Income Tax Severed Letters - 2002-06-07

Ruling

2002 Ruling 2001-0072103 - FOREIGN PROPERTY

Unedited CRA Tags
206(1)

Principal Issues: Whether debt of a trust resident in Canada is "foreign property".

Position: No

Reasons:
Debt of trust resident in Canada does not fall into definition of "foreign property" in subsection 206(1) and moreover the assets of the trust were comprised of property other than "foreign property". The fact that the risk and return on the debt issued by the trust was similar to the risk and return on certain foreign property as a result of the trust's derivative transactions did not result in the application of GAAR.

2002 Ruling 2002-0136313 - Safe Income Extraction

Unedited CRA Tags
55(2) 88(1)(c)

Principal Issues: Whether Canco is entitled to a "bump" under paragraph 88(1)(d) in a series of transactions involving the extraction of safe income?

Position: Yes

Reasons: Meets the requirements of the law.

2002 Ruling 2002-0139233 F - FERR ET ARTICLE 689 DU CODE CIVIL

Unedited CRA Tags
146.3(1) 146(1) 146.3(6.2)

Position Adoptée:
Oui, sauf à l'égard des montants libérés d'impôt au sens du paragraphe 146(1) de la Loi.

2002 Ruling 2001-0109853 - DEFERRED SALARY LEAVE PLAN

Unedited CRA Tags
REG 6801(a)

Principal Issues:
Does a deferred salary leave plan satisfy the requirements of 6801(a)?

Position: Yes.

Reasons: Review of plan.

2002 Ruling 2001-0115733 - damage settlement

Unedited CRA Tags
9

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

The taxpayers were victims of fraud committed by an employee of a bank. A settlement has been proposed whereby the taxpayers will receive a lump sum payment that the taxpayers wish to allocate as:

2002 Ruling 2002-0122743 - Vertical Amalgamation and Bump

Unedited CRA Tags
88(1)(d.2) 88(1)(d.3)

Principal Issues: Vertical amalgamation and bump

Position: Favourable rulings provided

Reasons: In accordance with prior positions

2002 Ruling 2002-0123843 - Distrib. shares - trust under XXXXXXXXXX

Unedited CRA Tags
75(2) 107(4.1)

Principal Issues: Does 75(2) apply to the property held by the trust such that 107(2) will not apply when the property is distributed to the beneficiaries?

Position: 75(2) does not apply.

Reasons: The corporate settlor settled the trust with shares of the settlor to be held for distribution to persons to be determined by the trustees prior to the wind up of the trust in accordance with certain XXXXXXXXXX . On the wind-up of the trust, the trustees will distribute shares of the corporate settlor to those beneficiaries who have met the contractual requirements necessary to obtain such shares and the balance of shares will be distributed to such person as is determined jointly by the XXXXXXXXXX who provided funding to the corporate settlor. While the trustees are also directors of the corporate settlor, the corporate settlor is not a beneficiary of the trust nor is it able to add beneficiaries or direct the disposition of the trust property in its own right.

2002 Ruling 2002-0133053 - INNOVATIVE INSTRUMENTS - PARA 20(1)(c)

Unedited CRA Tags
20(1)(c) 104(7.1)

Principal Issues:
1. Whether the Deposit Note to be issued to a special purpose vehicle in a loan-backed innovative instrument financing will evidence borrowed money for the purpose of paragraph 20(1)(c).
2. Whether subsection 104(7.1) will apply to deny a deduction to the special purpose vehicle under paragraph 104(6)(b) of amounts payable to its unitholders.

Position:
1. Yes.
2. No.

2001 Ruling 2001-0108843 - Carrying on Business in Canada

Unedited CRA Tags
2(3)(6) 212(13.2)

Principal Issues: Whether: (a) USHoldco is carrying on business in Canada; and (b) the business of USHoldco is carried on principally in Canada?

Position: We did not rule on whether USHoldco was "carrying on business" in Canada and we ruled that subsection 212(13.2) would not apply to deem USHoldco to be a resident of Canada for purposes of Part XIII of the Act.

