Income Tax Severed Letters - 2003-04-04

Ruling

31 March 2003 Ruling 2002-01662730 - DEBT OF A TRUST FOREIGN PROPERTY

Unedited CRA Tags
206 245(2)

Principal Issues:
Will GAAR apply to a transaction, for purposes of section 206 of the Income Tax Act, where a trust issues debt and the only property held by the trust is 100% foreign?

Position: Yes, GAAR will apply.

Reasons:
In a situation involving debt of a trust, where the property held by the trust is more than 50% foreign property, GAAR will apply.

31 March 2003 Ruling 2002-0166273 - DEBT OF A TRUST FOREIGN PROPERTY

Unedited CRA Tags
206 245(2)

Principal Issues:
Will GAAR apply to a transaction, for purposes of section 206 of the Income Tax Act, where a trust issues debt and the only property held by the trust is 100% foreign?

Position: Yes, GAAR will apply.

Reasons:
In a situation involving debt of a trust, where the property held by the trust is more than 50% foreign property, GAAR will apply.

2003 Ruling 2002-01527030 F - XXXXXXXXXX Abandon - Fiducie

Unedited CRA Tags
248(1) 106 107

Principales Questions:
Un abandon de la participation d'un bénéficiaire d'une fiducie donne-t-il lieu à une disposition à la juste valeur marchande de la participation ?

Position Adoptée: Non.

2003 Ruling 2002-01746930 - DEFERRED SHARE UNIT PLAN

Unedited CRA Tags
REG 6801(d)

Principal Issues:
Will the payment of a percentage of annual compensation in the form of deferred share units result in an SDA?

Position: No.

Reasons:
The conditions of paragraph 6801(d) of the Regulations are satisfied. Two out of the ordinary issues in this ruling have previously been accepted, i.e., the use of preferred shares and the ability to use deferred share units as security for an employer loan.

2003 Ruling 2002-0152703 F - XXXXXXXXXX Abandon - Fiducie

Unedited CRA Tags
248(1) 106 107

Principales Questions:
Un abandon de la participation d'un bénéficiaire d'une fiducie donne-t-il lieu à une disposition à la juste valeur marchande de la participation ?

Position Adoptée: Non.

2003 Ruling 2002-0174693 - DEFERRED SHARE UNIT PLAN

Unedited CRA Tags
REG 6801(d)

Principal Issues:
Will the payment of a percentage of annual compensation in the form of deferred share units result in an SDA?

Position: No.

Reasons:
The conditions of paragraph 6801(d) of the Regulations are satisfied. Two out of the ordinary issues in this ruling have previously been accepted, i.e., the use of preferred shares and the ability to use deferred share units as security for an employer loan.

Ministerial Correspondence

28 March 2003 Ministerial Correspondence 2003-00057140 - DSLP RETIREMENT AFTER LEAVE

Unedited CRA Tags
REG 6801(a)(v)

Principal Issues: Would the conditions in 6801(a) be satisfied if the employee retires after the leave of absence

Position: No

Reasons: The provision requires that the employee returns to his or her regular employment with the employer or another employer that participates in the same or similar arrangement for a period that is not less than the period of leave. Retirement of the participant would not satisfy this condition.

28 March 2003 Ministerial Correspondence 2003-0005714 - DSLP RETIREMENT AFTER LEAVE

Unedited CRA Tags
REG 6801(a)(v)

Principal Issues: Would the conditions in 6801(a) be satisfied if the employee retires after the leave of absence

Position: No

Reasons: The provision requires that the employee returns to his or her regular employment with the employer or another employer that participates in the same or similar arrangement for a period that is not less than the period of leave. Retirement of the participant would not satisfy this condition.

Technical Interpretation - External

3 April 2003 External T.I. 2002-0160155 - CRITICAL ILLNESS WHETHER A TAX BENEFIT

Unedited CRA Tags
6(1)(a)

Principal Issues:
Whether premiums paid by an employer under a group critical illness insurance policy constitute a taxable benefit to its employees under paragraph 6(1)(a).

Position: Depends on the particular situation. Question of fact and law.

Reasons:
Based on the terms of this particular critical illness insurance policy and the relevant provincial insurance legislation, it is our view that the policy qualifies as a group sickness or accident insurance plan. Pursuant to subparagraph 6(1)(a)(i), employer-paid premiums to a group sickness and accident plan are not taxable benefits. Accordingly, the premiums paid by the employer in respect of coverage for its employees under this particular group critical illness insurance policy are not taxable benefits.

3 April 2003 External T.I. 2002-01601550 - CRITICAL ILLNESS WHETHER A TAX BENEFIT

Unedited CRA Tags
6(1)(a)

Principal Issues:
Whether premiums paid by an employer under a group critical illness insurance policy constitute a taxable benefit to its employees under paragraph 6(1)(a).

Position: Depends on the particular situation. Question of fact and law.

Reasons:
Based on the terms of this particular critical illness insurance policy and the relevant provincial insurance legislation, it is our view that the policy qualifies as a group sickness or accident insurance plan. Pursuant to subparagraph 6(1)(a)(i), employer-paid premiums to a group sickness and accident plan are not taxable benefits. Accordingly, the premiums paid by the employer in respect of coverage for its employees under this particular group critical illness insurance policy are not taxable benefits.

2 April 2003 External T.I. 2003-00047250 - ADOPTION SUBSIDIES

Unedited CRA Tags
56(1)(u) 81(1)(h)

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 ISSUE:

Income tax treatment of financial assistance paid to adoptive applicants to enable them to meet the special needs of a child placed with them for adoptions.

