Income Tax Severed Letters - 2003-08-01

Miscellaneous

21 July 2003 Miscellaneous 2002-017676A50 - In Trust Accounts

Unedited CRA Tags
104(1) 248(1) "Trust"

Principal Issues: Legal nature of "in trust" accounts.

Position: Depends on the arrangement.

Reasons: Applicable law.

Ruling

2003 Ruling 2003-00014830 - Dividend under 55(3)(a) Exemption

Unedited CRA Tags
55(3)(a) 112(1)

Principal Issues: Whether an inter-corporate dividend offends 55(3)(a).

Position: No. However, explicit comments were added to the ruling.

Reasons: There is no disposition or increase in interest described in any of subparagraphs 55(3)(a)(i) to (v) as part of a series of transactions or events that includes payment of the dividend. However, nothing in this ruling should be construed as implying that the CCRA has confirmed that a subsequent disposition of property or increase interest described in subparagraphs 55(3)(a)(i) to (v) will not be part of the series of transactions or events that includes the payment of the dividend.

2003 Ruling 2003-00181030 F - DEDUCTIBILITE DES INTERETS

Unedited CRA Tags
20(1)(c) 112(2.1) 245(2)

Principales Questions:
1) Les intérêts sur un prêt effectué dans le cadre d'un mécanisme d'utilisation des pertes dans un groupe de sociétés affiliées sont-ils déductibles?
2) Le paragraphe 112(2.1) de la Loi est-il applicable aux dividendes en question?

Position Adoptée :
1) Oui.
2) Non.

2003 Ruling 2003-0001483 - Dividend under 55(3)(a) Exemption

Unedited CRA Tags
55(3)(a) 112(1)

Principal Issues: Whether an inter-corporate dividend offends 55(3)(a).

Position: No. However, explicit comments were added to the ruling.

Reasons: There is no disposition or increase in interest described in any of subparagraphs 55(3)(a)(i) to (v) as part of a series of transactions or events that includes payment of the dividend. However, nothing in this ruling should be construed as implying that the CCRA has confirmed that a subsequent disposition of property or increase interest described in subparagraphs 55(3)(a)(i) to (v) will not be part of the series of transactions or events that includes the payment of the dividend.

2003 Ruling 2003-0018103 F - DEDUCTIBILITE DES INTERETS

Unedited CRA Tags
20(1)(c) 112(2.1) 245(2)

Principales Questions:
1) Les intérêts sur un prêt effectué dans le cadre d'un mécanisme d'utilisation des pertes dans un groupe de sociétés affiliées sont-ils déductibles?
2) Le paragraphe 112(2.1) de la Loi est-il applicable aux dividendes en question?

Position Adoptée :
1) Oui.
2) Non.

Technical Interpretation - External

29 July 2003 External T.I. 2003-0012335 F - PLACEMENT A RENDEMENT PROGRESSIF

Unedited CRA Tags
REG 7000(1)(c) REG 7000(2)(c.1)

Principales Questions:
Est-ce que la position applicable à l'égard d'un placement à intérêt légèrement croissant s'applique toujours?

Position Adoptée: Non.

29 July 2003 External T.I. 2003-00091150 F - FRAIS DE DEMENAGEMENT

Unedited CRA Tags
62 248(1)

Principales Questions: Est-ce que l'article 62 s'applique dans une situation où le particulier déménage, le critère de 40km est respecté mais le nouvel emploi (nouvel employeur) est situé dans le même édifice que l'ancien emploi.

Position Adoptée:
Question de fait

29 July 2003 External T.I. 2003-0009115 F - FRAIS DE DEMENAGEMENT

Unedited CRA Tags
62 248(1)

Principales Questions: Est-ce que l'article 62 s'applique dans une situation où le particulier déménage, le critère de 40km est respecté mais le nouvel emploi (nouvel employeur) est situé dans le même édifice que l'ancien emploi.

Position Adoptée:
Question de fait

29 July 2003 External T.I. 2003-00123350 F - PLACEMENT A RENDEMENT PROGRESSIF

Unedited CRA Tags
REG 7000(1)(c) REG 7000(2)(c.1)

Principales Questions:
Est-ce que la position applicable à l'égard d'un placement à intérêt légèrement croissant s'applique toujours?

Position Adoptée: Non.

28 July 2003 External T.I. 2003-00263950 F - PLACEMENT ADMISSIBLE REEE

Unedited CRA Tags
146.1(i)

Principales Questions:
Est-ce que le versement d'une cotisation à un REEE sous la forme d'actions résulte en une " disposition " telle que définie au paragraphe 248(1) pour le souscripteur?

Position Adoptée:
Oui.

28 July 2003 External T.I. 2003-0026395 F - PLACEMENT ADMISSIBLE REEE

Unedited CRA Tags
146.1(i)

Principales Questions:
Est-ce que le versement d'une cotisation à un REEE sous la forme d'actions résulte en une " disposition " telle que définie au paragraphe 248(1) pour le souscripteur?

Position Adoptée:
Oui.

25 July 2003 External T.I. 2002-01565450 - 89(1) - Capital Dividend Account

Unedited CRA Tags
89(1)

Principal Issues:
In computing the capital dividend account of a corporation, whether paragraph (b) of the definition of "capital dividend account" in subsection 89(1) includes all amounts of subsection 83(2) capital dividends that the corporation received while it was a public corporation or while it was not a private corporation?

Position:
No.

Reasons:
Paragraph (b) of the definition of "capital dividend account" allows only those amounts of subsection 83(2) capital dividends that the corporation received after it last became a private corporation.

