yes

24 May 2002 External T.I. 2002-0118195 - Immediately prior, deemed residency

Unedited CRA Tags
250(1)(c)

Principal Issues: meaning of "immediately prior to appointment or employment" found in 250(1)(c)

Position: refers to hiring rather than actual commencement of employment

Reasons: previous position taken in files 9507485 and 2000-001328

24 May 2002 External T.I. 2002-0123225 F - REER DONNE EN GARANTIE

Unedited CRA Tags
146(10) 146(7) 146(8)

Principales Questions:
Quelles sont les conséquences fiscales lorsque les biens d'une fiducie régie par un REÉR sont donnés à titre de garantie?

Position Adoptée: Les paragraphes 146(10) et 146(7) de la Loi s'appliquent.

24 May 2002 External T.I. 2002-0132815 - Reg 805 Non-resident withholding

Unedited CRA Tags
Reg. 805

Principal Issues: Whether a waiver is required for not withholding tax under Part XIII of the Act where the amount on which Part XIII tax is otherwise exigible can reasonably be attributed to a permanent establishment in Canada through which a non-resident person carries on business?

Position: Yes.

Reasons: Subsection 805(2) of the Income Tax Regulations is there for a purpose and the fact that the Minister may permit non-withholding where he is satisfied that the amount is not taxable under Part XIII of the Act implies that a waiver is required.

24 May 2002 External T.I. 2002-0126395 - CORPORATE LOAN TO S/H'S CHILD

Unedited CRA Tags
15(2) 15(2.2)

Principal Issues: Would the lending of funds from a corporation to a shareholder's child to pay down the child's home mortgage be taxable to the child?

Position: likely yes

Reasons: The exceptions discussed in the provisions of subsections 15(2.2) to (2.6) of the Act appear likely to not apply and the daughter/son-in-law is connected with a shareholder of the corporation; therefore, the daughter/son-in-law would be required to include the amount of the loan in income for that year under subsection 15(2) of the Act.

23 May 2002 External T.I. 2002-0136105 - SPOUSAL RRSP TAXATION OF WITHDRAWALS

Unedited CRA Tags
146(8.3)

Principal Issues:
Will the attribution rules in subsection 146(8.3) apply to withdrawals from a spousal RRSP?

Position: Yes.

Reasons:
Where amounts are withdrawn from a spousal RRSP, the attribution rules will apply if the annuitant's spouse contributed to a spousal RRSP in the year of withdrawal or in the previous two years.

23 May 2002 External T.I. 2002-0136145 - PRIZES AND TUITION

Unedited CRA Tags
56(1)(n) 118.5 118.6

Principal Issues:
1. Are "XXXXXXXXXX prizes" given to students to reward superior performance taxable? If so, is there a minimum dollar amount with respect to the issuance of T4As?
2. XXXXXXXXXX . Is this an eligible tuition expense?
3. Can the university withhold the T2202A form from a student if the student owes a balance to the University?

Position TAKEN:
1. Yes. Subject to $500 minimum.
2. Question of fact.
3. Possibly. However, in our view, this would be an inappropriate use of Canada's income tax system.

Reasons:
1. Included in paragraph 56(1)(n).
2. It depends on whether the expense is included in the students' tuition (eligible) or whether it is an ancillary fee (not eligible).
3. There is no requirement in the Act or Regulations to issue the T2202A. However, in our view, withholding a prescribed form from a taxpayer thereby preventing the taxpayer from claiming all the deductions to which he or she is entitled is not an appropriate use of Canada's income tax system.

23 May 2002 External T.I. 2002-0136645 - RRSP WITHDRAWAL COMPASSIONATE GROUNDS

Unedited CRA Tags
146(5)

Principal Issues:
Can amounts withdrawn from an RRSP to help the annuitant's mother be re-contributed back into the RRSP on compassionate grounds?

Position: No.

Reasons:
Other than the Home Buyers' Plan or the Lifelong Learning Plan, there is no provision in the Act that would allow for the re-contribution of amounts previously withdrawn from an RRSP.

23 May 2002 External T.I. 2002-0137125 - FOREIGN PROP COST AMOUNT RESOURCE PROP

Unedited CRA Tags
REG 5000(1)

Principal Issues:
Even though the CCRA has concluded that the "cost amount" of a Canadian resource property is nil, could we ignore this position in the determination of whether units of a mutual fund trust would constitute foreign property?