Position TAKEN:

2 April 2003 External T.I. 2003-0007215 - COUNCILLOR REMUNERATION

Unedited CRA Tags
6(1)(c) 56(2) 118.1

Principal Issues: Follow-up inquiry to 2002-017458, in which we provided an opinion that an honorarium earned by a councillor for serving on certain commissions, on behalf of a municipality, is employment income when:
(a) The amount was paid directly to the municipality by the commission at the direction of the councillor or
(b) The amount was paid to the councillor by the commission and then turned over to the municipality by the councillor.
We also indicated that if all the conditions of section 118.1 of the Act were otherwise met, the councillor would be entitled to claim a non-refundable tax credit for a gift made to a Canadian municipality.
In the follow-up inquiry, further information was provided which indicated that the municipality has the authority to demand that a certain commission pay it an honorarium without the concurrence of the councillor. The municipality exercises this authority when the councillor already receives an annual salary for performing the duties of his or her office, which includes representing the municipality on the commission.

Position: If the municipality exercises its authority to demand that the commission directly pay it an honorarium, and does so without the concurrence of the councillor, the amount is not required to be included in the councillor's income under the Act. However, the councillor is not entitled to claim a non-refundable tax credit for the amount under section 118.1 of the Act.

Reasons: The councillor has not received the amount or directed the commission to pay it to the municipality. Therefore, paragraph 6(1)(c) and subsection 56(2) of the Act are not applicable. Further, under these circumstances it is likely that the amount can be considered a reimbursement to the municipality of an amount already paid to councillor and included in the councillor's taxable employment income by the municipality.
The councillor would not be entitled to a non-refundable tax credit under section 118.1. The amount would not be considered a "gift" under these circumstances, nor would it be reasonable to allow a credit in this situation since the amount in question is not included in the councillor's employment income.

2 April 2003 External T.I. 2003-00072150 - COUNCILLOR REMUNERATION

Unedited CRA Tags
6(1)(c) 56(2) 118.1

Principal Issues: Follow-up inquiry to 2002-017458, in which we provided an opinion that an honorarium earned by a councillor for serving on certain commissions, on behalf of a municipality, is employment income when:
(a) The amount was paid directly to the municipality by the commission at the direction of the councillor or
(b) The amount was paid to the councillor by the commission and then turned over to the municipality by the councillor.
We also indicated that if all the conditions of section 118.1 of the Act were otherwise met, the councillor would be entitled to claim a non-refundable tax credit for a gift made to a Canadian municipality.
In the follow-up inquiry, further information was provided which indicated that the municipality has the authority to demand that a certain commission pay it an honorarium without the concurrence of the councillor. The municipality exercises this authority when the councillor already receives an annual salary for performing the duties of his or her office, which includes representing the municipality on the commission.

Position: If the municipality exercises its authority to demand that the commission directly pay it an honorarium, and does so without the concurrence of the councillor, the amount is not required to be included in the councillor's income under the Act. However, the councillor is not entitled to claim a non-refundable tax credit for the amount under section 118.1 of the Act.

Reasons: The councillor has not received the amount or directed the commission to pay it to the municipality. Therefore, paragraph 6(1)(c) and subsection 56(2) of the Act are not applicable. Further, under these circumstances it is likely that the amount can be considered a reimbursement to the municipality of an amount already paid to councillor and included in the councillor's taxable employment income by the municipality.
The councillor would not be entitled to a non-refundable tax credit under section 118.1. The amount would not be considered a "gift" under these circumstances, nor would it be reasonable to allow a credit in this situation since the amount in question is not included in the councillor's employment income.

2 April 2003 External T.I. 2003-0004725 - ADOPTION SUBSIDIES

Unedited CRA Tags
56(1)(u) 81(1)(h)

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 ISSUE:

Income tax treatment of financial assistance paid to adoptive applicants to enable them to meet the special needs of a child placed with them for adoptions.

Position TAKEN:

1 April 2003 External T.I. 2003-0004005 - EMPLOYER-PROVIDED GIFTS & AWARDS

Unedited CRA Tags
6(1)(a)

Principal Issues: 1. Does policy apply to gifts and awards that do not bear corporate logo, and gifts and awards of leisure, recreational, or travel services?
2. Does policy apply to gifts and awards of points that can be redeemed at financial institutions for services and RRSP contributions?
3. Does policy apply to accumulations of points that can be used to select items from employer-provided catalogue?
4. Does policy apply to gifts made by manufacturers to employees of independent distributors?
5. Does policy apply to rewards given to employees for meeting or exceeding economic targets directly related to their employment duties?
6. Does policy apply to gifts and awards costing more than $500, where the employee reimburses the employer for part of the cost of the item?

Position: 1. No requirement for items to bear corporate logo. Question of fact for travel, leisure and recreational services, depending on whether the item is considered near-cash.
2. Policy does not apply to points that can be redeemed for financial services.
3. Question of fact depending on method by which, and circumstances under which points are accumulated, and variety of merchandise available for selection.
4. Policy does not apply to gifts by third parties.
5. Rewards for achieving economic objectives related to employment duties are presumed to be remuneration, unless the employer can establish the contrary.
6. Policy does not apply to gifts or awards costing more than $500 regardless of whether the employer reimburses the employee for part of the cost.

Reasons: Consistent with underlying rationale for policy.

