Income Tax Severed Letters - 2003-05-02

Miscellaneous

29 April 2003 Income Tax Severed Letter 2003-001406A70 - AED FOR GRANDCHILD

Unedited CRA Tags
118(1)(b) 118(4) 122.6

Principal Issues:
Whether grandmother residing with daughter and granddaughter can claim Amount for an Eligible Dependent under paragraph 118(1)(b) if daughter claims Canada Child Tax Benefit and GST Credit.

Ruling

2003 Ruling 2002-0143543 - INCOME FROM BUSINESS

Unedited CRA Tags
9 18

Principal Issues: Deductibility of a royalty paid to a non-resident for the right to distribute the non-resident's products in Canada

Position: Royalty is deductible

Reasons: The royalty will be incurred for the purpose of earning income from business and will not be a capital outlay

2003 Ruling 2002-0159913 - cca-computer software

Unedited CRA Tags
Class 8 Class 10

Principal Issues:
Is the computer software "systems software" or "applications software" and therefore included in Class 8 or Class 12, respectively.

Position:
The software is systems software and therefore included in Class 8.

Reasons:
The software would be included in paragraphs (c) and (d) of the definition of "systems software" in subsection 1104(2) of the Regulations.

2003 Ruling 2002-0162403 - LOSS UTILIZATION

Unedited CRA Tags
20(1)(c)

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 2002-0165313 F - ACTIVITE COMMERCIALE COMPLEMENTAIRE

Unedited CRA Tags
149.1(2)(a)

Principales Questions:
Le fait d'être un commanditaire d'une société en commandite compromet-il les conditions enregistrement d'une œuvre de bienfaisance?

Position Adoptée: Non

2003 Ruling 2002-0180273 - Sale of Assets

Unedited CRA Tags
84(2) 212.1

Principal Issues:
1. Whether subsection 84(2) applies to the proposed transactions?
2. Whether section 212.1 applies to the proposed transactions?
3. Whether GAAR applies?

Position:
No.
No.
No.

Reasons:
1. Holdco is not a special purpose corporation and has been an investment holding company since the 1970's. Holdco is making a cash payment for the Assets. Holdco proposes to hold the Assets in its business and any sales will be in the ordinary course of its business. Therefore it cannot be said that Holdco is an instrumentality designed to facilitate these proposed transactions.
2. It is represented that the parties deal at arm's length.
3. The main purpose of the proposed transactions is not to obtain a "tax benefit".

2003 Ruling 2002-0180523 F - MISE A PART DE L'ARGENT-INTERET

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

Principales Questions:
1. L'intérêt sur l'argent emprunté est-il déductible dans une situation de mise à part de l'argent?
2. Est-ce que la RGAÉ serait applicable à cette situation de mise à part de l'argent?

Ministerial Correspondence

11 April 2003 Ministerial Correspondence 2003-0009074 - INVESTMENTS HELD IN A RRSP

Unedited CRA Tags
207.1

Principal Issues:
Taxation of corporate securities held in an RRSP after corporation is bankrupt or reorganized.

Position:
Limited explanation of the tax law was provided based on information available on the web pertaining to the particular corporation.

Reasons:
XXXXXXXXXX

Technical Interpretation - External

5 May 2003 External T.I. 2002-0118705 - Paragraphs 88(1)(c) & (d) bump

Unedited CRA Tags
88(1)(d.3) 88(1)(d.2)

Principal Issues : Application of paragraphs 88(1)(d.2) and 88(1)(d.3)

Position: Question of fact. General comments only.

Reasons: We need more information

1 May 2003 External T.I. 2002-0172925 - Non-Profit Organization - Business - OETC

Unedited CRA Tags
122.3

Principal Issues: Whether the fact that two of the members of a partnership are non-profit organizations prevents an employee from claiming the benefit of section 122.3 of the Act.

