Income Tax Severed Letters - 2002-07-19

Principales Questions: Est-ce qu'un contribuable détient une ou deux participations dans la même société de personnes lorsqu'il détient à la fois des parts privilégiées et des parts ordinaires. Comment déterminer le prix de base rajusté (PBR) à attribuer aux parts privilégiées qui seront vendues par le contribuable.

Position Adoptée: Le contribuable détient une seule participation dans la société de personnes dont une fraction est disposée. La détermination du PBR de la fraction de la participation disposée se fait en vertu du paragraphe 43(1) de la Loi. Ce paragraphe mentionne que pour les fins du calcul du gain ou de la perte en capital qu'un contribuable tire de la disposition partielle d'un bien, le PBR de la partie disposée correspond à la fraction du PBR, à ce moment, de la totalité du bien qu'il est raisonnable d'attribuer à cette partie.

Principal Issues:
Is an interest in a limited partnership foreign property for purposes of Part XI of the Act?

Position: Yes.

Reasons:
Under paragraph (i) of the definition of foreign property in subsection 206(1) of the Act, except as prescribed by Regulation, an interest in a partnership is a foreign property.

Principal Issues: Whether amounts paid to have an individual's sperm banked (which involved extracting, testing and freezing the sperm), qualifies as a medical expense under subsection 118.2(2) of the Income Tax Act.

Position: Question of fact but may qualify under paragraph 118.2(2)(a).

Reasons: Under paragraph 118.2(2)(a) of the Act, an amount may qualify as a medical expense if it is paid "to a ... public or private licensed hospital in respect of medical ... services..." In the case at hand, the amounts were paid to a public hospital. Further, it is our view that the amounts can be considered to have been paid in respect of medical services given the particular circumstances.

Principales Questions:
Est-ce que la disposition d'un permis est une disposition d'immobilisation ou une disposition d'immobilisation admissible?

Position Adoptée:
Selon les informations obtenues du Ministère émettant le permis, la durée du permis ne serait pas limitée. Par conséquent, la disposition du permis serait une disposition d'immobilisation admissible. La détermination finale ne pourrait se faire que suite à une vérification des informations obtenues et à l'analyse des faits et des documents reliés au permis et à sa vente.

Principales Questions:
Les paiements d'une rente à terme sont-ils admissibles pour le crédit pour pension lorsque le particulier a moins de 65 ans? La rente est-elle une rente viagère?

Position Adoptée:
Les paiements ne sont pas admissibles au crédit. Ce n'est pas un versement d'une rente viagère prévue par un régime de retraite ou d'autres pensions, ou en provenant.

Principal Issues: Is a per diem allowance for board and lodging while working in Angola exempt from tax?

Position: Likely, depends on facts.

Reasons: Criteria in subsection 6(6) of the Income Tax Act appear to be met.

Principal Issues: 1. Absent specific reversionary conditions attaching to property transferred to a trust, does 75(2) apply when the settlor trust decisions are made by the majority provided that the settlor, who is also a trustee, concurs with the decision?
2. If the answer to Q. 1 is yes, will 75(2) cease to apply if the terms of the trust are changed such that the settlor's explicit consent is not required such that trust decisions are made solely by consensus of the majority, even though the settlor remains one of three trustees?
3. Will 107(4.1) apply to the distribution of property other than the property which was subject to 75(2)?

Position: 1. Yes 2. Generally, yes 3. Yes

Reasons: 1. When the trustees must obtain the consent of the person who contributed the property before distribution or disposition, subsection 75(2) will apply whether or not the contributor is also a trustee.
2. When the settlor or other contributor is one of two or more co-trustees acting in a fiduciary capacity in administering the trust property and there are no specific terms outlining how the trust property is to be dealt with, but rather the property is subject to standard terms ordinarily found in trust indentures, we accept that paragraph 75(2)(b) will generally not be considered applicable. When the conditions which cause 75(2) to apply cease to apply at some future time, such as when the trust is varied, 75(2) will cease to apply at that time.
3. A plain reading of 107(4.1) indicates that it would apply to a capital distribution of any property, and not just the property referred to in 107(4.1)(b) since the reference to "any property" in 107(4.1)(b) does not refer to the same property as referred to in the preamble as "any property". While "the property" referred to in 107(4.1)(c) must refer to the property in 107(4.1)(b) rather than the property referred to in the preamble, this means that the condition in (c) which doesn't result in a FMV distribution can only arise in respect of property that is returned to the contributor. For example, if more than 1 person contributed property to the trust in circumstances under which 75(2) applied, 107(4.1) would apply if any particular property was returned to a person other than the person who contributed the property to the trust.

Principal Issues: Recognition of an ABIL

Position: Question of Fact

Reasons: General comments provided.

Principal Issues: A number of medical doctors have established a fund at a hospital to which they contribute annual dues of $XXXXXXXXXX each. The fund is used for food and beverages at meetings, gift baskets for the bereavement of patients or former patients, and retirement gifts. We have been asked whether the medical doctors, who are employees, can deduct the contributions.

Position: Our general position is that the contributions are not deductible.

Reasons: There is no provision within section 8 of the Income Tax Act that allows such a deduction and subsection 8(2) of the Act contains a general limitation denying a deduction from office or employment income except as permitted by section 8 of the Act.

Principal Issues: Would land owned by a partnership be considered QFP.

Position: Likely.

Reasons: Where a partnership owns a parcel of land and carries on the business of farming, it may be considered to principally use the property in that business where all the other requirements of the definition of QFP are satisfied.