1 April 2003 External T.I. 2003-00040050 - EMPLOYER-PROVIDED GIFTS & AWARDS

Unedited CRA Tags
6(1)(a)

Principal Issues: 1. Does policy apply to gifts and awards that do not bear corporate logo, and gifts and awards of leisure, recreational, or travel services?
2. Does policy apply to gifts and awards of points that can be redeemed at financial institutions for services and RRSP contributions?
3. Does policy apply to accumulations of points that can be used to select items from employer-provided catalogue?
4. Does policy apply to gifts made by manufacturers to employees of independent distributors?
5. Does policy apply to rewards given to employees for meeting or exceeding economic targets directly related to their employment duties?
6. Does policy apply to gifts and awards costing more than $500, where the employee reimburses the employer for part of the cost of the item?

Position: 1. No requirement for items to bear corporate logo. Question of fact for travel, leisure and recreational services, depending on whether the item is considered near-cash.
2. Policy does not apply to points that can be redeemed for financial services.
3. Question of fact depending on method by which, and circumstances under which points are accumulated, and variety of merchandise available for selection.
4. Policy does not apply to gifts by third parties.
5. Rewards for achieving economic objectives related to employment duties are presumed to be remuneration, unless the employer can establish the contrary.
6. Policy does not apply to gifts or awards costing more than $500 regardless of whether the employer reimburses the employee for part of the cost.

Reasons: Consistent with underlying rationale for policy.

1 April 2003 External T.I. 2003-0008505 - BUSINESS INCOME OR WINDFALL

Unedited CRA Tags
9(1)

Principal Issues: In an actual fact situation, whether an amount received as a result of an out-of-court settlement is business income or a windfall.

Position: Based on the limited information provided, the amount is business income.

Reasons: The amount was intended to compensate the recipient for lost profits. There is no indication that it related to compensation for the destruction or material crippling of the profit-making apparatus of the business.

1 April 2003 External T.I. 2003-00085050 - BUSINESS INCOME OR WINDFALL

Unedited CRA Tags
9(1)

Principal Issues: In an actual fact situation, whether an amount received as a result of an out-of-court settlement is business income or a windfall.

Position: Based on the limited information provided, the amount is business income.

Reasons: The amount was intended to compensate the recipient for lost profits. There is no indication that it related to compensation for the destruction or material crippling of the profit-making apparatus of the business.

31 March 2003 External T.I. 2003-0006305 F - Safe Income Discretionary Dividend

Unedited CRA Tags
55(2) 55(5)

Principal Issues: In a situation where the capital-stock of a corporation is made up of a number of classes of participating common shares, each class being entitled to dividends at the directors discretion, whether (1) the corporation's safe income on hand can be considered attributable only to the shares of one class if the corporation paid a dividend equal to its safe income on hand only on the shares of that class ? (2) If the answer to (1) is yes, can the shares of that class participate in the safe income on hand earned before the issuance of the shares of that class ?

Position: (1) No. (2) No.

Reasons: (1) The fact that a dividend is paid on the shares of one class of discretionary / exclusionary shares is not, in and of itself, determinative of the safe income attributable to the shares of that class of the capital stock of the corporation. The allocation of safe income on hand between different classes of shares cannot be made without knowing all the facts and circumstances surrounding a particular situation, especially when "discretionary dividend shares" are issued and outstanding. (2) CCRA's long standing position is that generally a share participates in the safe income on hand of a corporation, based on its entitlement to participate in the income of the corporation earned during the "holding period" of the share, that is from the time it is acquired to the day of the safe- income determination time.

31 March 2003 External T.I. 2002-01718350 F - DON D'ACTIONS COTEES EN BOURSE

Unedited CRA Tags
38(a.1) 149.1(6.3)

Position Adoptée: Oui
RAISON POUR POSITION ADOPTÉE: Analyse législative

31 March 2003 External T.I. 2003-00024950 - MEDICAL EXPENSE-HOT TUB

Unedited CRA Tags
118.2(m) Reg. 5700

Principal Issues: Whether the cost of a hot tub that is used with a portable sling and lift qualifies as a medical expense for the purpose of the medical expense tax credit?

Position: No

Reasons: A hot tub is not a prescribed medical device for the purposes of paragraph 118.2(2)(m) and Regulation 5700. The fact that it is used in conjunction with a prescribed device (i.e., "equipment designed to be used to assist an individual to enter or leave a bathtub") does not convert the cost of a hot tub into a medical expense.

31 March 2003 External T.I. 2003-0004375 - GAIN ON GIFT OF CULTURAL PROPERTY

Unedited CRA Tags
39(1)(a) 118.1(11)

Principal Issues:
If an individual disposes of cultural property to an institution or public authority that is not designated under subsection 32(2) of the Cultural Property Export and Import Act until after the individual disposes of the property to the institution or public body, will any capital gain that arises on the disposition, be excluded in computing individuals' income by virtue of subparagraph 39.1(1)(a)(i.1)?

Position:
No. Any capital gain on the disposition would not be excluded from the computation of the taxpayer's income by virtue of subparagraph 39.1(1)(a)(i.1).

Reasons:
There is no provision that would permit the CCRA to treat an institution or public body that is designated after the time of the disposition as though it had been designated at the time of the disposition for the purposes of subparagraph 39.1(1)(a)(i.1).

31 March 2003 External T.I. 2003-00063050 F - Safe Income Discretionary Dividend

Unedited CRA Tags
55(2) 55(5)

Principal Issues: In a situation where the capital-stock of a corporation is made up of a number of classes of participating common shares, each class being entitled to dividends at the directors discretion, whether (1) the corporation's safe income on hand can be considered attributable only to the shares of one class if the corporation paid a dividend equal to its safe income on hand only on the shares of that class ? (2) If the answer to (1) is yes, can the shares of that class participate in the safe income on hand earned before the issuance of the shares of that class ?