Position: No.

Reasons:
The determination of whether the units of a mutual fund trust would constitute foreign property depends on whether the cost amount of its foreign property exceeds 30% of the cost amount of all of its property. Without a legislative change, we can not justify using a cost amount of nil for several provisions of the Act and using another cost amount for the purposes of subsection 5000(1) of the Regulations. Our response will be copied to Finance for its consideration from a policy perspective.

22 May 2002 External T.I. 2002-0140635 - taxability of employer paid insurance

Unedited CRA Tags
6(4)

Principal Issues:
Correction Letter.

Position:
N/A

Reasons:
N/A

21 May 2002 External T.I. 2002-0138115 - MORTGAGE INVESTMENT CORPORATION

Unedited CRA Tags
130.1(6)

Principal Issues:
Whether or not shares qualify as debts owing to a corporation as described in subparagraph 130.1(6)(f)(i)

Position: No

Reasons: A share is not a debt

20 May 2002 External T.I. 2002-0117885 F - Lien de dépendance et application de 120.4

Unedited CRA Tags
120.4 251(2) 104(1) et (13)

Principales Questions: Application de l'article 120.4 de la Loi de l'impôt sur le revenu à diverses situations factuelles.

Position Adoptée: Commentaires généraux.

15 May 2002 External T.I. 2001-0103605 F - Prêt par un Associé à une Société

Unedited CRA Tags
20(1)(c) 96(1)

Principal Issues: 1. Whether the interest on a loan made to a partnership by a partner is deductible under 20(1)(c)?
2. Whether the interest on the loan is business or property income for the lender?

Position: 1. Yes, if conditions in 20(1)(c) are satisfied.
2. Question of fact. Based on the lending activities of the lender.

Reasons: 1. 20(1)(c), 96(1) and previous positions.
2. Previous positions.

15 May 2002 External T.I. 2002-0123755 - Active Income of Foreign Affiliate

Unedited CRA Tags
95(3)(b) 95(2)(b)

Principal Issues: Whether paragraph 95(3)(b) applies to manufacturing services provided by an affiliate to goods owned throughout by the Cdn. parent corporation.

Position: No.

Reasons: The phrase "services performed in connection with the ... sale of goods" is limited to services that are related to the sale activity and do not extend to the manufacture of the goods.

14 May 2002 External T.I. 2001-0097785 - Deduction & Tax cr. on optional return

Unedited CRA Tags
70(2) 104(23) 150(4) 114.2

Principal Issues: Deductions available on optional returns under 70(2), 104(23)(d) & 150(4)
1. Based on comments in T4011 which permit carrying charges, contributions to RRSP, RPP, union dues and other employment expenses on the return to which the income relates, why are ABIL, exploration & development, moving expenses not similarly permitted to be claimed on any of the optional returns?
2. Why is the caregiver tax credit under 118(1)(c.1) not allowed on optional returns when it is provided for in the legislation?

Position: 1. An RRSP deduction, like deductions for an ABIL, exploration & development, moving expenses, can only be claimed on the final return. While certain deductions in computing net income, such as carrying charges, contributions to an RPP, union dues and other employment expenses, are deductible on the optional return which includes the income to which the deduction can reasonably be considered to be wholly applicable, such deductions would normally be wholly applicable to the income reported on the final return.
2. 118(1)(c.1) credit is allowed on both final and optional returns.

Reasons: 1. As stated in 4(1), the deductions in computing net income, such as carrying charges, contributions to RPP, union dues and other employment expenses, are deductible in computing the income to which the amounts can reasonably be considered as wholly applicable to that source subject to subsection 4(2). Moving expenses and contributions to RRSPs are not deductible on the optional return because of 4(2). An ABIL, as a type of capital loss, cannot be claimed on the optional return. Exploration and development expenses are added to a taxpayer's pools and there is no provision to transfer the pools to the optional returns.
2. Position was likely added to 1989 version of T4011 before the legislation on 118(1)(c.1) was finalized

13 May 2002 External T.I. 2002-0135555 - French & Entitlement to Treaty Benefit

Unedited CRA Tags
Article IV(l), Canada France Treaty

Principal Issues: Is a French société en nom collectif ("SNC") that has made an irrevocable election to be taxed as a corporation in France considered a resident of France for the purposes of the Canada-France Income Tax Convention ?

