Income Tax Severed Letters - 2003-04-18

Ruling

15 April 2003 Ruling 2002-01276330 - STOCK OPTION SHARE REDEMPTIONS

Unedited CRA Tags
248(28) 7(1) 84(3)

Principal Issues:
Will sections 7 and 84 apply on the redemption of shares under a particular stock option plan?

Position: No ruling provided.

Reasons:
The request for a ruling was terminated when the client was advised that the position taken in our file 2000-0016875 had been reconsidered because it was not supportable in law and that, as a consequence, 248(28) of the Act could not apply to prevent the application of both subsections 7(1.1) and 84(3) in the proposed transactions.

15 April 2003 Ruling 2002-0127633 - STOCK OPTION SHARE REDEMPTIONS

Unedited CRA Tags
248(28) 7(1) 84(3)

Principal Issues:
Will sections 7 and 84 apply on the redemption of shares under a particular stock option plan?

Position: No ruling provided.

Reasons:
The request for a ruling was terminated when the client was advised that the position taken in our file 2000-0016875 had been reconsidered because it was not supportable in law and that, as a consequence, 248(28) of the Act could not apply to prevent the application of both subsections 7(1.1) and 84(3) in the proposed transactions.

2003 Ruling 2003-0184023 - Common Share Purchase Rights

Unedited CRA Tags
15(1)(c)

Principal Issues: 15(1)(c) exemption from shareholder benefit

Position: Favorable Ruling Given

Reasons: In accordance with the exemption

2003 Ruling 2003-00004830 - LOSS CONSOLIDATION

Unedited CRA Tags
20(1)(c) 111(5)

Principal Issues: Loss-utilization within a corporate group

Position TAKEN: Acceptable

Reasons:
Meets the technical requirements of the Act, including 20(1)(c), and is not an abuse of the Act as per Finance's technical notes to section 245.

2003 Ruling 2003-01840230 - Common Share Purchase Rights

Unedited CRA Tags
15(1)(c)

Principal Issues: 15(1)(c) exemption from shareholder benefit

Position: Favorable Ruling Given

Reasons: In accordance with the exemption

2003 Ruling 2003-0000483 - LOSS CONSOLIDATION

Unedited CRA Tags
20(1)(c) 111(5)

Principal Issues: Loss-utilization within a corporate group

Position TAKEN: Acceptable

Reasons:
Meets the technical requirements of the Act, including 20(1)(c), and is not an abuse of the Act as per Finance's technical notes to section 245.

2002 Ruling 2002-01587530 - Payments to use Electronic Trading

Unedited CRA Tags
212(1)(d)(iii)

Principal Issues: Request for a ruling that payments for the use of an electronic trading system operated by a non-resident will not be subject to withholding under Part XIII of the Income Tax Act.

Position: Ruling granted.

Reasons: The services are being "performed in connection with the sale of property or the negotiation of a contract".

2002 Ruling 2002-0158753 - Payments to use Electronic Trading

Unedited CRA Tags
212(1)(d)(iii)

Principal Issues: Request for a ruling that payments for the use of an electronic trading system operated by a non-resident will not be subject to withholding under Part XIII of the Income Tax Act.

Position: Ruling granted.

Reasons: The services are being "performed in connection with the sale of property or the negotiation of a contract".

Technical Interpretation - External

16 April 2003 External T.I. 2003-0004625 - RESPITE CARE

Unedited CRA Tags
81(10(h) 56(1)(u)

Principal Issues:
Whether certain amounts received are taxable.

Position TAKEN:
General information provided.

Reasons:
Insufficient information.

16 April 2003 External T.I. 2003-00046250 - RESPITE CARE

Unedited CRA Tags
81(10(h) 56(1)(u)

Principal Issues:
Whether certain amounts received are taxable.

Position TAKEN:
General information provided.

Reasons:
Insufficient information.

15 April 2003 External T.I. 2003-0006295 - LABOUR-SPONSORED FUNDS

Unedited CRA Tags
127.4(6) 204.8(6)(c)

Principal Issues: Whether a labour-sponsored funds tax credit is available in respect of a share of a labour-sponsored venture capital corporation registered under the Act to Establish the Fonds de solidarité des travailleurs du Québec acquired by a person over 65 years of age.