Reasons: See Issue Sheet

Technical Interpretation - External

4 July 2002 External T.I. 2002-0125695 - Can. Council; composers

Unedited CRA Tags
56(1)(n)

Principal Issues: what/whether information returns are required for payments made by Canada Council under the Canadian Composers Program

Position: uncertain

Reasons: depends on nature of payment

3 July 2002 External T.I. 2002-0131355 - SHORT SALE

Unedited CRA Tags
7(1)(a) 110(1)(d.1)

Principal Issues:
Whether a a short sale transaction will be recharacterized such that the securities borrower will be considered to have disposed of other shares (original shares) which he or she acquired less than 2 years earlier through a stock option plan and held as investments and that are otherwise identical to the borrowed shares and which are ultimately used to settle the short position and as a consequence the original shares may not be eligible for the stock option deduction under paragraph 110(1)(d.1).

3 July 2002 External T.I. 2002-0141305 - SH-MANAGER BONUS AT END OF BUS.

Unedited CRA Tags
67

Principal Issues: Whether a shareholder-manager's bonus is deductible in the situation where a year-end is triggered by the sale of the shareholder's 100% shareholding in the particular corporation. Also, the bonus payable, along with an equal amount of cash, would be transferred to a related corporation at year-end, before the particular corporation's shares are sold.

Position: Question of fact.

Reasons: Our general policy regarding the deductibility of management salaries and bonuses, as outlined in ITN22, was established with straightforward situations in mind.

3 July 2002 External T.I. 2002-0123685 - INTEREST DEDUCTIBILITY NOTE PAYABLE

Unedited CRA Tags
20(1)(c)

Principal Issues: Deductibility of Interest on a Note issued to Redeem Shares

Position: Not Deductible

Reasons: Status Quo - The Note is not considered to be Borrowed Money.

2 July 2002 External T.I. 2002-0128305 - principal residence

Unedited CRA Tags
54 40 110.6

Principal Issues:
1.Miscellaneous questions on availability of principal residence exemption, qfp; reserves etc.

Position:
Question of fact- Will provide general comments

Reasons: n/a

2 July 2002 External T.I. 2002-0142035 - INTEREST DEDUCTIBILITY CHANGE IN USE

Unedited CRA Tags
20(1)(c)

Principal Issues:
Deductibility of mortgage interest on borrowed money used to acquire a principal residence.

Position: In the situation provided it is not deductible.

Reasons: The direct use of the borrowed funds is for an ineligible use.

2 July 2002 External T.I. 2002-0142715 - employee recognition program

Unedited CRA Tags
6(1)(a)

Principal Issues: The income tax consequences of a service recognition program under which qualifying employees would be allowed to visit their local favourite store and purchase any item of their choice, for which they would be reimbursed by the company. Alternatively, employees would have the option of selecting an item from the company's catalogue.

Position: The amount of the award would be a taxable employment benefit.

Reasons: Employee receiving awards under the program are essentially in the same position as employees receiving gift certificates. Accordingly, awards received by the employees would be considered near-cash awards, and the amount of such awards would be taxable employee benefits pursuant to our policy announced in Income Tax Technical News Issue #22..

27 June 2002 External T.I. 2002-0137715 - EMPLOYEE COMPENSATION

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

Principal Issues: Whether an amount paid to employees with respect to the use of their tools, including a power saw, is required to be included in their income.

Position: Our general position is that such an amount is required to be included in the employee's income.

Reasons: The amount is taxable under paragraph 6(1)(a) of the Income Tax Act (the "Act") as an employee benefit or paragraph 6(1)(b) of the Act as an allowance.

27 June 2002 External T.I. 2002-0138045 - BENEFICIAL OWNERSHIP

Unedited CRA Tags
19(5)(e)(iii)(B)

Principal Issues:

Whether a discretionary trust's assets are beneficially owned by the trustees for the purposes of the definition of "Canadian newspaper" in subsection 19(5) of the Act?

Position:

No.

