Income Tax Severed Letters - 2003-04-25

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:

Company hires employee, who relocates from another city and has several months remaining on a leased apartment. The employer pays the employee the difference between the monthly rent and the amount that the employee receives from subletting the apartment. Is this a taxable benefit?

Principales Questions:

1. Est-ce que les crédits d'impôt à recevoir relatifs à la recherche scientifique et ceux relatifs aux activités de transformation d'une société exploitant une entreprise de transformation sont des éléments utilisés principalement dans l'entreprise exploitée activement par la société aux fins de la définition de " action admissible de petite entreprise " au paragraphe 110.6(1) de la Loi et de la définition de " société exploitant une petite entreprise " au paragraphe 248(1) de la Loi?

2. Est-ce que l'impôt à recevoir provenant du fait que les acomptes provisionnels d'impôt sont supérieurs à l'impôt dû par une société exploitant une entreprise est un élément utilisé principalement dans l'entreprise exploitée activement?

Position Adoptée:

Principal Issues: Whether the land owned by a taxpayer is considered to be "qualified farm property"?

Position: Question of fact, general comments provided.

Reasons: Question of fact, insufficient facts provided.

Principal Issues: Whether a resident of XXXXXXXXXX is taxable in Canada on a non-arm's length disposition of land that is a capital property to a resident of Canada for no proceeds of disposition?

Position: Yes

Reasons: The property is taxable Canadian property, the proceeds of disposition are deemed to be at fair market value, and Canada retains its right to tax pursuant to the Canada-XXXXXXXXXX Income Tax Convention.

Principal Issues:
1. Are stock option rights or stock appreciation rights considered property within the meaning assigned by subsection 248(1) of the Act?
2. Would they be property for a qualifying disposition in section 107.4?

Position:
1. Yes.
2. Question of fact.

Reasons:
1. Paragraph (a) of the definition includes a right of any kind.
2. No information so we don't know the context that they are asking from.

Principal Issues:
Where property is contributed to an RRSP in error and the property is subsequently extracted out of the RRSP, in claiming the deduction under subsection 146(8.2) will the extraction have to be made at the fair market value of the property on the contribution date or on the extraction date?

Position: FMV on the extraction date.

Reasons:
The provision refers to the payment from the RRSP so the fair market value on the extraction date will be used in applying subsection 146(8.2) of the Act.

Principal Issues: 1. Based on paragraph 6(e) of IT-506, are foreign taxes paid in respect of a capital gain deductible under 20(12)? 2. Whether a portion of foreign tax withheld which was not available for a foreign tax credit could be considered an outlay or expense made or incurred for purposes of making the disposition for purposes of subparagraph 40(1)(a)(i).

Position: 1. No deduction available. 2. No.

Reasons: 1. Wording of IT was based on wording of subsection 20(12) at the time the IT was issued. Wording of subsection was changed effective for 1992 and subsequent years and Finance indicated that the deduction would be available only in respect of foreign taxes paid in respect of income from business or property. 2. Outlays in respect of foreign taxes were as a result of the fact that the property had increased in value so it could not be said that they were made or incurred for purposes of making the disposition. This reflects the position taken in 2002-0128865 and is supported by comments of the TCC in Avis Immobilien G.M.B.H.