Position: The labour-sponsored funds tax credit is available.
REASONS: Section 127.4 of the Act.

15 April 2003 External T.I. 2002-0167675 - Debt guaranteed by a Mutual Fund Trust

Unedited CRA Tags
108(2)(b) 132(6)

Principal Issues : Is a mutual fund trust tainted where it guarantees a loan to a wholly owned subsidiary?

Position: Generally, no.

Reasons: Object and spirit of the Act and previous rulings.

15 April 2003 External T.I. 2003-00062950 - LABOUR-SPONSORED FUNDS

Unedited CRA Tags
127.4(6) 204.8(6)(c)

Principal Issues: Whether a labour-sponsored funds tax credit is available in respect of a share of a labour-sponsored venture capital corporation registered under the Act to Establish the Fonds de solidarité des travailleurs du Québec acquired by a person over 65 years of age.

Position: The labour-sponsored funds tax credit is available.
REASONS: Section 127.4 of the Act.

15 April 2003 External T.I. 2002-01676750 - Debt guaranteed by a Mutual Fund Trust

Unedited CRA Tags
108(2)(b) 132(6)

Principal Issues : Is a mutual fund trust tainted where it guarantees a loan to a wholly owned subsidiary?

Position: Generally, no.

Reasons: Object and spirit of the Act and previous rulings.

15 April 2003 External T.I. 2003-0181555 - INTEREST DEDUCTIBILITY

Unedited CRA Tags
20(1)(c)

Principal Issues:
Contingent interest

15 April 2003 External T.I. 2003-01815550 - INTEREST DEDUCTIBILITY

Unedited CRA Tags
20(1)(c)

Principal Issues:
Contingent interest

11 April 2003 External T.I. 2002-0173065 F - REPAS FOURNIS COURS SEMINAIRES

Unedited CRA Tags
67.1(1) 37.1(2)(a)

Position Adoptée: Oui.

11 April 2003 External T.I. 2002-01730650 F - REPAS FOURNIS COURS SEMINAIRES

Unedited CRA Tags
67.1(1) 37.1(2)(a)

Position Adoptée: Oui.

10 April 2003 External T.I. 2002-0152065 F - DEFINITION D'AGRICULTURE

Unedited CRA Tags
110.6(2) 248(1) 34

Principales Questions: Est-ce qu'un vétérinaire peut être considéré comme exploitant une entreprise agricole s'il exerce sa profession auprès d'agriculteurs?

Position Adoptée: Non

10 April 2003 External T.I. 2002-01520650 F - DEFINITION D'AGRICULTURE

Unedited CRA Tags
110.6(2) 248(1) 34

Principales Questions: Est-ce qu'un vétérinaire peut être considéré comme exploitant une entreprise agricole s'il exerce sa profession auprès d'agriculteurs?

Position Adoptée: Non

10 April 2003 External T.I. 2002-0169775 - Foreign Merger

Unedited CRA Tags
248(1) "disposition" 87 Art. 13 Cda-Japan Convention

Principal Issues: Does Bco, a Japanese company, dispose of its assets, including its shares of Cco (a "taxable Canadian corporation" in the oil & gas business in Canada), if Bco merges with Aco (another Japanese company that is Bco's parent) and the corporate law in Japan is of a "continuation type", as described in The Queen v. Black and Decker Manu Co., [1975] 1 S.C.R. 411.

Position: No, generally.

Reasons: Generally, there is no disposition of assets by a predecessor corporation upon a merger if the applicable corporate law is of a "continuation type", unless there is a factual disposition of the assets, or a "disposition" of the assets pursuant to subsection 248(1) of the Act. However, there can be a disposition of shares in the predecessor corporations at the shareholder level.

10 April 2003 External T.I. 2002-01697750 - Foreign Merger

Unedited CRA Tags
248(1) "disposition" 87 Art. 13 Cda-Japan Convention

Principal Issues: Does Bco, a Japanese company, dispose of its assets, including its shares of Cco (a "taxable Canadian corporation" in the oil & gas business in Canada), if Bco merges with Aco (another Japanese company that is Bco's parent) and the corporate law in Japan is of a "continuation type", as described in The Queen v. Black and Decker Manu Co., [1975] 1 S.C.R. 411.