Position: (1) No. (2) No.

Reasons: (1) The fact that a dividend is paid on the shares of one class of discretionary / exclusionary shares is not, in and of itself, determinative of the safe income attributable to the shares of that class of the capital stock of the corporation. The allocation of safe income on hand between different classes of shares cannot be made without knowing all the facts and circumstances surrounding a particular situation, especially when "discretionary dividend shares" are issued and outstanding. (2) CCRA's long standing position is that generally a share participates in the safe income on hand of a corporation, based on its entitlement to participate in the income of the corporation earned during the "holding period" of the share, that is from the time it is acquired to the day of the safe- income determination time.

31 March 2003 External T.I. 2003-0004595 - T4 REQUIREMENTS FOR RCA

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

Principal Issues:
What is the taxation effect to employee in a group savings plan arrangement?

Position:
The arrangement appears to be an RCA. As such, employees are taxed when amounts are paid to them from the RCA.

Reasons:
Employees are not entitled to amounts from the group savings plan until they cease employment with the employer. As such, the arrangement appears to fit the definition of RCA. Under 56(1)(x), an amount received in a year from an RCA is taxable to the recipient.

31 March 2003 External T.I. 2003-00043750 - GAIN ON GIFT OF CULTURAL PROPERTY

Unedited CRA Tags
39(1)(a) 118.1(11)

Principal Issues:
If an individual disposes of cultural property to an institution or public authority that is not designated under subsection 32(2) of the Cultural Property Export and Import Act until after the individual disposes of the property to the institution or public body, will any capital gain that arises on the disposition, be excluded in computing individuals' income by virtue of subparagraph 39.1(1)(a)(i.1)?

Position:
No. Any capital gain on the disposition would not be excluded from the computation of the taxpayer's income by virtue of subparagraph 39.1(1)(a)(i.1).

Reasons:
There is no provision that would permit the CCRA to treat an institution or public body that is designated after the time of the disposition as though it had been designated at the time of the disposition for the purposes of subparagraph 39.1(1)(a)(i.1).

31 March 2003 External T.I. 2003-0000225 - SELF-FUNDED SHORT TERM DISABILITY

Unedited CRA Tags
6(1)(a)

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 ISSUE:

Taxation of premiums and benefits of a self-funded short-term disability plan.

Position TAKEN:

General comments provided.

Reasons:

Insufficient information.

XXXXXXXXXX T. Young, CA
2003-000022
March 31, 2003

31 March 2003 External T.I. 2003-00045950 - T4 REQUIREMENTS FOR RCA

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

Principal Issues:
What is the taxation effect to employee in a group savings plan arrangement?

Position:
The arrangement appears to be an RCA. As such, employees are taxed when amounts are paid to them from the RCA.

Reasons:
Employees are not entitled to amounts from the group savings plan until they cease employment with the employer. As such, the arrangement appears to fit the definition of RCA. Under 56(1)(x), an amount received in a year from an RCA is taxable to the recipient.

31 March 2003 External T.I. 2003-0184015 - LEGAL FEES-SPOUSAL SUPPORT

Unedited CRA Tags
18(1)(b)

Principal Issues: (1) Whether ITTN no.24 refers only to increase in spousal support. (2) Whether a breakdown of legal fees between spousal and child support necessary. (3) Whether announced change in position can be applied to the taxation year 2001 if objection period not expired.

Position: (1) No. (2) No. (3)Yes.

Reasons: (1) Applies to legal fees incurred to increase both spousal and child support. (2) The same tax treatment is given to fees that relate to both. (3) As mentioned in announcement, change in position applies to all future assessments and reassessments.

31 March 2003 External T.I. 2002-0171835 F - DON D'ACTIONS COTEES EN BOURSE

Unedited CRA Tags
38(a.1) 149.1(6.3)

Position Adoptée: Oui
RAISON POUR POSITION ADOPTÉE: Analyse législative

31 March 2003 External T.I. 2003-00002250 - SELF-FUNDED SHORT TERM DISABILITY

Unedited CRA Tags
6(1)(a)

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 ISSUE:

Taxation of premiums and benefits of a self-funded short-term disability plan.

Position TAKEN:

General comments provided.

Reasons:

Insufficient information.

XXXXXXXXXX T. Young, CA
2003-000022
March 31, 2003

31 March 2003 External T.I. 2003-01840150 - LEGAL FEES-SPOUSAL SUPPORT

Unedited CRA Tags
18(1)(b)

Principal Issues: (1) Whether ITTN no.24 refers only to increase in spousal support. (2) Whether a breakdown of legal fees between spousal and child support necessary. (3) Whether announced change in position can be applied to the taxation year 2001 if objection period not expired.

Position: (1) No. (2) No. (3)Yes.

Reasons: (1) Applies to legal fees incurred to increase both spousal and child support. (2) The same tax treatment is given to fees that relate to both. (3) As mentioned in announcement, change in position applies to all future assessments and reassessments.

31 March 2003 External T.I. 2003-0002495 - MEDICAL EXPENSE-HOT TUB

Unedited CRA Tags
118.2(m) Reg. 5700

Principal Issues: Whether the cost of a hot tub that is used with a portable sling and lift qualifies as a medical expense for the purpose of the medical expense tax credit?

Position: No

Reasons: A hot tub is not a prescribed medical device for the purposes of paragraph 118.2(2)(m) and Regulation 5700. The fact that it is used in conjunction with a prescribed device (i.e., "equipment designed to be used to assist an individual to enter or leave a bathtub") does not convert the cost of a hot tub into a medical expense.

