Income Tax Severed Letters - 2003-01-24

Miscellaneous

2002 2002-013816D - AMENDMENT OF QLP RULING

Unedited CRA Tags
REG 5000(7)

Principal Issues:
Where the terms of a partnership agreement provide a limited partner with the right to be excused or excluded from a particular investment, will the existence of this right result in the units of the limited partnership not being identical in all respects for the purposes of paragraph 5000(7)(d) of the definition of "qualified limited partnership"?

Position:
A limited partnership will cease to be a "qualified limited partnership" at the time any term or clause in a partnership agreement is exercised which would cause the interests of the limited partners which were described by reference to units of the partnership that were in all respects to no longer be identical.

Reasons:

2002 2002-0174811 F - Butterfly

Unedited CRA Tags
55

Principal Issues: Changes to proposed transactions - Split-up butterfly.

Position: Favourable rulings provided.

Reasons: Meets the requirements of the law.

Ruling

2002 Ruling 2002-0162293 - Butterfly

Unedited CRA Tags
55(3)(b)

Principal Issues: Single wing split-up butterfly

Position: Meets the requirements under paragraph 55(3)(b).

Reasons: The pre-butterfly transactions do not taint the butterfly.

2002 Ruling 2002-0169433 F - ALLOCATION DE RETRAITE & CONVENTION RETRAITE

Unedited CRA Tags
248(1) 56(1)(x) 56(1)(a)

Principales Questions:
1. L'allocation de retraite peut-elle être payée en versements inégaux sur une période maximale de 10 ans?
2. Un employé peut-il renoncer à l'indemnité de départ et l'employeur peut-il verser un montant équivalent dans une convention de retraite?

2002 Ruling 2002-0179323 - STRUCTURED SETTLEMENT

Unedited CRA Tags
56(1)(d)

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

Technical Interpretation - External

31 January 2003 External T.I. 2002-0177055 - PERSONAL TRAVEL-MULTIPLE WORK LOCATIONS

Unedited CRA Tags
6(2) 6(1)(b)

Principal Issues: Whether travel from an employee's residence to a regular place of employment is personal when there are several regular places of employment.

Position: Yes.

Reasons: Long-standing position.

30 January 2003 External T.I. 2002-0169785 - PRODUCT LIABILITY INSURANCE

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

Principal Issues: Whether subparagraph 18(9)(a)(iii) of the Act applies to a premium paid in year 1 for product liability insurance that provides lifetime coverage against liability for products manufactured and sold in year 1.

Position: Yes

Reasons: The product liability insurance premium paid in year 1 guarantees coverage against liability arising from goods manufactured in year 1 for the life of the good. Since the year 1 premium provides coverage in respect of a period after the end of year 1, subparagraph 18(9)(a)(iii) of the Act would apply.

30 January 2003 External T.I. 2003-0181175 - SUPPLEMENTAL RETIREMENT BENEFITS

Unedited CRA Tags
207.6(2)

Principal Issues:
Whether the purchase of an annuity in the year of retirement in the name of an employee in order to satisfy the obligations of the employer pursuant to an unregistered supplemental retirement plan (the "Plan") results in the employee being taxed on the value of the annuity contract in the year of receipt.

Position TAKEN: Yes

Reasons:
It is not an SDA nor a RCA since the employer did not acquire an interest in the annuity.

30 January 2003 External T.I. 2003-0182715 - ONLY OCCUASIONALLY EMPLOYED

Unedited CRA Tags
212(1)(h)(vi)

Principal Issues:
Will CCRA change its position concerning our interpretation of "only occasionally employed" for purposes of the application of subparagraph 212(1)(h)(vi) of the Act and apply the decision of the court in the Louis V. Nanne v. The Queen 2000 DTC 1653 (TCC) ("Nanne") case?

Position: Yes

Reasons:
Where the facts in a particular situation are similar to the facts in the Nanne case, we will apply the decision of the Nanne case on a case-by case basis.

