Income Tax Severed Letters - 2003-02-07

Miscellaneous

2003 2002-0176711 - SUPPLEMENTAL RULING

Unedited CRA Tags
81

Principal Issues:

1. Minor change in facts re ruling 2002-014913: The phrase "... minus the amount of benefits paid from the Registered Pension Plan" in paragraph 10 of the ruling was removed.
2. Extension of time

Position: 1. No effect on ruling 2. Yes

Reasons:

Ruling

2003 Ruling 2002-0177363 - Loss Utilization in a Related Group

Unedited CRA Tags
20(1)(c) 112(1) 112(2.4)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c)

Principal Issues: Loss utilization in a related group of companies.

Position: The loss utilization is acceptable.

Reasons: In accordance with our revised policy on interest deductibility, it is no longer necessary for the dividend rate on the preferred shares to be greater than the interest rate on the loan (a so-called "positive" spread), as had been customary in our previous loss utilization rulings. In this ruling, there is a "negative" spread, that is, the dividend rate on the preferred shares is less than the interest rate on the loan. The dividend rate will, however, reflect an appropriate commercial rate considering the specific circumstances.

2002 Ruling 2002-0159923 - 55(3)(a)

Unedited CRA Tags
55(3)(a) 55(4)

Principal Issues:
Parents have controlled Opco since its inception. As part of the proposed transactions, parents will incorporate 3 Holdcos and will control each Holdco. Each of the parents' children will acquire shares of one Holdco. Opco will then transfer a portion of its assets to each Holdco. Whether subsection 55(4) would deem each child not to be related to his or her sibling's Holdco?

Position:
For the reason given below, subsection 55(4) would not apply to deem each child not to be related to his or her sibling's Holdco.

Reasons:
The taxpayer represented that the purpose of having the parents control each Holdco was to protect the parents' economic interest in each Holdco and that none of the purposes of having parents control each Holdco was to cause each child to be related to his or her sibling's Holdco so that subsection 55(2) would not apply to a dividend.

Technical Interpretation - External

10 February 2003 External T.I. 2002-0177955 - DEFERRED SALARY LEAVE PLAN

Unedited CRA Tags
REG 6801(a)

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

Position:
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.

10 February 2003 External T.I. 2002-0178115 - HBP EXCEPTIONS TO ELIGIBILITY REQUIREMENTS

Unedited CRA Tags
146.01(1)

Principal Issues:
Can we change the eligibility requirements for the Home Buyers Plan for specific situations?

Position: No.

Reasons: Changes to the law have to be made by Finance.

5 February 2003 External T.I. 2002-0157445 F - AAPE ACTION ADM PETITE ENTREPRISE

Unedited CRA Tags
110.6(1)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1) - Qualified Small Business Corporation Share - Paragraph (c)
question of fact whether shares of stock-trading corporation were QSBCs
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Small Business Corporation
CCRA articulation of Ensite test in relation to stock-trading business

Principale Question: Est-ce que les actions détenues par les investisseurs externes vont se qualifier à titre d'actions admissibles de petite entreprise pour les fins de la déduction pour gains en capital prévue au paragraphe 110.6(2.1) de la Loi lorsqu'elles seront vendues ?

Position Adoptée: Aucune et commentaires généraux seulement.

5 February 2003 External T.I. 2003-0000565 - CLASSROOM FEE

Unedited CRA Tags
118.5

Principal Issues:
Is a "classroom fee" an eligible tuition fee for purposes of the tuition tax credit

Position TAKEN: Yes

Reasons:
Classroom fee is charged for classroom portion of an apprenticeship program.

4 February 2003 External T.I. 2002-0177695 - TERMINAL LOSS RENTAL PROPERTY

Unedited CRA Tags
20(16) 1100(11)

Principal Issues: In a situation in which a taxpayer disposes of a rental property, and was not entitled to deduct any CCA in computing income from the property pursuant to subsection 1100(11) of the Regulations, or chooses not to claim CCA, is it possible for a terminal loss to result on the property under subsection 20(16) of the Act?

Position: Yes.

Reasons: These facts alone would not affect whether a terminal loss is possible.

3 February 2003 External T.I. 2002-0176295 - PREJUDGMENT INTEREST

Unedited CRA Tags
12(1)(c) 5(1)

Principal Issues: Whether interest with respect to a settlement or an award of salary, wages and other remuneration owing to a taxpayer by his former employer is considered pre-judgement interest which may be non-taxable.