28 March 2003 External T.I. 2002-0166655 - Sale of shares to co-owners

Unedited CRA Tags
84.1

Principal Issues: The application of section 84.1 to a group of shareholders who transfer their shares of Opco to a holding corporation, Xyco.

Position: Section 84.1 may apply.

Reasons: It appears that the shareholders are acting in concert and therefore do not factually deal at arm's length with Xyco.

28 March 2003 External T.I. 2003-0006665 - AMENDED SUBSECTION 110.6(19) ELECTION110.6(19)

Unedited CRA Tags
110.6(25) 110.6(26)

Principal Issues: Can an individual amend a subsection 110.6(19) election in 2003?

Position: No.

28 March 2003 External T.I. 2003-00066650 - AMENDED SUBSECTION 110.6(19) ELECTION110.6(19)

Unedited CRA Tags
110.6(25) 110.6(26)

Principal Issues: Can an individual amend a subsection 110.6(19) election in 2003?

Position: No.

28 March 2003 External T.I. 2002-0168575 - ACTIVE BUSINESS MONEY LENDING

Unedited CRA Tags
125(7)

Principal Issues: Whether the business of lending money can be considered as an active business because the corporation originated the loans from which the interest is received.

Position: No.

Reasons: The business is one described in the definition of "specified investment business" in ss. 125(7).

28 March 2003 External T.I. 2002-01666550 - Sale of shares to co-owners

Unedited CRA Tags
84.1

Principal Issues: The application of section 84.1 to a group of shareholders who transfer their shares of Opco to a holding corporation, Xyco.

Position: Section 84.1 may apply.

Reasons: It appears that the shareholders are acting in concert and therefore do not factually deal at arm's length with Xyco.

28 March 2003 External T.I. 2002-01685750 - ACTIVE BUSINESS MONEY LENDING

Unedited CRA Tags
125(7)

Principal Issues: Whether the business of lending money can be considered as an active business because the corporation originated the loans from which the interest is received.

Position: No.

Reasons: The business is one described in the definition of "specified investment business" in ss. 125(7).

27 March 2003 External T.I. 2002-0155705 - PENSION INCOME US SOURCE

Unedited CRA Tags
CAN-US ART XVII

Principal Issues: Is a U.S government pension subject to Canadian tax?

Position: Yes.

Reasons:
Paragraph 1 and subparagraph 2(a) of Article XVIII of Canada-U.S. Income Tax Convention.

27 March 2003 External T.I. 2002-01557050 - PENSION INCOME US SOURCE

Unedited CRA Tags
CAN-US ART XVII

Principal Issues: Is a U.S government pension subject to Canadian tax?

Position: Yes.

Reasons:
Paragraph 1 and subparagraph 2(a) of Article XVIII of Canada-U.S. Income Tax Convention.

27 March 2003 External T.I. 2002-0178035 F - HYPOTHEQUE PLACEMENT ADMISSIBLE

Unedited CRA Tags
REG 4900(1)(j) 146(2)(c.4) 146(12)

Principales Questions:
Est-ce qu'une hypothèque est un placement admissible pour un REER?

Position Adoptée: Commentaires généraux

27 March 2003 External T.I. 2002-0180045 F - DEDUCTION DES INTERETS

Unedited CRA Tags
245(2) 20(1)(c)

Principales Questions:
Les intérêts sont-ils déductibles par suite d'une série de transactions effectuées dans le but de rendre les intérêts déductibles?

27 March 2003 External T.I. 2002-01780350 F - HYPOTHEQUE PLACEMENT ADMISSIBLE

Unedited CRA Tags
REG 4900(1)(j) 146(2)(c.4) 146(12)

Principales Questions:
Est-ce qu'une hypothèque est un placement admissible pour un REER?

Position Adoptée: Commentaires généraux

27 March 2003 External T.I. 2002-01800450 F - DEDUCTION DES INTERETS

Unedited CRA Tags
245(2) 20(1)(c)

Principales Questions:
Les intérêts sont-ils déductibles par suite d'une série de transactions effectuées dans le but de rendre les intérêts déductibles?

25 March 2003 External T.I. 2003-00051650 - CONSERVATION EASEMENTS AND GIFTING

Unedited CRA Tags
248(30) 248(31)

Principal Issues:
A charitable organization is proposing to undertake various transactions (i.e., grant a conservation easement to another charity, sell the land with the easement to a purchaser, and immediately thereafter reacquire the conservation easement from the other charity) in order to protect ecologically sensitive land. Is the purchaser entitled to include the excess of the purchase price over the fair market value of the property in computing the purchaser's charitable tax credit or deduction pursuant to the draft gifting legislation?

Position: Yes, on the basis of the facts described.

Reasons:
Pursuant to the draft gifting legislation released on December 20, 2002, where the fair market value of the advantage to a taxpayer does not exceed 80% of the amount paid by the taxpayer to a qualified donee, the taxpayer may include the difference as an eligible amount of a gift in computing the taxpayer's charitable tax credit or deduction.

25 March 2003 External T.I. 2003-0005165 - CONSERVATION EASEMENTS AND GIFTING

Unedited CRA Tags
248(30) 248(31)

Principal Issues:
A charitable organization is proposing to undertake various transactions (i.e., grant a conservation easement to another charity, sell the land with the easement to a purchaser, and immediately thereafter reacquire the conservation easement from the other charity) in order to protect ecologically sensitive land. Is the purchaser entitled to include the excess of the purchase price over the fair market value of the property in computing the purchaser's charitable tax credit or deduction pursuant to the draft gifting legislation?

Position: Yes, on the basis of the facts described.