Position: We are now reconsidering this issue.

Reasons: N/A

13 May 2002 External T.I. 2002-0135575 - IFA 2002-Discussion of 86.1 Issues

Unedited CRA Tags
86.1

Principal Issues: Discussion of current issues on new section 86.1 (foreign spin-offs).

Position: See below.

Reasons: N/A

13 May 2002 External T.I. 2001-0114125 - MUNICIPAL CORPORATIONS

Unedited CRA Tags
149(1)(d.5) 149(1)(d.6)

Principal Issues:
Is the reference to "income" in paragraph 149(1)(d.5) a reference to "net income"?

Position: Yes

Reasons: Previous position which is supported at law

13 May 2002 External T.I. 2002-0135585 - IFA 2002-Discussion of IT-221R3

Unedited CRA Tags
250(1) 250(3) 250(5)

Principal Issues: Why did we revise IT-221R2?

Position: Several reasons, including removing the "2-year presumption", adding comments on subsection 250(5), and reporting our change in position on the "permanent home" test in the tax treaty residence tie-breaker rules.

Reasons: N/A

7 May 2002 External T.I. 2002-0127485 - COST PLUS HEALTH PLANS

Unedited CRA Tags
6(1)(a) 248

Principal Issues:
PHSP for self-employed person and his immediate family (Cost-plus plans)

Position:
Lacks necessary element of insurance

Reasons:
Prior letters 1999-0014245,9904155,

2 May 2002 External T.I. 2002-0134335 F - Sous-aliéna 104(4)a)(i) et 110.6(15)a)(i)

Unedited CRA Tags
104(4)a)(i) 110.6(15)a)(i)

Principales Questions: Application de la présomption prévue au sous-alinéa 110.6(15)a)(i) de la Loi de l'impôt sur le revenu à l'égard d'une disposition présumée en vertu du sous-alinéa 104(4)a)(i).

Position Adoptée: La présomption prévue au sous-alinéa 110.6(15)a)(i) ne s'applique pas à l'égard d'une disposition visée au sous-alinéa 104(4)a)(i).

24 April 2002 External T.I. 2002-0128815 - LWOP PART IN TWO RPPS

Unedited CRA Tags
147.1(8)

Principal Issues:
What are the tax implications of an employee participating in the pension plan of a federal crown corporation while on leave without pay with the Federal government and the employee continues to contribute to the government's pension plan?

Position:
Pension Plan of the federal crown corporation may become revocable.

Reasons:
Employers controlled by Her Majesty in Right of Canada are related. When an employee participates in an RPP of a Federal Crown Corporation in addition to an RPP of a Federal Government Department, the total pension adjustment in respect of both employers must be compared to the money purchase limit. Where the total pension adjustment of both employers exceeds the money purchase amount, the RPP of the Crown Corporation may become a revocable plan pursuant to subsection 147.1(8) of the Act.

Conference

13 May 2002 IFA Roundtable Q. 7, 2002-0135330 - 2002 IFA - Thin Capitalization

Unedited CRA Tags
18(4)

Principal Issues: a) Will equity provided to a corporation at any time during the first day of a month included in equity for the month for thin capitalization purposes?
b) Will debt that is initially non-interest bearing, but which later converts to interest bearing, be an outstanding debt to a non-resident from the time it is issued?
c) Will the conversion of the debt from non-interest to interest bearing result in a shareholder benefit?

Position: a) No
b) Likely, unless interest is waived for the entire tax year
c) No response given

Reasons: a) Only equity in place at "the beginning of the calendar month", meaning the first moment of the month, qualifies as equity for the month for thin capitalization purposes.
b) The debt will be an outstanding debt to a non-resident because there will be an amount in respect of interest paid or payable in the tax year.
c) No response needed in light of answer to (b)

Technical Interpretation - Internal

6 June 2002 Internal T.I. 2002-0141367 - CLASSIFICATION OF AN ATV

Unedited CRA Tags
1100(1)(a)(x)

Principal Issues:
Whether an "all terrain vehicle" (ATV) is "automotive equipment" described in paragraph (a) of class 10 of Schedule II of the Income Tax Regulations (the Regulations).