Reasons:

26 June 2002 External T.I. 2002-0134885 - BORROWED MONEY

Unedited CRA Tags
149(1)(o.2)(ii)(C)

Principal Issues:
Does money borrowed to replace capital contributions meet the condition of clause 149(1)(o.2)(ii)(C) of the Act?

Position:
Likely no.

Reasons:
Clause 149(1)(o.2)(ii)(C) of the Act requires that borrowed money be used solely for the purpose of earning income from real property. Borrowed money used to replace capital would not meet this requirement.

26 June 2002 External T.I. 2002-0145375 - SPOUSAL RRSP PROPERTY TRANSFERRED

Unedited CRA Tags
160(1)

Position: No
REASON: Legislative analysis.

26 June 2002 External T.I. 2001-0068035 - ANNUITY FROM RETIREMENT ARRANGEMENT

Unedited CRA Tags
12.2 254 94.2

Principal Issues: Taxation of annuities acquired under retirement arrangements.

Position: General comments provided

Reasons: Detailed information must be provided in order to determine tax consequences.

26 June 2002 External T.I. 2002-0146745 - cattle farming income

Unedited CRA Tags
81(1)(a)

Principal Issues: Tax treatment of a status Indian's income from a cattle farming business.

Position: Likely exempt from taxation.

Reasons: Location of rangeland would be the most significant connecting factor.

26 June 2002 External T.I. 2002-0133705 - LEGAL COSTS - SUPPORT PAYMENTS

Unedited CRA Tags
60

Principal Issues: Will the CCRA change its position outlined in paragraphs 17 and 18 of IT-99R5 (Consolidated) and deny all taxpayers a deduction for legal costs incurred in relation to support payments following the decision of the Tax Court of Canada in the case of Pierre Bergeron v. The Queen, 99 DTC 1265.

Position: No.

Reasons: No clear indication from the courts to apply the reasoning in Bergeron.

25 June 2002 External T.I. 2002-0134625 - DISABILITY TAX CREDIT

Unedited CRA Tags
118.3(1) 118.4(1)

Principal Issues: Can a medical doctor certify that an individual, who dies prior to having been disabled for a period of 12 months, qualifies for the disability tax credit after the individual has died?

Position: No

Reasons: A certification, which is based on the expectation that the disability will last for more than 12 months, cannot be made after the individual's death. (view also consistent with admin. position of Disability Programs Section)

25 June 2002 External T.I. 2002-0128635 - INCOME EMPLOYMENT

Unedited CRA Tags
248(1) 5(1) Part XIII

Principal Issues: Whether payments received by an employee are income from employment or a retiring allowance.

Position: Question of fact.

Reasons: In this particular case, some of the amounts are employment income and some are a retiring allowance.

25 June 2002 External T.I. 2002-0143675 F - CONGE A TRAITEMENT DIFFERE ET RETRAITE

Unedited CRA Tags
REG 6801(a)

Principales Questions:
Un employé peut-il adhérer à un régime visé à l'alinéa 6801a) du Règlement et prendre sa retraite sans revenir à ses fonctions habituelles chez son employeur pour une période au moins égale à la durée de son congé?

Position Adoptée: Non, sauf dans des situations exceptionnelles

25 June 2002 External T.I. 2002-0139485 - CANADA COUNCIL; PUBLIC LENDING RIGHTS

Unedited CRA Tags
9 12(1)(x)

Principal Issues: whether payments to writers are taxable

Position: yes

Reasons: not a windfall; possibly royalty payments; section 9 or 12(1)(x) will apply

24 June 2002 External T.I. 2002-0146665 - WITHHOLDING ON RRSP CONTRIBUTIONS

Unedited CRA Tags
146(5)

Principal Issues:
Can a contribution be made to a spousal RRSP when the amount is considered pension income that is in excess of a permitted transfer under Regulation 8517 and have no tax withheld on the remuneration?

Position: Yes

Reasons:
The excess amount is income included in recipient's income under 56(1)(a) and a contribution can be made to a spousal RRSP provided the individual has RRSP contribution room.