Reasons:
Pursuant to the draft gifting legislation released on December 20, 2002, where the fair market value of the advantage to a taxpayer does not exceed 80% of the amount paid by the taxpayer to a qualified donee, the taxpayer may include the difference as an eligible amount of a gift in computing the taxpayer's charitable tax credit or deduction.

20 March 2003 External T.I. 2003-0004675 - RETIRING ALLOWANCE CONTRACT WORK

Unedited CRA Tags
56(1)(a)(ii) 60(j.1)

Principal Issues:
Whether a severance payment qualifies as a retiring allowance when the former employee may be hired as a consultant.

Position: Question of fact

Reasons:
Unsure whether employment ceased or continues under the circumstances.

20 March 2003 External T.I. 2003-00046750 - RETIRING ALLOWANCE CONTRACT WORK

Unedited CRA Tags
56(1)(a)(ii) 60(j.1)

Principal Issues:
Whether a severance payment qualifies as a retiring allowance when the former employee may be hired as a consultant.

Position: Question of fact

Reasons:
Unsure whether employment ceased or continues under the circumstances.

18 March 2003 External T.I. 2003-00019750 - PRESCRIBED AMOUNT UN REGULATION 8517

Unedited CRA Tags
REG 8517 147.3(4)

Principal Issues:
Interpretation of the phrase "at the time of the transfer" in Regulation 8517.

Position:
The words "at the time of the transfer" mean just that. The calculation is completed when the transfer occurs not at some previous time, such as when the commuted value of a pension benefit is first calculated.

Reasons: Interpretation of the legislation.

18 March 2003 External T.I. 2003-0001975 - PRESCRIBED AMOUNT UN REGULATION 8517

Unedited CRA Tags
REG 8517 147.3(4)

Principal Issues:
Interpretation of the phrase "at the time of the transfer" in Regulation 8517.

Position:
The words "at the time of the transfer" mean just that. The calculation is completed when the transfer occurs not at some previous time, such as when the commuted value of a pension benefit is first calculated.

Reasons: Interpretation of the legislation.

17 March 2003 External T.I. 2002-0130685 F - Limite inférieure - JVM Participation

Unedited CRA Tags
107.4(4)

Principales Questions: Le paragraphe 107.4(4) s'applique aux fins de la Loi?

Position Adoptée: Oui.

17 March 2003 External T.I. 2002-01306850 F - Limite inférieure - JVM Participation

Unedited CRA Tags
107.4(4)

Principales Questions: Le paragraphe 107.4(4) s'applique aux fins de la Loi?

Position Adoptée: Oui.

12 March 2003 External T.I. 2002-0176955 F - Retenu dividende français

Unedited CRA Tags
n/a

Principales Questions: Le taux de retenu sur les dividendes reçus par des fonds mutuels et de fonds de pensions canadien et provenant de la France est-il de 15% ou de 25%?

Position Adoptée: L'un ou l'autre, selon le cas.

12 March 2003 External T.I. 2002-01769550 F - Retenu dividende français

Unedited CRA Tags
n/a

Principales Questions: Le taux de retenu sur les dividendes reçus par des fonds mutuels et de fonds de pensions canadien et provenant de la France est-il de 15% ou de 25%?

Position Adoptée: L'un ou l'autre, selon le cas.

11 March 2003 External T.I. 2002-0169815 - EMPLOYEE STOCK OPTIONS

Unedited CRA Tags
7(1.1)

Principal Issues:
Various questions regarding the applicability of subsection 7(1.1)

Position: Question of Fact

Reasons: General comments provided.

11 March 2003 External T.I. 2002-01698150 - EMPLOYEE STOCK OPTIONS

Unedited CRA Tags
7(1.1)

Principal Issues:
Various questions regarding the applicability of subsection 7(1.1)

Position: Question of Fact

Reasons: General comments provided.

10 March 2003 External T.I. 2002-0172085 - QUALIFIED INVESTMENT-RRSP-MORTGAGE

Unedited CRA Tags
4900(1)(j)

Principal Issues: Is a mortgage of real property owned by the annuitant's arm's length employer a qualified investment for an RRSP?

Position: Yes

Reasons: Interpretation of legislation.

10 March 2003 External T.I. 2002-01720850 - QUALIFIED INVESTMENT-RRSP-MORTGAGE

Unedited CRA Tags
4900(1)(j)

Principal Issues: Is a mortgage of real property owned by the annuitant's arm's length employer a qualified investment for an RRSP?

Position: Yes

Reasons: Interpretation of legislation.

Technical Interpretation - Internal

4 April 2003 Internal T.I. 2003-0004387 F - OUTIL ADMISSIBLE APPRENTI MECANICIEN

Unedited CRA Tags
8(1)r) 8(6)

Position Adoptée:
Pour être un outil admissible, ce dernier doit être, entre autres, neuf (n'avoir jamais été utilisé).

4 April 2003 Internal T.I. 2003-00043870 F - OUTIL ADMISSIBLE APPRENTI MECANICIEN

Unedited CRA Tags
8(1)r) 8(6)

Position Adoptée:
Pour être un outil admissible, ce dernier doit être, entre autres, neuf (n'avoir jamais été utilisé).