Position:
Yes.

Reasons:
The phrase "automotive equipment" is interpreted broadly (we have previously stated that it includes outboard motors and air cushion vehicles known as hovercrafts). Given the ordinary meaning of the word "automotive", it is reasonable to conclude that an ATV is "automotive equipment" that is described in paragraph (a) of class 10 of Schedule II of the Regulations.

4 June 2002 Internal T.I. 2002-0134137 - FILM TAX CREDIT

Unedited CRA Tags
125.4(1)

Principal Issues:
Does the fact that a corporation sold several investments in a particular taxation year indicate that its activities in that year are not primarily the carrying on of a Canadian film or video production business, for the purposes of the definition of "qualified corporation" in subsection 125.4(1) of the Act?

PositionS:
Not necessarily. Involves a question of fact.

Reasons:
From the facts given it appears that the sale of the investments was an isolated incident and various tests such as the employees activities, use of assets and gross revenues, indicate that the "primarily" test may have been met.

29 May 2002 Internal T.I. 2002-0134677 - RESP TRANSFERS

Unedited CRA Tags
204.9(5)

Principal Issues:
Where paragraph 204.9(5)(c) of the Act does not apply and a partial transfer of property is made from one RESP (transferor plan) to another RESP (transferee plan), are all of the contributions made to the transferor plan deemed to be contributions made by each beneficiary under the transferee plan?

Position: Yes.

Reasons: Intepretation of paragraphs 204.9(5)(b) and (c) of the Act.

24 May 2002 Internal T.I. 2001-0113597 F - ASSURANCE CONTRE LES MALADIES GRAVES

Unedited CRA Tags
6(1)(a) 6(4)

Principales Questions:
Est-ce que les primes versées par un employeur à l'égard d'une police d'assurance contre les maladies graves représentent un avantage imposable pour l'employé assuré?

Position Adoptée:
Renseignements sur ce que constitue une police d'assurance contre la maladie ou les accidents selon le Code civil du Québec et la Loi sur les assurances du Québec. Dans la police type soumise avec le dossier, si la clause de remboursement de primes au décès est accessoire à l'assurance contre les maladies graves, la police d'assurance serait une police d'assurance contre la maladie ou les accidents. Dans ce cas, il n'y aurait pas d'avantage imposable en vertu de 6(1)a) de la Loi s'il s'agissait d'un régime d'assurance collective contre la maladie ou les accidents.

23 May 2002 Internal T.I. 2002-0132797 - partnership salary

Unedited CRA Tags
103(1.1) 96(1) 53(2)(C)

Principal Issues: In a husband and wife equal-sharing partnership, the husband received a "salary" even though the partnership incurred a loss for the fiscal period before and after allowing the payment to the member. The wife earned other income from what appeared to be full employment outside the partnership. (1) Should the loss be allocated to the members after deducting the amount of the salary? (2) Is subsection 103(1.1) applicable?

Position: (1) No. (2) subsection 103(1.1) appears to be applicable.

Reasons: The "salary" is not a deductible expense and the loss (subject to the application of subsection 103(1.1)) should be allocated between the members before any deduction of the payment. The payment would be a distribution representing the member's share of income of the partnership if there is sufficient income earned by the partnership. If there is no income, the payment is a withdrawal of capital of the partnership. Paragraphs 96(1)(f) and (g) provide that the income or loss, respectively, of a partnership from a particular source or sources from a particular place be the income or loss of the member from that source or place, to the extent of the member's share thereof.

15 May 2002 Internal T.I. 2001-0114667 - REGISTERED SECURITIES DEALERS

Unedited CRA Tags
248(1)

Principal Issues:
What are the types of licenses which will be considered unrestricted for the purposes of the definition of "registered securities dealer" in subsection 248(1)

Position: See memo.

Reasons: See memo.

15 May 2002 Internal T.I. 2002-0136707 - ELIGIBLE RETIRING ALLOWANCE

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

Principal Issues:
How much of the retiring allowance is eligible to be rolled into an RRSP

Position:
A portion of the retiring allowance can be transferred as the individual's former employer is related pursuant to 60(j.1)(v)

Reasons:
Previous positions taken and the provisions of the Act.