20 June 2002 External T.I. 2002-0145075 F - REER PLACEMENT ADMISSIBLE

Unedited CRA Tags
204(1)

Principales Questions:
1. Est-ce qu'une société particulière est une société publique au sens du paragraphe 89(1) de la Loi?
2. Est-ce que les actions de cette société se qualifient en tant que placements admissibles pour un REER?

Position Adoptée: Aucune.

20 June 2002 External T.I. 2002-0141135 - MENTAL OR PHYSICIAL INFIRMITY

Unedited CRA Tags
118(1) 60(2)

Principal Issues:
What are the criteria used by the CCRA to determine when an individual is considered to have a "mental or physical infirmity" for purposes of the clause 60(l)(v)(B) and paragraphs 118(1)(c.1) and (d) of the Income Tax Act (the Act).

Position:
The phrase "mental or physical infirmity" is not defined in the Act, nor has the CCRA developed specific guidelines to determine whether or not an individual is mentally or physically infirm, each situation will depend upon the facts - the phrase will take on its ordinary meaning.

Reasons:
Appendix A of Interpretation Bulletin IT-513R Personal Tax Credits

20 June 2002 External T.I. 2002-0120245 F - CREDIT D'IMPOT PERSONNELS

Unedited CRA Tags
118(1)

Principales Questions:
Aucune question n'a été demandée. Déclaration de revenu d'un particulier

Position Adoptée:
Aucune. Le contribuable devrait s'adresser au Bureau des services fiscaux ou au Centre fiscal.

20 June 2002 External T.I. 1999-0013055 - 75(2)(b) where settlor is sole trustee

Unedited CRA Tags
75(2)(b)

Principal Issues: Does 75(2) apply when the settlor or contributor is the sole trustee of an irrevocable non-discretionary trust with no power to add beneficiaries and the settlor or contributor is not a beneficiary of the trust?

Position: Yes

Reasons: As the sole trustee of the trust, the trust property cannot be disposed of without the settlor's consent or direction. As a result, the condition in 75(2)(b) is applicable to the property contributed by the settlor or contributor. If the conditions which cause 75(2) to apply cease to apply at some future time, such as when the settlor resigns as trustee, 75(2) will cease to apply; however, 107(4.1) will still apply to any distributions to beneficiaries.
XXXXXXXXXX 1999-001305
Annemarie Humenuk
Attention: XXXXXXXXXX

20 June 2002 External T.I. 2002-0120745 - CLERGY-TEACHERS AND ADMINISTRATION

Unedited CRA Tags
8(1)(c)

Principal Issues:
Whether teachers that work in administrative positions or do other ministering activities can qualify for the clergy residence deduction?

20 June 2002 External T.I. 2001-0110425 - 75(2) when settlor is sole trustee

Unedited CRA Tags
75(2) 107(4.1)

Principal Issues: Does 75(2) apply when the settlor or contributor is the sole trustee of an irrevocable non-discretionary trust with no power to add beneficiaries and the settlor or contributor is not a beneficiary of the trust?

Position: Yes

Reasons: As the sole trustee of the trust, the trust property cannot be disposed of without the settlor's consent or direction. As a result, the condition in 75(2)(b) is applicable to the property contributed by the settlor or contributor. If the conditions which cause 75(2) to apply cease to apply at some future time, such as when the settlor resigns as trustee, 75(2) will cease to apply; however, 107(4.1) will still apply to any distributions to beneficiaries.
XXXXXXXXXX 2001-011042
Annemarie Humenuk
Attention: XXXXXXXXXX

20 June 2002 External T.I. 2002-0140895 F - PRESTATION AU DECES

Unedited CRA Tags
248(1)

Position Adoptée: Montant non imposable pour le bénéficiaire.

RAISON POUR POSITION ADOPTÉE:
La prestation de décès n'est pas versée pour des services rendus par l'ancien employé puisqu'il doit verser une prime pour qu'une prestation soit versée suite à son décès.