2 April 2003 Internal T.I. 2003-0010087 - INTEREST DEDUCTIBILITY DIVIDENDS

Unedited CRA Tags
20(1)(c)

Principal Issues: Deductibility of interest on money borrowed to pay dividends

2 April 2003 Internal T.I. 2003-00100870 - INTEREST DEDUCTIBILITY DIVIDENDS

Unedited CRA Tags
20(1)(c)

Principal Issues: Deductibility of interest on money borrowed to pay dividends

31 March 2003 Internal T.I. 2003-0004377 - GAIN ON GIFT OF CAPITAL PROPERTY

Unedited CRA Tags
118.1(6)

Principal Issues:
Cover memo to TSO for copy of interpretation provided to taxpayer on assessment issue. Asked to provide general comments on the operation of subsection 118.1(6) of the Act.

Position: General comments provided

Reasons: Legislation

31 March 2003 Internal T.I. 2003-00043770 - GAIN ON GIFT OF CAPITAL PROPERTY

Unedited CRA Tags
118.1(6)

Principal Issues:
Cover memo to TSO for copy of interpretation provided to taxpayer on assessment issue. Asked to provide general comments on the operation of subsection 118.1(6) of the Act.

Position: General comments provided

Reasons: Legislation

28 March 2003 Internal T.I. 2002-0178587 - QUALIFIED FARM PROPERTY

Unedited CRA Tags
110.6

Principal Issues: Can the farming use by an individual who was the father-in-law of the taxpayer prior to the taxpayer's divorce satisfy the use tests in ITA 110.6(1)(a) of the definition of Qualified Farm Property (QFP) in respect of land acquired by the taxpayer from the individual at a point in time when the taxpayer was still married and the individual was the taxpayer's father-in-law?

Position: Yes

Reasons: ITA 110.6(1)(a) of the definition of QFP indicates that the use test may be met by a taxpayer if the farming use is by a person who qualifies as the taxpayer's parent [including a father-in-law under ITA 252(2)(a)(iii)].

28 March 2003 Internal T.I. 2002-01785870 - QUALIFIED FARM PROPERTY

Unedited CRA Tags
110.6

Principal Issues: Can the farming use by an individual who was the father-in-law of the taxpayer prior to the taxpayer's divorce satisfy the use tests in ITA 110.6(1)(a) of the definition of Qualified Farm Property (QFP) in respect of land acquired by the taxpayer from the individual at a point in time when the taxpayer was still married and the individual was the taxpayer's father-in-law?

Position: Yes

Reasons: ITA 110.6(1)(a) of the definition of QFP indicates that the use test may be met by a taxpayer if the farming use is by a person who qualifies as the taxpayer's parent [including a father-in-law under ITA 252(2)(a)(iii)].

26 March 2003 Internal T.I. 2003-0004967 - SR&ED APPROVED UNIVERSITY

Unedited CRA Tags
37(1)(a)(ii)

Principal Issues:
Paragraph 33 of IT-151R5 states that "For the purposes of clause 37(1)(a)(ii)(B), all Canadian universities and affiliated colleges are considered to be approved"- does this statement cover institutions called "university colleges" which are found throughout Canada (in this particular case the institution in question is situated in XXXXXXXXXX )

Position:
Question of fact, in most cases no.

Reasons:
- exemption is administrative in nature, therefore it should be applied restrictively to those public Universities and affiliated Colleges that are legislatively recognized as universities and receive government funding. This may include some University-Colleges.

26 March 2003 Internal T.I. 2003-00049670 - SR&ED APPROVED UNIVERSITY

Unedited CRA Tags
37(1)(a)(ii)

Principal Issues:
Paragraph 33 of IT-151R5 states that "For the purposes of clause 37(1)(a)(ii)(B), all Canadian universities and affiliated colleges are considered to be approved"- does this statement cover institutions called "university colleges" which are found throughout Canada (in this particular case the institution in question is situated in XXXXXXXXXX )

Position:
Question of fact, in most cases no.

Reasons:
- exemption is administrative in nature, therefore it should be applied restrictively to those public Universities and affiliated Colleges that are legislatively recognized as universities and receive government funding. This may include some University-Colleges.

24 March 2003 Internal T.I. 2002-0177587 F - XXXXXXXXXX EN CONSIGNATION PERTE

Unedited CRA Tags
54 20(16) 9(2)

Position Adoptée:
1. Non.
2. Non.
3 & 4. Aucune. Certaines démarches entreprises par le contribuable pourraient démontrer que le contribuable avait un projet comportant un risque ou une affaire de caractère commercial.

24 March 2003 Internal T.I. 2002-01775870 F - XXXXXXXXXX EN CONSIGNATION PERTE

Unedited CRA Tags
54 20(16) 9(2)

Position Adoptée:
1. Non.
2. Non.
3 & 4. Aucune. Certaines démarches entreprises par le contribuable pourraient démontrer que le contribuable avait un projet comportant un risque ou une affaire de caractère commercial.

11 March 2003 Internal T.I. 2003-0000087 F - Projet agricole au sens de 122.3(1)b)(i)(B)

Unedited CRA Tags
122.3(1)

Principales Questions: Est-ce que des travaux d'abattage, tronçonnage et ébranchage constituent un projet agricole pour les fins de 122.3(1)b)(i)(B)?

Position Adoptée: Question de faits.

11 March 2003 Internal T.I. 2003-00000870 F - Projet agricole au sens de 122.3(1)b)(i)(B)

Unedited CRA Tags
122.3(1)

Principales Questions: Est-ce que des travaux d'abattage, tronçonnage et ébranchage constituent un projet agricole pour les fins de 122.3(1)b)(i)(B)?

Position Adoptée: Question de faits.

3 March 2003 Internal T.I. 2003-0183077 - DIVIDEND STRIPPING USING RCA

Unedited CRA Tags
248(1) 84(3) 245(3)

Principal Issues:
Various questions pertaining to an RCA. However, the application of GAAR to the arrangement precludes having to determine the RCA issues.