29 January 2003 External T.I. 2003-0183825 - REIMBURSEMENT OF PERMANENT RESIDENT

Unedited CRA Tags
6(1)(a)

Principal Issues: Whether payment of permanent residence authorization fees by employer would constitute a taxable employment benefit

Position: Yes

Reasons: Reimbursement of a personal expense is a taxable benefit. Unlike work permit and visa fees, permanent residence authorization fees is not a reasonable relocation expense.

28 January 2003 External T.I. 2003-0183625 - DISPOSITION OF CAPITAL PROPERTY

Unedited CRA Tags
14(1.01) 220(3.2)

Principal Issues: Whether or not a taxpayer can late file a subsection 14(1.01) election.

Position: No.

Reasons: Neither subsection 14(1.01) of the Act, nor subsection 220(3.2) of the Act and section 600 of the Regulations, provide the means to do so

21 January 2003 External T.I. 2002-0173535 - 89(1)(c) & (c.2) Capital Dividend Account

Unedited CRA Tags
89(1) CDA 14(1) 14(5) CEC

Principal Issues: Computation of a corporation's capital dividend account ("CDA") in two given fact situations ("Situation A" and "Situation B").

Position: Situation A: No amount would be included in the corporation's CDA under paragraph (c) or (c.1) of the definition of CDA in subsection 89(1) of the Act at the end of the Corporation's 2002 taxation year. However, an amount would be included in the corporation's CDA under paragraph (c.2) of the definition of CDA at the end of the corporation's 2002 taxation year.
Situation B: No amount would be included in the corporation's CDA under paragraph (c.1) of the definition of CDA in subsection 89(1) of the Act at the end of the Corporation's 2001 taxation year. However, amounts would be included in the corporation's CDA under paragraphs (c) and (c.2) of the definition of CDA at the end of the corporation's 2001 taxation year.

Reasons: Wording of the Act.

21 January 2003 External T.I. 2001-0109445 F - Usufruit-droit privé français-nu-prop. Cdn.

Unedited CRA Tags
70(5) 107(2) 1102(1)(c) 13(7)(b)

Principal Issues: 1) When does a taxpayer acquire bare owner rights ("droits de nue-propriété") with respect to a rental property situated in France (the usufruct being established under French law) for the purposes of the Act, where such rights have been acquired pursuant to a will. 2) Whether the cost of major repairs can be deducted in computing the income of the bare owner.

Position: 1) In the particular situation described, CCRA would generally consider that the legatee would acquire the property bequeathed at the time of the person's death. Pursuant to subsections 70(5) and 107(2) of the Act, the cost of such property to the legatee would correspond to its fair market value at the time of its acquisition by the legatee.
2) Under par. 1102(1)(c) of the Regulations, the bare owner would not be entitled to capital cost allowance ("CCA") at least until the extinction of the usufruct because the rental income generated by the rental property belongs to the usufructuary. However, par. 13(7)(b) may be applicable at the extinction of the usufruct to allow the bare owner (then the full owner of the rental property) to claim CCA, subject to the restrictions established in subsection 1100(11) of the Regulations.

Reasons: Wording of the Act and current positions.

16 January 2003 External T.I. 2002-0168555 - SPECIFIED INVESTMENT BUSINESS

Unedited CRA Tags
125(7)

Principal Issues:
1. Would a corporation leasing licensed taxis be carrying on a specified investment business?

Position:
1. Question of fact. General comments given.

Reasons:
1. Reading of the relevant legislation and certain municipal codes re: taxis.

16 January 2003 External T.I. 2002-0176645 - MEDICAL EXPENSE TAX CREDIT

Unedited CRA Tags
118.2(2)(b)

Principal Issues: Can a full-time resident of a nursing home include, in his or her qualifying medical expenses, an amount paid for nursing care that is not provided by the nursing home?