20 June 2002 External T.I. 2002-0117125 - CAPITAL OF A CORPORATE PARTNER-PTI3

Unedited CRA Tags
181.2(3)(a) 96(1) 103(1) 103(1.1)

Principal Issues:
How to allocate partnership capital for purposes of Part I.3 tax where one partner is allocated the first $100,000 in income, and the balance of income or loss is divided equally.

Position:
Each partner includes that proportion of the amount defined in paragraph 181.2(3)(g) that their share of income or loss for the last fiscal period of the partnership was of the total income or loss for that period. However, the amount of income or loss "allocated" to a partner in respect of the period cannot exceed the total partnership income or loss for the period. Moreover, a partner cannot be allocated a loss where the partnership realized income, nor can it be allocated income where the partnership realized a loss.

Reasons: The Act.

19 June 2002 External T.I. 2002-0130185 - EMPLOYEE EXPENSES

Unedited CRA Tags
8(1)(f)

Principal Issues: An employee (a commissioned salesperson) has asked about claiming an amount paid to an assistant (Paragraph 8(1)(f) of the Income Tax Act).

Position: General comments were provided.

Reasons: The issue involves a question of fact and the information provided was very limited.

19 June 2002 External T.I. 2002-0124165 - Principal residence & alter ego trust

Unedited CRA Tags
40(4)

Principal Issues: Can the settlor of an alter ego trust have a separate principal residence from that of the alter ego trust for taxation years before 1982 if the settlor acquired a property that was his or her spouse's principal residence prior to the spouse's transfer to the settlor under 73(1) or 70(6) and the settlor owned another property which otherwise qualified as a p\r for the years in question?

Position: Yes

Reasons: When 40(4)(b) deems a property to be the p\r of the recipient, it does not prevent the recipient from designating another property as his or her principal residence for taxation years before 1982. After 1981, the rules in the definition of principal residence in 54 prevent a taxpayer and spouse from designating more than one property as a p\r in any one taxation year.

18 June 2002 External T.I. 2002-0126685 - Prin res designation by alter ego trust

Unedited CRA Tags
40(4) 107(2.01) 54 "principal residence"

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.

XXXXXXXXXX 							2002-012668
									Annemarie Humenuk
June 18, 2002

Dear XXXXXXXXXX:

Re: Principal Residence Designation and an Alter Ego Trust

18 June 2002 External T.I. 2002-012314A - RESEARCH ACCOUNTS

Unedited CRA Tags
5(1) 56(2) 6(3)

Principal Issues:
Application of subsection 5(1), 56(2) or 6(11) in a situation where an academic staff member at the University of XXXXXXXXXX waives his or her entitlement to directly receive honorarium for assuming extra duties, in lieu of the amount being deposited in a research account.

Position:
Forwarding a copy of TSO letter to taxpayer - The amounts reimbursed to Professors from the research account constitute salary, wages or other remuneration in the taxation year in which they are received, pursuant to subsection 5(1) of the Act, augmented by the deeming provision in subsection 6(3) of the Act, in particular, paragraphs (a), (b) and (d).

Reasons:
See 2001-011587.

18 June 2002 External T.I. 2001-0115875 - RESEARCH ACCOUNTS

Unedited CRA Tags
5(1) 56(2) 6(3)

Principal Issues:
Is an amount taxable employment income in a situation where an individual academic staff member at the University of XXXXXXXXXX forgoes his or her entitlement to directly receive honorarium for assuming extra duties, in lieu of the amount being deposited in a research account?

Position:
Yes - (reply to the TSO, representative of taxpayer forwarded a copy; see 2002-012314)

Reasons:
Contrary to our previous memo (2001-009429), which indicated that subsection 5(1) of the Act included the amount in income in the taxation year in which it was earned (supported by the doctrine of constructive receipt, and subsection 56(2) of the Act), the better legal view is that the amounts reimbursed to Professors from the research account constitute salary, wages or other remuneration in the taxation year in which they are received, pursuant to subsection 5(1) of the Act, augmented by the deeming provision in subsection 6(3) of the Act, in particular, paragraphs (a), (b) and (d).