Position: No.

Reasons: Only pre-judgement interest that relates to an award for personal injury or death is considered non-taxable.

3 February 2003 External T.I. 2002-0179395 - DAMAGES AND WINDFALL

Unedited CRA Tags
9(1)

Principal Issues: Whether a "release" payment is a non-taxable receipt, business income, on account of capital or a combination of different amounts.

Position: Question of fact.

Reasons: The payment is to compensate for future uncertainties. This includes possible negative impact on income and the assets used to earn that income.

31 January 2003 External T.I. 2002-0161555 F - VENTE D'UN IMMEUBLE LOCATIF

Unedited CRA Tags
54
Summary Under
Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(i)
payment made by vendor to purchaser of building reduced its proceeds of disposition

Principales Questions:
Quel est le traitement fiscal d'un montant équivalent aux 12 derniers mois de loyer remis par un propriétaire à un locataire lors de la vente de l'immeuble à ce dernier ?

Position Adoptée:
Question de fait, probablement une réduction du produit de disposition.

31 January 2003 External T.I. 2002-0166085 - Foreign Tax Credit

Unedited CRA Tags
126

Principal Issues: para. 30 of IT-270R2

Position: provided general comments

Reasons:

28 January 2003 External T.I. 2002-0166845 - Alternative Minimum Tax

Unedited CRA Tags
127.52

Principal Issues: To determine if Canadian Renewable and Conservation Expenses are deductible by an individual in the calculation of adjusted taxable income for Alternative Minimum tax purposes.

Position: NO

Reasons: Deductions allowed only to the extent of royalty income or income from the production of petroleum, natural gas and minerals.

Technical Interpretation - Internal

3 February 2003 Internal T.I. 2002-0168317 F - PAIEMENT DE DEPENSES

Unedited CRA Tags
56(1)B) 60.1(2) 60.1(1)
Summary Under
Tax Topics - Income Tax Act - Section 56.1 - Subsection 56.1(4) - Support Amount
amount recipient does not qualify as having discretion as to use if a court order specifies the expenses that are covered
Words and Phrases
has discretion discretion
Summary Under
Tax Topics - Income Tax Act - Section 56.1 - Subsection 56.1(2)
express mention of ss. 56.1(2) and 60.1(2) no longer required

Principale Question:

Les paiements faits par Monsieur à des tiers pour des dépenses afférentes au domicile conjugal se qualifient-ils à titre de pension alimentaire pour les années d'imposition XXXXXXXXXX et XXXXXXXXXX ?

Position Adoptée:
Non.

3 February 2003 Internal T.I. 2002-0172277 - APPLICATION OF 90(1) OF INDIAN ACT

Unedited CRA Tags
81(1)(a)

Principal Issues:
Application of subsection 90(1) of the Indian Act to Maritime fishers following R v. Marshall.

Position: Subsection 90(1) of the Indian Act would not apply.

Reasons:
For income to be exempt under paragraph 81(1)(a) of the Act, it must be situated on reserve. No personal property has been purchased with Indian money and no personal property has been given to Indians or a band pursuant to a treaty such that income would be deemed to be situated on reserve pursuant to subsection 90(1) of the Indian Act.

February 3, 2003

29 January 2003 Internal T.I. 2002-0172217 - DAMAGES-HR VIOLATION

Unedited CRA Tags
56(1)(a)(ii)

Principal Issues: Tax treatment of damages paid under a settlement agreement arising from loss of employment.

Position: General damages for violation of employee's human rights are not included in income. Aggravate damages for mental anguish caused by wrongful dismissal are taxable as a retiring allowance.

Reasons: 1. Available information, including settlement agreement, indicates that general damages were in respect of human rights violation. The provincial human rights legislation has no maximum award amount.
2. The facts indicate that the aggravated damages were paid for mental anguish caused by the loss of employment, and are therefore within the definition of retiring allowance.

28 January 2003 Internal T.I. 2003-0181917 - EDUCATION AND TUITION TAX CREDIT

Unedited CRA Tags
118.5 118.6

Principal Issues:
Whether a particular association can issue a T2202A for purposes of the tuition and education tax credit given the circumstances surrounding the particular program.

Position: Likely no.

Reasons:
Tuition Tax Credit: No tuition is actually paid to the association. Education Tax Credit:The program is jointly provided by two organizations, only one of which is certified by HRDC. This tends to indicate that the program is not provided by a designated educational institution.