Income Tax Severed Letters - 2003-01-10


2002 Ruling 2001-011367A - Amalgamation - Effect on Royalties

Unedited CRA Tags

Principal Issues:
Whether certain transactions will result in a new royalty being created.

Position: No.

Reasons: Based upon the facts of the situation and XXXXXXXXXX .

2002 Ruling 2002-0138693 - FOREIGN PENSION PLAN SURPLUS RCA

Unedited CRA Tags
207.6(5) 207.6(5.1) REG 8308.1(2)

Principal Issues:
The proposed transaction involves Canadian resident employees of a Canadian corporation becoming members of a foreign pension plan. All pension benefits to be provided to the Canadian resident employees will only be funded with the foreign pension plan's surplus. Will the proposed transaction constitute a retirement compensation arrangement?

Position: No.

The employer does not have an absolute right to the actuarial surplus, therefore, no employer contributions will be considered to be made to the foreign plan and there will not be a residents' contribution made in accordance with subsection 207.6(5.1). Therefore, the arrangement will not be a residents' arrangement in accordance with subsection 207.6(5) and the proposed transactions will not be subject to Part XI.3 tax.


Unedited CRA Tags
248(1) 146(1)

Principal Issues:
Will amendments to a supplementary pension plan cause the plan to be a salary deferral arrangement?

Position: No.

Reasons: The amendment does not affect the previous rulings given.

2002 Ruling 2002-0152583 - Loss Consolidation

Unedited CRA Tags
20(1)(c) 245

Principal Issues: Whether interest is deductible in a proposed loss consolidation arrangement

Position: Yes.

Reasons: Meets the requirements under paragraph 20(1)(c).
Meets our requirements for loss consolidation arrangements.

2002 Ruling 2002-0174333 - GIFTS BY WILL

Unedited CRA Tags
118.1(5) 118.1(15) 118.1(13)

Principal Issues:
The trustees of the subject estate are directed by the will to make gifts to specified charities in specified amounts. The will gives the trustees a choice as to how the gifts may be completed. One of the permitted methods for satisfying the bequests involves steps that may negate the transfers being viewed as gifts at law. The trustees ask whether the gifts would be viewed as gifts by will within the meaning of subsection 118.1(5) and 118.1(15) if that method is not used.

Position: The gifts are gifts by will within the meaning of subsection 118.1(5).

The terms of the will clearly specify the following: the identity of the recipients, the quantum of the gifts, that the trustees are required to make the gifts, that the recipients of the gifts are qualified donees, and that the estate will be able to complete the gifts after payment of its debts.

Technical Interpretation - External

24 January 2003 External T.I. 2002-0173815 - FORMER BUSINESS PROPERTY

Unedited CRA Tags
13(4) 44(1) 44(6)

Principal Issues: Whether a building situated on leased land can be considered a "former business property" under the replacement property rules.

Position: Yes - the building and leasehold interest in land can be considered a former business property.

Reasons: Definition of former business property includes an interest in real property.

24 January 2003 External T.I. 2002-0180955 - Active Solar System & Cogeneration Equip.

Unedited CRA Tags
Class 43.1

Principal Issues: 1. Whether an active solar system is eligible for inclusion in Class 43.1 2.Whether a cogeneration system installed in a greenhouse is eligible for inclusion in Class 43.1

Position: 1. No. 2. Yes.

Reasons: 1. The purpose of the active solar system is to meet space heating needs of a greenhouse. Class 43.1 states that solar heat energy captured by active solar systems be used directly in industrial process. CCRA does not consider greenhouse space heating, or space heating in general, to be an industrial process. Consequently, the active solar system installed by the Company does not qualify for Class 43.1.
2. Each of the four micro-turbine units and the eligible service connections can be included in Class 43.1 by virtue of meeting the requirements of paragraphs (a), (b), and (c) of Class 43.1.

24 January 2003 External T.I. 2002-0164895 - SINGLE PURPOSE CORP.

Unedited CRA Tags

Principal Issues: Do shares of a single purpose corporation qualify as a "principal residence" for purposes of section 54 of the Act?

Position: No.

Reasons: The shares of a single purpose corporation would not be considered shares of a co-operative housing corporation and consequently would not qualify as a principal residence for purposes of claiming the principal residence exemption.

23 January 2003 External T.I. 2002-0161405 F - COUT DE TRANSPORT DU CONJOINT

Unedited CRA Tags

Principales Questions:
Est-ce qu'un employé peut être considéré tenir ailleurs comme lieu principal de résidence un établissement domestique autonome pour les fins de l'application du paragraphe 6(6) de la Loi malgré le fait que sa conjointe vienne habiter avec lui sur le site du chantier particulier ?

En supposant une réponse affirmative à la première question, est-ce que le remboursement des frais de transport de la conjointe constitue un avantage imposable pour l'employé ?

Position Adoptée:
Question de fait.