12 June 2002 External T.I. 2002-0138015 - XXXXXXXXXX RELOCATION XXXXXXXXXX

Unedited CRA Tags
3(1)

Principal Issues: Whether travel and relocation assistance to be paid to residents of a small mining community by the XXXXXXXXXX government as a result of the closing of the town's mine, XXXXXXXXXX , is taxable.

Position: No.

Reasons: The travel and relocation assistance to be paid by XXXXXXXXXX to eligible households is for personal expenses only, i.e., not in respect of any recipient's employment, business or investment. There is no provision in the Income Tax Act which taxes such payments.

12 June 2002 External T.I. 2002-0143925 - Article XVI and Provincial FTC

Unedited CRA Tags
120 Reg. 2600

Principal Issues: Where an actor who is resident in Ontario has acting income but no PE in the United States, does the interaction between Article XVI, section 120 and the provincial foreign tax credit system mean that he may be subject to unrecoverable double-taxation?

Position: Yes.

Reasons: The actor will only get to use the federal FTC up to the amount of federal income tax paid, but he will have to pay provincial tax on his income earned in the U.S. because he has no PE there. The provincial tax system does not provide a foreign tax credit for business income tax, so there will be an element of double-tax where the provincial tax and the U.S. tax overlap. Normally, there wouldn't be U.S. tax payable unless there was a PE, and if there was a PE then the actor would have to pay surtax (which is federal) rather than provincial tax. The rest of the FTC could then be claimed against the surtax. The situation arises because Article XVI provides that the U.S. can tax business income earned by an actor in the U.S. (as long as it is over US$15,000) even though there is no PE in the U.S. The actor may not be able to ever use up the room carried forward as a business-income-tax FTC, because this situation will generally repeat itself every year.

11 June 2002 External T.I. 2002-0122955 - OETC, Employee, Carrying on Business

Unedited CRA Tags
Section 122.3

Principal Issues: Is the taxpayer entitled to the overseas employment tax credit?

Position: Based on limited information, most likely not.

Reasons: It appears the employment in question is not in connection with a contract under which a specified employer carries on business outside Canada with respect to a qualifying activity

11 June 2002 External T.I. 2001-0104075 F - DEDOMMAGEMENT

Unedited CRA Tags
18(1)b)

Principales Questions:
1. Quel est le traitement fiscal pour les montants versés selon un jugement octroyant un dédommagement?
2. Dans quelle année doit-on tenir compte des conséquences fiscales attribuables au dédommagement lorsqu'un jugement est porté en appel?

Position Adoptée:
1. Selon la position actuelle, tous les montants prévus dans le jugement seraient des composantes du dédommagement. Le traitement fiscal des trois composantes du dédommagement serait identique. La nature du dédommagement ne peut être déterminée qu'après un examen de tous les faits pertinents. Il nous apparaît que, dans la présente situation, le dédommagement pourrait représenter une dépense encourue en relation avec l'acquisition d'une immobilisation. Le dédommagement serait un paiement à titre de capital s'il représente le coût d'acquisition d'une immobilisation. Par conséquent, dans ce cas, les trois composantes du dédommagement seraient ajoutées au coût de cette immobilisation.
2. Aucune. Commentaires généraux.

8 April 2002 External T.I. 2002-1125885 - Pensions Received from Germany

Unedited CRA Tags
Art. 18 of the treaty

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.

April 8, 2002

XXXXXXXXXX Jane Stalker
Tel: (613) 946-8764
Fax: (613) 941-5932

ID# 2002-112588
HBW # 4125-4/49
HBW #4125-7/18

Dear XXXXXXXXXX:

Re: Pensions received from Germany

Technical Interpretation - Internal

2 July 2002 Internal T.I. 2002-0140537 - LICENSE TO TRANSFER TECHNOLOGY

Unedited CRA Tags
Schedule II

Principal Issues: Whether the entire amount paid by a Taxpayer under an Agreement belongs in class 14, or whether some of this amount is allocable to other classes, such as class 43, or is deductible as a current expense.