Position: Yes

Reasons: Paragraph 118.2(2)(b) includes an amount paid for the full-time care in a nursing home of the patient. Full-time care in a nursing home may include nursing care not provided by the nursing home.

XXXXXXXXXX 2002-017664
Daryl Boychuk
January 16, 2003

16 January 2003 External T.I. 2002-0174305 - SPECIFIED INVESTMENT BUSINESS-TAXI

Unedited CRA Tags
125(7)

Principal Issues:
1. Would a corporation leasing licensed taxis be carrying on a specified investment business?

Position:
1. Question of fact. General comments given.

Reasons:
1. Reading of the relevant legislation and certain municipal codes re: taxis.

16 January 2003 External T.I. 2002-0133545 - GIFTS BY DIRECT DESIGNATION

Unedited CRA Tags
149.1(1) 118.1(5.1) 118.1(5.3)

Principal Issues:
Whether gifts by direct designation in an insurance policy or RRSP/RRIF provided for in subsections 118.1(5.1) and (5.3) are gifts "of capital received by way of bequest or inheritance" and thereby excluded from the calculation of the disbursement quota in subsection 149.1(1).

Position:
Such payments are not gifts for the purposes of subsection 149.1(1) and are, therefore, not included in the DQ.

Reasons: Legislation

15 January 2003 External T.I. 2002-0174805 - MEDICAL EXPENSE TAX CREDIT

Unedited CRA Tags
118.2(2)(b)

Principal Issues: Can a full-time resident of a nursing home include, in his or her qualifying medical expenses, an amount paid for attendant care not provided by the nursing home?

Position: Yes

Reasons: Paragraph 118.2(2)(b) includes an amount paid for the full-time care in a nursing home of the patient. Full-time care in a nursing home may include attendant care that is not provided by the nursing home.

XXXXXXXXXX 2002-017480
Daryl Boychuk
January 15, 2002

15 January 2003 External T.I. 2002-0178505 - SUPERFICIAL LOSS

Unedited CRA Tags
54 40(2)(g)(i) 53(1)(f)

Principal Issues: Do the superficial loss rules apply to particular scenarios?

Position: No in one, yes in the other.

Reasons: Application of the Law

14 January 2003 External T.I. 2002-0150205 - PHSPS FOR SOLE PROPRIETORS

Unedited CRA Tags
20.01

Principal Issues: General information about PHSP's for sole proprietors.

Position: Referred them to IT-339R2.

Reasons: They had no specific interpretative question.

14 January 2003 External T.I. 2002-0167085 - PREMIUM-LIFE INSURANCE USED AS COLLATERAL

Unedited CRA Tags
20(1)(e.2)

Principal Issues:
In order to deduct an amount in respect of the premium on a life insurance policy provided as collateral for a loan must the loan be owing to the financial institution from whom the money was originally borrowed.

Position: Yes.

Reasons: Legislation

13 January 2003 External T.I. 2002-0175305 - AMOUNT FOR ELIGIBLE DEPENDENT

Unedited CRA Tags
118(5) 118(1)(b)

Principal Issues: Taxpayer paid child support to a former spouse in respect of a daughter from XXXXXXXXXX . The child began living with the taxpayer on XXXXXXXXXX and the obligation to pay child support ceased. Is the taxpayer entitled to claim the amount for an eligible dependent pursuant to paragraph 118(1)(b) of the Act?

Position: No.

Reasons: Subsection 118(5) provides that no amount may be claimed under subsection (1) where a support amount was required to be paid in respect of the child and a) the taxpayer and the former spouse were living separate and apart throughout the year or b) if a deduction was claimed under section 60 in respect of a support amount.

13 January 2003 External T.I. 2002-0176905 F - CPCC Status

Unedited CRA Tags
125(7) 89(1)

Principal Issues: Whether a corporation is a CCPC in a given fact situation.

Position: General comments

Reasons: Question of fact.