15 May 2002 Internal T.I. 2002-0127307 - FILM TAX CREDIT - ASSISTANCE

Unedited CRA Tags
125.4(1) 12(1)(x)

Principal Issues:
Are payments from the government of Canada assistance to a television producer for the purposes of the Canadian film or video production tax credit?

PositionS:
Subject to valuation considerations, the "advertising" portion of the payments would be assistance and the "purchased assets" portion of the payments would not be assistance.

Reasons:
The advertising portion of the payments would more in the nature of a government grant and the purchased assets portion of the payments would be in respect of acquiring property from the Producer.

15 May 2002 Internal T.I. 2002-0137767 - MEANING OF SUBSTANTIALLY ALL

Unedited CRA Tags
149.1(6.1) 149.1(6.2) 6(2)

Principal Issues:
1. What is the meaning of "substantially all" in subsections 149.1(6.1) and (6.2)?
2. Whether the meaning of "substantially all" may vary from one provision to the next.

Position:
While the words "substantially all" cannot be rigidly interpreted as referring to a specific percentage in all cases, we continue maintain the position that for the purposes of the ITA the phrase "substantially all" generally means more that 90%.

Reasons: Jurisprudence

9 May 2002 Internal T.I. 2002-0135307 F - Application du paragraphe 39(2)

Unedited CRA Tags
39(2), 40 92(2), 15(1) 53(2)b)
paid-in capital returned as dividend out of Delaware surplus

Principales Questions: Déterminer si le paragraphe 39(2) de la Loi de l'impôt sur le revenu s'applique à l'égard du rapatriement d'une partie du " Contributed Surplus " d'une société étrangère affiliée.

Position Adoptée: Non.

9 May 2002 Internal T.I. 2001-010880A - RRSP FORFEITURE

Unedited CRA Tags
146(8) 146(12)(b)

Principal Issues:
Does an annuitant have to include amounts held in an RRSP that is forfeited to the Crown under Part XII.2 of the Criminal Code in his or her income?

Position: No.

Reasons:
There is no provision in the Act that would allow us to include the amounts in the annuitant's income.

9 May 2002 Internal T.I. 2002-0132897 - Art. XVI U.S. and Foreign Tax Credits

Unedited CRA Tags
126 Reg. 2601(10 Art. XVI (U.S.)

Principal Issues: Where the income of a resident of Canada is subject to the application of paragraph 1 of Article XVI of the Canada-United States Income Tax Convention, would he automatically be considered to have a permanent establishment or fixed base in the U.S.?

Position: No.

Reasons: He does not need to have a permanent establishment or fixed base before paragraph 1 of Article XVI applies. In fact, the preamble of that paragraph stating "notwithstanding the provisions of Article XIV and Article XV" appears to imply that is the case. We could not find anything in that paragraph to say that the taxpayer is deemed to have a permanent establishment or fixed base.

30 April 2002 Internal T.I. 2002-0130827 - Insurance commissions paid to non-resident

Unedited CRA Tags
212(1)(d)(iii)

Principal Issues: Application of the Canada-U.S. Tax Convention and subparagraph 212(1)(d)(iii) of the Income Tax Act to commissions earned by a non-resident insurance agent.

Position: Subparagraph 212(1)(d)(iii) does not apply. Commissions are subject to either Article VII or XIV of the Canada-U.S. Tax Convention.

Reasons: Commissions are paid in connection with the sale of property and amount to either business income or income in respect of independent personal services.

13 February 2002 Internal T.I. 2001-0109827 - ITC-CHANGE TO NIL ASSESSED RETURN

Unedited CRA Tags
152(4) 164(1)

Principal Issues: A nil assessment for a XXXXXXXXXX T2 was issued on XXXXXXXXXX and is now statute barred. Can a t/p requested change to provide the t/p with refundability on its ITC be allowed?

Position: no

Reasons: The CCRA is not obligated to do so. Although a nil assessment may be issued at any time as a matter of policy (IC 75-7R3 and TOM13 (152)6 par.7) the CCRA would not issue another nil assessment to process the t/p's requested changes.