Position: Class 14.

Reasons: The Agreement specifically states that it is an agreement for the transfer of technology, and it has been verified that the Agreement is effective for XXXXXXXXXX years. Accordingly, there is a reasonable argument that the entire amount paid by the Taxpayer under the agreement constitutes a license that falls within class 14. Further, there is not enough information to substantiate an allocation of some of the amount paid by the Taxpayer under the agreement on some other basis.

26 June 2002 Internal T.I. 2002-0118647 - RETIREMENT COPENSATION ARRANGEMENT

Unedited CRA Tags
212(1)(j) 56(1)(x)

Principal Issues:
What are the income tax consequences of transferring all of the assets of a deregistered RPP to an unregistered U.S. pension plan?

Position:
The fair market value of the assets transferred is subject to withholding tax of 25%.

Reasons:
Paragraph 212(1)(j), 56(1)(x) of the Act and paragraph 1 of Article XVIII of the Canada-U.S. Income Tax Convention.

24 June 2002 Internal T.I. 2002-0147387 - TRAVEL & VEHICLE EXP. SPECIAL DUTY PAY

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

Principal Issues: Whether reasonable travel and motor vehicle expenses may be claimed by a police officer for expenses incurred while on special duty pay.

Position: Question of fact.

Reasons: The requirements of paragraphs 8(1)(h) and 8(1)(h.1) of the Income Tax Act must be met.
June 24, 2002

20 June 2002 Internal T.I. 2002-0145937 - INDIAN ACT EXEMPTION - EMPLOYMENT

Unedited CRA Tags
81(1)(a)

Principal Issues: Whether employment income guidelines apply to exempt the employment income of a status Indian employee?

Position: Question of Fact

Reasons: General comments provided.

19 June 2002 Internal T.I. 2002-0140647 - GROUP RRSP

Unedited CRA Tags
204.2(1.3)

Principal Issues: How is the "group RRSP amount" calculated?

Position: Confirmed example submitted.

Reasons: Subsection 204.2(1.3).

17 June 2002 Internal T.I. 2001-0111717 F - BFT ET CONSTRUCTION MAISON EN USINE

Unedited CRA Tags
125.1

Principales Questions:
Est-ce qu'une entreprise qui construit des maisons en usine peut bénéficier du "crédit au titre des bénéfices de fabrication et de transformation"?

Position Adoptée:
Probablement que oui.

12 June 2002 Internal T.I. 2002-0127357 - Corporate Late-Filing Penalty

Unedited CRA Tags
162(1) 150(1)(a)

Principal Issues: Is the date for the calculation of the corporate late-filing penalty under subsection 162(1) of the Income Tax Act extended by the application of section 26 of the Interpretation Act.

Position: Yes

Reasons: Subsection 162(1) refers to the filing deadline specified by paragraph 150(1)(a), and since the time limit in paragraph 150(1)(a) will be extended by the application of section 26 of the Interpretation Act, the date for the calculation of the late-filing penalty under subsection 162(1) will also be extended.

7 June 2002 Internal T.I. 2002-0134537 - ACB Calculation in Subs. 86.1(3)

Unedited CRA Tags
86.1(3)

Principal Issues: Subsection 86.1(3) provides for adjustments to the cost base of "an original share" and "a spin-off share". In the case of a spin-off where the ratio of original shares to spin-off shares is not 1:1 (for example, where the taxpayer receives 0.5 spin-off shares for every one original share that he or she holds), should the term "the spin-off share" as used in "B" and "C" of the calculation always mean a single, whole share or should it refer to that fraction of a whole spin-off share that is equal to a single, whole original share?

Position: The better position is that the distribution ratio (i.e., number of spin-off shares received per original share held) should be taken into account in calculating the ACB adjustments.