Position: No, generally.

Reasons: Generally, there is no disposition of assets by a predecessor corporation upon a merger if the applicable corporate law is of a "continuation type", unless there is a factual disposition of the assets, or a "disposition" of the assets pursuant to subsection 248(1) of the Act. However, there can be a disposition of shares in the predecessor corporations at the shareholder level.

9 April 2003 External T.I. 2003-0003245 - ELIGIBLE DEPENDANT CREDIT

Unedited CRA Tags
118(5)

Principal Issues: An individual ("Individual A") and his spouse ("Individual B") have two children who are of the ages of XXXXXXXXXX years and XXXXXXXXXX years. Since XXXXXXXXXX 2000, Individual A and Individual B have been separated from each other and, in XXXXXXXXXX of 2002, Individual A and Individual B entered into a separation agreement (the "Agreement"). Under the Agreement, Individual A and Individual B share the parenting of the two children (i.e., the children will reside 50% of the time at Individual A's residence and the other 50% of the time at the residence of Individual B), and, commencing in 2002, Individual A is required to pay monthly child support of $XXXXXXXXXX in respect of the two children. Is Individual A entitled to claim the amount for an eligible dependent pursuant to paragraph 118(1)(b) of the Income Tax Act (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.

9 April 2003 External T.I. 2003-01816550 - INTEREST DEDUCTIBILITY

Unedited CRA Tags
20(1)(c)

Principal Issues:
Is Interest deductible when borrowing to invest in a sister corporation or other corporation in the chain of affiliated group of corporations?

9 April 2003 External T.I. 2003-00032450 - ELIGIBLE DEPENDANT CREDIT

Unedited CRA Tags
118(5)

Principal Issues: An individual ("Individual A") and his spouse ("Individual B") have two children who are of the ages of XXXXXXXXXX years and XXXXXXXXXX years. Since XXXXXXXXXX 2000, Individual A and Individual B have been separated from each other and, in XXXXXXXXXX of 2002, Individual A and Individual B entered into a separation agreement (the "Agreement"). Under the Agreement, Individual A and Individual B share the parenting of the two children (i.e., the children will reside 50% of the time at Individual A's residence and the other 50% of the time at the residence of Individual B), and, commencing in 2002, Individual A is required to pay monthly child support of $XXXXXXXXXX in respect of the two children. Is Individual A entitled to claim the amount for an eligible dependent pursuant to paragraph 118(1)(b) of the Income Tax Act (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.

9 April 2003 External T.I. 2003-0009175 - STRUCTURED SETTLEMENT

Unedited CRA Tags
56(1)(d)

Principal Issues:
Can a survivor of an estate that has no dependants that makes a claim against a provincial fund established for survivors of a fatality able to receive the amounts as a structured settlement?

9 April 2003 External T.I. 2003-00091750 - STRUCTURED SETTLEMENT

Unedited CRA Tags
56(1)(d)

Principal Issues:
Can a survivor of an estate that has no dependants that makes a claim against a provincial fund established for survivors of a fatality able to receive the amounts as a structured settlement?

9 April 2003 External T.I. 2003-0011555 F - Application of 13(21.2) - Affil. Persons

Unedited CRA Tags
251.1 13(21.2) 13(21.1)

Principal Issues: Whether, in a particular situation where a corporation ("HOLDCO 1") would dispose of its rights in a building in favour of another corporation ("OPCO B") and on the assumption that no corporation would be controlled in fact by a person or group of persons, subsection 13(21.2) of the Act would apply.

Position: No. HOLDCO 1 and OPCO B would not be affiliated with each other at any given time. Consequently and subject, among other things, to the application of subsection 13(21.1), the disposition of the building would give rise to a terminal loss for HOLDCO 1 pursuant to subsection 20(16) of the Act.

Reasons: Wording of the Act.

9 April 2003 External T.I. 2003-00115550 F - Application of 13(21.2) - Affil. Persons

Unedited CRA Tags
251.1 13(21.2) 13(21.1)

Principal Issues: Whether, in a particular situation where a corporation ("HOLDCO 1") would dispose of its rights in a building in favour of another corporation ("OPCO B") and on the assumption that no corporation would be controlled in fact by a person or group of persons, subsection 13(21.2) of the Act would apply.