22 January 2003 External T.I. 2002-0141415 F - BIENS UTILISES-ENTREPRISE

Unedited CRA Tags
73(3) 70(9) 110.6(1)

Principales Questions:
Pour les fins de la définition de "biens agricoles admissibles" et des paragraphes 73(3) et 70(9) de la Loi :
a) les fonds de terre boisés qui protègent contre l'érosion et l'effritement des terres cultivées peuvent-ils être considérés comme étant des biens utilisés principalement dans le cadre de l'exploitation d'une entreprise agricole ?

b) les fonds de terres boisés détenus pour expansion future peuvent-ils être considérés comme étant des biens utilisés principalement dans le cadre de l'exploitation d'une entreprise agricole ?

c) peut-on comparer la valeur de la partie cultivée par rapport à la valeur de la partie boisée non défrichée pour déterminer si un lot particulier est utilisé principalement dans le cadre d'une entreprise agricole?

Position Adoptée:
a) peut-être

22 January 2003 External T.I. 2002-0173595 - moving expenses

Unedited CRA Tags

Principal Issues: An individual moved (apparently a distance which is in excess of 40 kilometres) in order to enhance his employment opportunities with his current employer. However, the individual has been unsuccessful in obtaining a position at the new location. The employee has asked about the deductibility of the moving expenses.

Position: General comments were provided. We noted that subsection 62(1) of the Act allows for the amount paid as or on account of eligible moving expenses that were not deductible in the year they were paid, to be deducted in a future year to the extent not previously deductible. However, it is a question of fact whether or not the individual moved for the purpose of enabling himself to be employed at a new work location in Canada (paragraph 15 of IT-178R3).

Reasons: It was not possible to provide definitive comments because of the limited information that was considered.

20 January 2003 External T.I. 2002-0180395 - PILOT LESSONS AND LIFELONG LEARNING PLAN

Unedited CRA Tags

Principal Issues: Are individual flying lessons eligible for the Lifelong Learning Plan?

Position: Question of Fact.

Reasons: The classes must satisfy the LLP conditions in section 146.02.

20 January 2003 External T.I. 2002-0172895 - DEFERRED SALARY LEAVE PLAN

Unedited CRA Tags
REG 6801(a)

Principal Issues:
Does a proposed deferred salary leave plan comply with Regulation 6801(a)?

Not a ruling request. It would be a question of fact, based upon a review of all substantiating documents.

Reasons: General information and commentary provided.

16 January 2003 External T.I. 2002-0151025 - Subsection 40(3.6)

Unedited CRA Tags

Principal Issues: Application of subsection 40(3.6) where a trust acquires some shares of a corporation from a deceased's estate and the remaining shares of the corporation held by the estate are redeemed. The estate and the trust have the same non-affiliated executors/trustees.

Position: Generally, the estate would not be considered to be affiliated with the corporation after the share redemption.

Reasons: The law.

16 January 2003 External T.I. 2002-0157475 - TUITION T1 SHCEDULE II

Unedited CRA Tags

Principal Issues:
Is the calculation of the current year's claim for the tuition and education amount on Schedule 11 incorrect?

Position: No.

Because the ordering provisions of section 118.92 must be applied, the amount of the tuition and education credits claimed and carried-forward are determined before claiming certain tax credits that may be available.

16 January 2003 External T.I. 2002-0170015 - HEALTH & WELFARE TRUSTS

Unedited CRA Tags
18(9) 18(1)(a)

Principal Issues: Whether the health and welfare trust arrangement, as described, satisfies the requirements in IT-85R2.

Position: Not entirely.

Reasons: Trust arrangement does not deal with all of the requirements outlined in IT-85R2. Provided general comments.

Technical Interpretation - Internal

23 January 2003 Internal T.I. 2002-0159027 - REIMBURSEMENT OF MEDICAL EXPENSES

Unedited CRA Tags

Principal Issues: Whether the payment made to a former employee to compensate him for medical expenses that would have been covered under employer's private health services plan would be taxable.

Position: Probably not taxable.

Reasons: Since the other payments made to the employee under the settlement agreement appear to represent employment income, then it is reasonable to conclude that the reimbursement of the medical expenses that would otherwise have been covered under the phsp, would not be subject to tax.

21 January 2003 Internal T.I. 2002-0160907 - INCOME FROM AN EQUITY PARTICIPATION PLAN

Unedited CRA Tags
6 39(1)

Principal Issues:
Whether payment received under an equity participation plan is employment income or capital gains.

Position: Question of Fact

The facts provided suggest the payment is employment income. There is nothing to suggest a capital gain.

17 January 2003 Internal T.I. 2002-0143427 - TRAVEL EXPENSES

Unedited CRA Tags

Principal Issues:
Meaning of the wording "travel expenses incurred by the taxpayer while away from home in the course of carrying on the taxpayer's business" as used in section 18(1)(h) of the Act in a situation of a self-employed contractor.

Position: General comments given

Reasons: Ordinary meaning of the words.

16 January 2003 Internal T.I. 2002-0164407 - Interest on Crown Charges

Unedited CRA Tags
12(1)(x) 12(2.2)

Principal Issues: Is non-deductible interest that is refunded to a taxpayer on an overpayment of Crown royalty charges included in income.

Position: Yes.

Reasons: A refund of interest to a taxpayer on an overpayment of Crown royalty charges would be required to be included in income in accordance with subparagraph 12(1)(x)(iv). However, the taxpayer would be entitled to elect pursuant to subsection 12(2.2), provided the requirements of both provisions are otherwise satisfied.