Reasons: To interpret "the spin-off share", for purposes of subsection 86.1(3), as meaning a single, whole share leads to absurd results. Also, "spin-off share" and "original share" are not defined as such; those terms are defined only as a collective (i.e., "spin-off shares" and "original shares"). The ACB adjustments in subsection 86.1(3) are consistent if made either by considering the shares collectively or by taking into account the distribution ratio. Also, the definition of "share" in subsection 248(1) includes a fraction of a share, therefore, it is not unreasonable to interpret "spin-off share" as meaning "the share, or fraction of a share" that is received on account of each original share held. See FITAC document # F 2002-0118937.

4 June 2002 Internal T.I. 2002-0120377 - Foreign tax credit on State tax refund

Unedited CRA Tags
126(7)

Principal Issues: Whether a claim for a Canadian foreign tax credit on U.S. federal tax attributable to a refund of state tax should be denied.

Position: It should not be systematically denied.

Reasons: It is reasonable to assume (unless indicated otherwise) that the state tax refund was not claimed as a Canadian foreign tax credit in the prior year.

31 May 2002 Internal T.I. 2002-0131647 F - REPORT CREDITS FRAIS SCOLARITE

Unedited CRA Tags
118.61(1) 118.61(2)

Principales Questions:
Y aurait-il lieu de modifier le Guide général d'impôt et de prestations ainsi que l'annexe 11 à l'égard du mécanisme de report des crédits d'impôt pour frais de scolarité et pour études inutilisés considérant l'utilisation facultative plutôt qu'obligatoire de ces crédits d'impôt ?

Position Adoptée: Non

29 May 2002 Internal T.I. 2002-0142017 - Taxation of XXXXXXXXXX

Unedited CRA Tags
149(1)(l)

Principal Issues: Canadian income tax treatment of XXXXXXXXXX

Position: N/A

Reasons: Summary of provisions provided

23 May 2002 Internal T.I. 2002-0127987 - Paragraph 85(1)(i)

Unedited CRA Tags
85(1)(i)

Principal Issues: Whether paragraph 85(1)(i) would apply where the taxpayer is resident in Canada at the time the property is transferred and the transferred property is a taxable Canadian property?

Position: Yes.

Reasons: See analysis in the memorandum.

21 May 2002 Internal T.I. 2002-0133747 - LLC Entitlement to Treaty Benefits

Unedited CRA Tags
Art. IV(1), Canada U.S. Treaty; Art. XIII (4) Canada - U.S. Treaty

Principal Issues: (1) Is a U.S. LLC that is treated as a partnership for U.S. tax purposes and whose majority member is a political subdivision of the State of the U.S. a resident of the U.S. for purposes of the Canada-U.S. Income Tax Convention (the "Convention")?
(2) Is such a LLC's share of the gain realized by a U.S. limited partnership in which the LLC is a partner from the disposition of taxable Canadian property exempt from Canadian tax under Article XIII(4) of the Convention?

Position: (1) No; (2) No

Reasons: (1) The LLC is not a person liable to tax in the U.S. nor is it generally exempt from income taxation in the U.S. by reason of its nature as an "organization or other arrangement that is operated exclusively to administer or provide pension, retirement or employee benefits" within the meaning of Article IV(1) of the Convention.
(2) The LLC is not a resident of the U.S. for purposes of the Convention and is therefore not entitled to benefits thereunder.

18 April 2002 Internal T.I. 2002-0118827 F - DEBENTURES CONVERTIBLES

Unedited CRA Tags
20(1)f)(ii) 248(1) 18(9.1) 20(1)e)(ii.2)

Principales Questions: (1) Lorsque le détenteur d'une débenture convertit cette dernière en actions ordinaires sans valeur nominale de l'émetteur, l'alinéa 20(1)f) de la Loi s'applique-t-il pour permettre de déduire le montant de la JVM des actions émises qui excède la somme pour laquelle le titre a été émis? (2) Le paragraphe 18(9.1) de la Loi est-il applicable à la prime payée lors du remboursement avant échéance d'une débenture si le remboursement est fait à la demande de l'émetteur?

Position Adoptée: (1) Non (2) Oui, sauf pour la portion de la prime qui se rapporte à la partie des débentures qui a été remplacée par une autre créance.