Position: No. HOLDCO 1 and OPCO B would not be affiliated with each other at any given time. Consequently and subject, among other things, to the application of subsection 13(21.1), the disposition of the building would give rise to a terminal loss for HOLDCO 1 pursuant to subsection 20(16) of the Act.

Reasons: Wording of the Act.

9 April 2003 External T.I. 2003-0181655 - INTEREST DEDUCTIBILITY

Unedited CRA Tags
20(1)(c)

Principal Issues:
Is Interest deductible when borrowing to invest in a sister corporation or other corporation in the chain of affiliated group of corporations?

8 April 2003 External T.I. 2003-0001995 - Value or the greater part of their value

Unedited CRA Tags
Art. 13(5)(a)

Principal Issues: Does the term "value or the greater part of their value" mean more than 50%?

Position: Yes.

Reasons: Ordinary meaning of the term.

8 April 2003 External T.I. 2003-00019950 - Value or the greater part of their value

Unedited CRA Tags
Art. 13(5)(a)

Principal Issues: Does the term "value or the greater part of their value" mean more than 50%?

Position: Yes.

Reasons: Ordinary meaning of the term.

17 March 2003 External T.I. 2001-0095675 - Unit Trust investing in a limited partnership

Unedited CRA Tags
253.1 108(2)(b) 96(1)
Ontario partnership debt owing to limited partner respected

Principal Issues:
1) Can a unit trust invest in a limited partnership?
2) What is the meaning of "investing business"?
3) For purposes of subparagraph 108(2)(b)(iii) of the Income Tax Act (the "Act"), is a limited partnership looked through?
4) For purposes of subparagraph 108(2)(b)(iv) of the Act, is a limited partnership looked through?
5) Can a unit trust be more than 10% invested in a single limited partnership?
6) Does a limited partnership have to abide by the 10% limitation in subparagraph 108(2)(b)(v) of the Act?
7) May a unit trust lend more than 10% of its property to a single limited partnership?
8) Do the answers change if a unit trust invests in a general partnership instead?

Position:
1) Yes.
2) N/A.
3) Yes, unless the interest in the limited partnership is a marketable security.
4) Yes, unless the interest in the limited partnership is a marketable security.
5) Depends on circumstances.
6) No.
7) Depends on circumstances.
8) #1 and #2 differ.

Reasons:
1) Section 253.1 of the Act.
2) Section 253.1.
3) Partnership case law. Marketable securities are treated as separate investment under subparagraph 108(2)(b)(iii).
4) Partnership case law. Marketable securities treated consistently with treatment given under subparagraph 108(2)(b)(iii).
5) Look through the limited partnership.
6) Subparagraph 108(2)(b)(v) applies to the unit trust not the limited partnership.
7) If the loan qualifies as a security, the term "debtor" is broad enough to encompass a limited partnership.
8) Section 253.1 does not apply.

17 March 2003 External T.I. 2001-00956750 - Unit Trust investing in a limited partnership

Unedited CRA Tags
253.1 108(2)(b) 96(1)

Principal Issues:
1) Can a unit trust invest in a limited partnership?
2) What is the meaning of "investing business"?
3) For purposes of subparagraph 108(2)(b)(iii) of the Income Tax Act (the "Act"), is a limited partnership looked through?
4) For purposes of subparagraph 108(2)(b)(iv) of the Act, is a limited partnership looked through?
5) Can a unit trust be more than 10% invested in a single limited partnership?
6) Does a limited partnership have to abide by the 10% limitation in subparagraph 108(2)(b)(v) of the Act?
7) May a unit trust lend more than 10% of its property to a single limited partnership?
8) Do the answers change if a unit trust invests in a general partnership instead?

Position:
1) Yes.
2) N/A.
3) Yes, unless the interest in the limited partnership is a marketable security.
4) Yes, unless the interest in the limited partnership is a marketable security.
5) Depends on circumstances.
6) No.
7) Depends on circumstances.
8) #1 and #2 differ.