Position: No

Reasons: Based on the Timmins case, it is our view that a non-profit organization can sometimes be said to carry on business with respect to certain of its activities, depending on the nature of those activities.

30 April 2003 External T.I. 2003-0011815 - MEDICAL EXPENSE TAX CREDIT

Unedited CRA Tags
118.2(2)(b)

Principal Issues: Does the cost of a personal support worker qualify as a medical expense for the purpose of the medical expense tax credit?

Position: Yes, if the patient is eligible for the disability tax credit and the expense is not otherwise claimed under any other provision of the Act. However, the total claim in any year for a personal support worker and all other attendant care expenses is limited to $10,000 ($20,000 in the year of death).

30 April 2003 External T.I. 2002-0172485 F - LIQUIDATION SOCIETE DE PERSONNES

Unedited CRA Tags
85(2) 85(3)
Summary Under
Tax Topics - Income Tax Act - Section 85 - Subsection 85(3)
taking back note for receivables transferred under s. 22 rather than s. 85(2) precludes s. 85(3) application to wind-up

Principales Questions:
1. Est-ce que le paragraphe 85(3) de la Loi peut s'appliquer à la société de personnes (SPC) dans la situation où, immédiatement avant la liquidation, la SPC détient un billet à demande qui ne provient pas de la disposition de biens visés au paragraphe 85(2) de la Loi ?

30 April 2003 External T.I. 2003-0006085 - TRAVEL EXPENSE

Unedited CRA Tags
8(1)(h)

Principal Issues: Whether travelling expenses of an employee between home and a job site should be allowed a deduction in a specific situation.

Position: No.

Reasons: The taxpayer is not travelling in the course of the office or employment as the job site is a place where he regularly reports for work.

29 April 2003 External T.I. 2003-0006465 - RETIRING PARTNER-INCOME INTEREST

Unedited CRA Tags
56(2) 56(4) 248(28)

Principal Issues: Whether subsection 96(1.1) permits the retired partner to direct some or all of the allocation to his or her spouse.

Position: Yes, but subsection 56(2) and possibly subsection 56(4) would apply so that the allocation would also be included in the retired partner's income during the retired partner's lifetime.

Reasons: Paragraph 96(1.1)(b) requires the amount allocated to be included in the income of the taxpayer to whom it is allocated. Payments made to the retired partner's spouse under an agreement entered into by the retired partner and the other members of the partnership would likely be described in either of subsection 56(2) or (4) and thus would also be included in the income of the retired partner.

29 April 2003 External T.I. 2003-0013375 - taxpayer confidentiality-bc pharmacare

Unedited CRA Tags
241(5)

Principal Issues: Follow-up to 2003-000762: Taxpayer is concerned over the disclosure of her tax information to the BC Ministry of Health in order for her to qualify for BC Pharmacare program; Taxpayer also requesting past income information.

Position: Referred to appropriate areas of CCRA for response. Information sought was of non-interpretive nature.

29 April 2003 External T.I. 2002-0177065 F - CONFISCATION DE LA SOLDE

Unedited CRA Tags
5(1) 8
Summary Under
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)
salary that is forfeited by RCMP officer for misconduct nonetheless is includible as salary which was constructively received
Summary Under
Tax Topics - General Concepts - Payment & Receipt
forfeited salary nonetheless includible as salary received

Principales Questions:
Est-ce qu'une confiscation de la solde prévue à l'alinéa 45.12(3)d) de la Loi sur la Gendarmerie royale du Canada réduit le montant du salaire inclus dans le calcul du revenu tiré d'un emploi?

Si non, est-ce que l'employé peut déduire le montant confisqué à titre d'amende ou de pénalité?

Position Adoptée:
Le montant confisqué ne réduit pas le montant de salaire inclus dans le revenu d'emploi.