Position: Arrangement would be considered an avoidance transaction.

Reasons:
Similar arrangements have been determined by the GAAR Committee to be avoidance transactions.

3 March 2003 Internal T.I. 2003-01830770 - DIVIDEND STRIPPING USING RCA

Unedited CRA Tags
248(1) 84(3) 245(3)

Principal Issues:
Various questions pertaining to an RCA. However, the application of GAAR to the arrangement precludes having to determine the RCA issues.

Position: Arrangement would be considered an avoidance transaction.

Reasons:
Similar arrangements have been determined by the GAAR Committee to be avoidance transactions.

24 February 2003 Internal T.I. 2002-01655370 F - Le détachement d'employés et l'article XV

Unedited CRA Tags
l'article XV

Principales Questions :
Un employé, résident canadien, en détachement auprès d'un autre employeur est-il imposable uniquement au Canada lors de l'application de l'Article XV de la Loi de 1984 sur la Convention Canada-États-Unis en matière d'impôts.
Is a canadien resident employee on a secondment to another employer taxable only in Canada as per Article XV of the Canada-United States Tax Convention Act, 1984.

Position Adoptée : Non/ No.

24 February 2003 Internal T.I. 2002-0165537 F - Le détachement d'employés et l'article XV

Unedited CRA Tags
l'article XV

Principales Questions :
Un employé, résident canadien, en détachement auprès d'un autre employeur est-il imposable uniquement au Canada lors de l'application de l'Article XV de la Loi de 1984 sur la Convention Canada-États-Unis en matière d'impôts.
Is a canadien resident employee on a secondment to another employer taxable only in Canada as per Article XV of the Canada-United States Tax Convention Act, 1984.

Position Adoptée : Non/ No.

18 February 2003 Internal T.I. 2002-0177447 - Non-resident Health and Welfare Trust

Unedited CRA Tags
251(1) 18(1)(b) 75(2)

Principal Issues:
1- Is the employer and trust dealing at arm's length?
2- Is the arrangement an employee benefit plan?
3- What provisions can be relied upon to disallow the deduction of the contributions?
4- Can a penalty be levied?
5- Is it gaarable?
6- Attribution rules applicable?

Position:
1- No.
2- No.
3- It will depend on the plan under review.
4- Dealt verbally.
5- Not considered.
6- Yes.

Reasons:
1- Subsection 251(1) of the Income Tax Act (the "Act").
2- Paragraph (a) of the definition of employee benefit plan.
3- Paragraph 18(1)(b) and subparagraph 18(9)(a)(iii) of the Act.
4- Dealt verbally.
5- In light of the above.
6- Subsection 75(2) of the Act.

18 February 2003 Internal T.I. 2002-01774470 - Non-resident Health and Welfare Trust

Unedited CRA Tags
251(1) 18(1)(b) 75(2)

Principal Issues:
1- Is the employer and trust dealing at arm's length?
2- Is the arrangement an employee benefit plan?
3- What provisions can be relied upon to disallow the deduction of the contributions?
4- Can a penalty be levied?
5- Is it gaarable?
6- Attribution rules applicable?

Position:
1- No.
2- No.
3- It will depend on the plan under review.
4- Dealt verbally.
5- Not considered.
6- Yes.

Reasons:
1- Subsection 251(1) of the Income Tax Act (the "Act").
2- Paragraph (a) of the definition of employee benefit plan.
3- Paragraph 18(1)(b) and subparagraph 18(9)(a)(iii) of the Act.
4- Dealt verbally.
5- In light of the above.
6- Subsection 75(2) of the Act.

18 February 2003 Internal T.I. 2003-0182997 F - Calcul du revenu net étranger à 126(1)b)(i)

Unedited CRA Tags
126(1)b)(i) 126(7), 126(9) 110(1)d)

Principales Questions: Doit-on tenir compte de la déduction prévue à l'alinéa 110(1)d) lors du calcul du revenu net étranger prévu au sous-alinéa 126(1)b)(i).

Position Adoptée: Non.

18 February 2003 Internal T.I. 2003-01829970 F - Calcul du revenu net étranger à 126(1)b)(i)

Unedited CRA Tags
126(1)b)(i) 126(7), 126(9) 110(1)d)

Principales Questions: Doit-on tenir compte de la déduction prévue à l'alinéa 110(1)d) lors du calcul du revenu net étranger prévu au sous-alinéa 126(1)b)(i).

Position Adoptée: Non.

17 February 2003 Internal T.I. 2003-0182177 - Transfer of Mutual Funds into Joint Tenancy

Unedited CRA Tags
74.1(1), 69(1), 248(1)

Principal Issues: Tax consequences of transferring a non-RRSP mutual funds account into joint tenancy with spouse.

Position: Question of fact. If a change in beneficial ownership has occurred, it would result in a disposition of 50% interest at fair market value and the application of the attribution rules in subsection 74.1(1).

Reasons: Paragraphs 69(1)(b) and (c) and subsections 74.1(1) and 248(1) "disposition".

17 February 2003 Internal T.I. 2003-01821770 - Transfer of Mutual Funds into Joint Tenancy

Unedited CRA Tags
74.1(1), 69(1), 248(1)

Principal Issues: Tax consequences of transferring a non-RRSP mutual funds account into joint tenancy with spouse.

Position: Question of fact. If a change in beneficial ownership has occurred, it would result in a disposition of 50% interest at fair market value and the application of the attribution rules in subsection 74.1(1).

Reasons: Paragraphs 69(1)(b) and (c) and subsections 74.1(1) and 248(1) "disposition".