Reasons:
1) Section 253.1 of the Act.
2) Section 253.1.
3) Partnership case law. Marketable securities are treated as separate investment under subparagraph 108(2)(b)(iii).
4) Partnership case law. Marketable securities treated consistently with treatment given under subparagraph 108(2)(b)(iii).
5) Look through the limited partnership.
6) Subparagraph 108(2)(b)(v) applies to the unit trust not the limited partnership.
7) If the loan qualifies as a security, the term "debtor" is broad enough to encompass a limited partnership.
8) Section 253.1 does not apply.

Technical Interpretation - Internal

17 April 2003 Internal T.I. 2003-00064070 F - PRET SANS INTERET DEDUCTIBILITY INTERETS

Unedited CRA Tags
20(1)(c) 20.1(l)

Position Adoptée: Commentaires généraux.
RAISON POUR POSITION ADOPTÉE:
Lors de la perte de source, application du paragraphe 20.1(1) de la Loi selon les circonstances.

17 April 2003 Internal T.I. 2003-0006407 F - PRET SANS INTERET DEDUCTIBILITY INTERETS

Unedited CRA Tags
20(1)(c) 20.1(l)

Position Adoptée: Commentaires généraux.
RAISON POUR POSITION ADOPTÉE:
Lors de la perte de source, application du paragraphe 20.1(1) de la Loi selon les circonstances.

16 April 2003 Internal T.I. 2003-00115870 - PENSION TAX CREDIT RRIF PAYMENTS

Unedited CRA Tags
118(3) 118(7)

Principal Issues:
Can a taxpayer who is under age 65 and receiving payments from an RRIF claim the pension credit amount, where the funds in the taxpayer's RRIF were transferred to the RRIF from the taxpayer's pension plan.

Position: No.

Reasons:
Payments received by a taxpayer who is under 65 years of age from a RRIF, unless as a result of the death of the taxpayer's spouse or common-law partner, are not defined to be "qualified pension income" and therefore do not qualify for the pension credit under subsection 118(3) of the Act.

16 April 2003 Internal T.I. 2003-0011587 - PENSION TAX CREDIT RRIF PAYMENTS

Unedited CRA Tags
118(3) 118(7)

Principal Issues:
Can a taxpayer who is under age 65 and receiving payments from an RRIF claim the pension credit amount, where the funds in the taxpayer's RRIF were transferred to the RRIF from the taxpayer's pension plan.

Position: No.

Reasons:
Payments received by a taxpayer who is under 65 years of age from a RRIF, unless as a result of the death of the taxpayer's spouse or common-law partner, are not defined to be "qualified pension income" and therefore do not qualify for the pension credit under subsection 118(3) of the Act.

10 April 2003 Internal T.I. 2002-01777670 F - INDEMNITE RECUE PAR UN ARTISTE

Unedited CRA Tags
39(1) 248(1)

Principales Questions:
Est-ce qu'une indemnité reçue en réparation de la violation du droit à l'intégrité d'une œuvre d'un artiste est imposable?

Position Adoptée:
Aucune réponse définitive sans un examen de tous les faits et documents pertinents mais il semblerait que le droit est un bien, que l'indemnité reçue suite à la violation du droit à l'intégrité de l'œuvre pourrait représenter le produit de disposition d'un bien et que cette disposition pourrait donner lieu à un gain en capital, tel que prévu à l'article 39 de la Loi, si le montant du gain n'est pas autrement inclus dans le revenu ou si le bien ne représente pas une immobilisation admissible

10 April 2003 Internal T.I. 2002-0177767 F - INDEMNITE RECUE PAR UN ARTISTE

Unedited CRA Tags
39(1) 248(1)

Principales Questions:
Est-ce qu'une indemnité reçue en réparation de la violation du droit à l'intégrité d'une œuvre d'un artiste est imposable?

Position Adoptée:
Aucune réponse définitive sans un examen de tous les faits et documents pertinents mais il semblerait que le droit est un bien, que l'indemnité reçue suite à la violation du droit à l'intégrité de l'œuvre pourrait représenter le produit de disposition d'un bien et que cette disposition pourrait donner lieu à un gain en capital, tel que prévu à l'article 39 de la Loi, si le montant du gain n'est pas autrement inclus dans le revenu ou si le bien ne représente pas une immobilisation admissible