10 November 2002 External T.I. 2002-0156845 F - CONGRE 2002 APFF

Unedited CRA Tags
7(1)(a)

Principales Questions: Comment détermine-t-on l'avantage imposable en vertu de l'alinéa 7(1)a) de la Loi lorsque l'action a perdu de la valeur après son acquisition ?

Position Adoptée: L'alinéa 7(1)a) de la Loi s'applique et le contribuable réalisera une perte en capital au moment de la disposition de l'action.

Technical Interpretation - Internal

27 January 2003 Internal T.I. 2002-0177197 F - ATTRIBUTION DU GAIN A UN CONJOINT SEPARE

Unedited CRA Tags
74.2

Principales Questions:
1. Est-ce que le gain en capital imposable résultant de la disposition d'un immeuble par Madame peut être imposé à part égale entre les conjoints qui vivent séparés pour cause d'échec du mariage au moment de la disposition?

2. Est-ce que les revenus nets de location font partie du revenu imposable de Madame?

Position Adoptée:
1. Dans la situation présentée, une moitié de l'immeuble avait été transférée à Madame par Monsieur. La moitié du gain en capital imposable serait attribuée à Monsieur à moins qu'un choix conjoint ait été signé par Monsieur et Madame pour que l'article 74.2 ne s'applique pas.

27 January 2003 Internal T.I. 2002-0177457 - PRESCRIBED MEDICAL DEVICE

Unedited CRA Tags
118.2(2)

Principal Issues: 1) Whether the cost of a close caption device and related monthly costs qualify as medical expenses. 2) Whether the cost of a computer and speech recognition software for use by an individual with partial paralysis qualifies as a medical expense.

Position: 1) The cost of the closed caption device qualifies as a medical expense, provided that it is prescribed by a medical practitioner. In situations where a service provider cost is incurred to render the device operational, we would consider that cost to be a medical expense; 2) The cost of the computer and speech recognition software does not qualify as a medical expense.

Reasons: The provisions of section 118.2 of the Act.

27 January 2003 Internal T.I. 2002-0177677 - TERMINAL LOSS RENTAL PROPERTY

Unedited CRA Tags
1100(11) 20(16) 13(21)

Principal Issues: In a situation in which a taxpayer disposes of a "rental property", and throughout the period of ownership was not entitled to deduct any CCA in computing income from the property pursuant to subsection 1100(11) of the Regulations, does the property meet the definition of "depreciable property" in subsection 13(21) of the Act and can a "terminal loss" with respect to the property be claimed under subsection 20(16) of the Act?

Position: Yes.

Reasons: A terminal loss with respect to a rental property should not be denied merely because subsection 1100(11) of the Regulations has restricted the taxpayer from deducting any CCA on the property.

24 January 2003 Internal T.I. 2002-0176287 - FISCAL PERIOD OF PARTNERSHIP

Unedited CRA Tags
402(6) 5204

Principal Issues: Determining the cost of labour for purpose of the M&P profits calculation, and the gross revenue and salaries and wages allocation, for a corporation that is a member of a partnership that has two fiscal periods ending in the same taxation year of the corporation.

Position: The amounts are computed for each fiscal period of the partnership that ends in or coincides with the taxation year of the corporation.

Reasons: Result dictated by legislation.

10 January 2003 Internal T.I. 2002-0178707 - Late-Filing/Production Tardive

Unedited CRA Tags
162(2) 152(7) 152(4)

Principal Issues: In a situation where a Taxpayer late-filed T1 returns for XXXXXXXXXX , and, before the filing deadline for the XXXXXXXXXX T1 return (the relevant time), the Taxpayer was liable for late-filing penalties in respect of the T1 returns for XXXXXXXXXX but the penalties were not assessed, whether the penalty in respect of the XXXXXXXXXX T1 return, for repeated failure to file a T1 return under ss. 162(2) applies ?

Position: No.

Reasons: The condition under paragraph 162(2)(c) is not met because the penalties in respect of XXXXXXXXXX were not "payable", as they were not assessed at the relevant time.