25 April 2003 External T.I. 2002-0171075 F - AVANTAGE-POLICE D'ASSURANCE

Unedited CRA Tags
6(1)(a) 15(1)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)
s. 6(1)(a) benefit where employer, as policyholder, pays premiums on policy on life of employee, whose estate is the revocable beneficiary
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1)
s. 15(1) benefit where corporate policyholder pays premiums on policy on shareholder’s life where the revocable beneficiary is the shareholder’s estate

Principales Questions:
Est-ce qu'une société confère un avantage imposable à un employé (ou à un actionnaire) lorsqu'elle paie la prime d'une police individuelle d'assurance sur la vie de l'employé (ou de l'actionnaire) et que les bénéficiaires révocables sont les ayants droit de l'employé (ou de l'actionnaire)?

Position Adoptée:
Oui.

23 April 2003 External T.I. 2002-0179085 - INTEREST DEDUCTIBILITY

Unedited CRA Tags
20(1)(c)

Principal Issues:
Interest deductibility on borrowed money used for the purpose of earning income

Technical Interpretation - Internal

1 May 2003 Internal T.I. 2002-0178347 F - BENEFICES FABRICATION

Unedited CRA Tags
125.1(1)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5202 - Cost of Manufacturing and Processing Labour
reimbursements of SR&ED expenses do not reduce cost of manufacturing and processing labour
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5202 - Qualified Activities
no requirement that the SR&ED be connected to M&P
Summary Under
Tax Topics - Income Tax Act - Section 9 - Expense Reimbursement
reimbursements of SR&ED labour and other expenses did not reduce cost of labour

Principale Question:

Une société manufacturière canadienne effectue des activités de recherche scientifique et de développement expérimental pour le compte de sa société mère américaine. Cette dernière rembourse les coûts engagés. La société canadienne inclut dans ses revenus le montant du remboursement.

Aux fins du calcul du crédit au titre des bénéfices de fabrication et de transformation au paragraphe 125.1(1) de la Loi, le " coût en main-d'œuvre " pour la société canadienne doit-il être réduit des remboursements de salaires faits par la société mère américaine?

Position Adoptée:
Non, sauf si la société canadienne agit comme mandataire pour la société mère américaine.

30 April 2003 Internal T.I. 2003-0007907 - TRAVEL EXPENSES

Unedited CRA Tags
8(1)(h.1)

Principal Issues: Whether motor vehicle expenses of XXXXXXXXXX workers should be allowed a deduction in a specific situation.

Position: Yes.

Reasons: The taxpayer is ordinarily required to travel away from the employer's place of business or at different places and the other requirements of par. 8(1)(h.1) are met in this situation.
April 30, 2003

29 April 2003 Internal T.I. 2003-001406A - AED FOR GRANDCHILD

Unedited CRA Tags
118(1)(b) 118(4) 122.6

Principal Issues:
Whether grandmother residing with daughter and granddaughter can claim Amount for an Eligible Dependent under paragraph 118(1)(b) if daughter claims Canada Child Tax Benefit and GST Credit.

25 April 2003 Internal T.I. 2003-0181797 F - FRAIS JURIDIQUES-DECISION

Unedited CRA Tags
60o.1)
Summary Under
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(o.1)
legal expenses incurred to recover loss to taxpayer’s RRSP from negligence of investment advisor, were non-deductible

Principales Questions:
Est-ce que les frais juridiques encourus par un particulier pour recouvrer les pertes subies à l'intérieur de son REÉR dû à de mauvais placements effectués par son conseiller financier sont déductibles dans le calcul du revenu du particulier ?

Position Adoptée:
Non

17 April 2003 Internal T.I. 2003-0181507 F - PRET SANS INTERET

Unedited CRA Tags
20(1)C)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i)
accessing the exceptional circumstances test requires demonstrating “a sufficient connection between the interest-free loan and an indirect source of the person's income”

Principal question:

Peut-on définir les critères à considérer pour l'application du principe des circonstances exceptionnelles

Position Adoptée: Non.

RAISON POUR POSITION ADOPTÉE:
Application de la jurisprudence aux faits en cause.