25 July 2003 External T.I. 2002-0156545 - 89(1) - Capital Dividend Account

Unedited CRA Tags
89(1)

Principal Issues:
In computing the capital dividend account of a corporation, whether paragraph (b) of the definition of "capital dividend account" in subsection 89(1) includes all amounts of subsection 83(2) capital dividends that the corporation received while it was a public corporation or while it was not a private corporation?

Position:
No.

Reasons:
Paragraph (b) of the definition of "capital dividend account" allows only those amounts of subsection 83(2) capital dividends that the corporation received after it last became a private corporation.

24 July 2003 External T.I. 2003-00084050 - SPLIT RECEIPTING GUIDELINES

Unedited CRA Tags
248(30) 248(31) 248(32)

Principal Issues:
We are asked to provide comments on the tax implications of purchasing a ticket to a fundraising dinner after December 20, 2002.

Position:
Provided general comments on the application of the draft gifting legislation in determining the eligible amount of a gift.

Reasons: Legislation and draft legislation.

24 July 2003 External T.I. 2003-0008405 - SPLIT RECEIPTING GUIDELINES

Unedited CRA Tags
248(30) 248(31) 248(32)

Principal Issues:
We are asked to provide comments on the tax implications of purchasing a ticket to a fundraising dinner after December 20, 2002.

Position:
Provided general comments on the application of the draft gifting legislation in determining the eligible amount of a gift.

Reasons: Legislation and draft legislation.

23 July 2003 External T.I. 2003-00104350 - Foreign Pension PLan - EBP

Unedited CRA Tags
248(1)- EBP 18(1)(0) 15(1)

Principal Issues: (i) Whether contributions made by a Canadian employer to a foreign pension plan which is an employee benefit plan for Canadian tax purposes for the benefit of its sole non-resident employee/shareholder are deductible? (ii) Whether the employer is considered to have conferred a benefit on its sole employee/shareholder by making contributions to the foreign pension plan? (iii) If the employee/shareholder re-establishes residency in Canada, would income earned in a trust administering the foreign pension plan having the employee/shareholder as the sole trustee be taxable in Canada?

Position: (i) Yes; (ii) No; and (iii) Yes.

Reasons: (i) By virtue of subsection 18(10) or 32.1(1); (ii) The contributions are made to the foreign pension plan for the benefit of an employee, not for the benefit of a shareholder; (iii) The trust will likely be resident in Canada if the sole trustee becomes a resident of Canada.

23 July 2003 External T.I. 2003-0010435 - Foreign Pension PLan - EBP

Unedited CRA Tags
248(1)- EBP 18(1)(0) 15(1)

Principal Issues: (i) Whether contributions made by a Canadian employer to a foreign pension plan which is an employee benefit plan for Canadian tax purposes for the benefit of its sole non-resident employee/shareholder are deductible? (ii) Whether the employer is considered to have conferred a benefit on its sole employee/shareholder by making contributions to the foreign pension plan? (iii) If the employee/shareholder re-establishes residency in Canada, would income earned in a trust administering the foreign pension plan having the employee/shareholder as the sole trustee be taxable in Canada?

Position: (i) Yes; (ii) No; and (iii) Yes.

Reasons: (i) By virtue of subsection 18(10) or 32.1(1); (ii) The contributions are made to the foreign pension plan for the benefit of an employee, not for the benefit of a shareholder; (iii) The trust will likely be resident in Canada if the sole trustee becomes a resident of Canada.

22 July 2003 External T.I. 2002-0175715 F - GAIN EN CAPITAL RESIDENCE PRINCIPALE

Unedited CRA Tags
40(2)(b) 54

Position Adoptée: Non, pas sur la totalité

22 July 2003 External T.I. 2003-00144950 - DEFERRED SALARY LEAVE PLAN

Unedited CRA Tags
REG 6801(a)

Principal Issues:
Under a DSLP, after an employee has been on leave for 1 year, can the employee only return to work for a couple of months and then retire?

Position: No

Reasons: It contravenes the provisions of 6801(a)(v) of the Regulations

22 July 2003 External T.I. 2003-0014495 - DEFERRED SALARY LEAVE PLAN

Unedited CRA Tags
REG 6801(a)

Principal Issues:
Under a DSLP, after an employee has been on leave for 1 year, can the employee only return to work for a couple of months and then retire?

Position: No

Reasons: It contravenes the provisions of 6801(a)(v) of the Regulations

22 July 2003 External T.I. 2002-01757150 F - GAIN EN CAPITAL RESIDENCE PRINCIPALE

Unedited CRA Tags
40(2)(b) 54

Position Adoptée: Non, pas sur la totalité

21 July 2003 External T.I. 2002-017676A - In Trust Accounts

Unedited CRA Tags
104(1) 248(1) "Trust"

Principal Issues: Legal nature of "in trust" accounts.

Position: Depends on the arrangement.

Reasons: Applicable law.

21 July 2003 External T.I. 2002-01804650 - CATEGORIES 8 ET 43

Unedited CRA Tags
20(1)A)

Principales Questions:
Est-ce que des améliorations apportées à une usine en vue de respecter certaines normes gouvernementales sont des biens qui peuvent être inclus dans la catégorie 43 de l'Annexe II du Règlement ?

Position Adoptée:
Question de fait

21 July 2003 External T.I. 2002-0180465 - CATEGORIES 8 ET 43

Unedited CRA Tags
20(1)A)

Principales Questions:
Est-ce que des améliorations apportées à une usine en vue de respecter certaines normes gouvernementales sont des biens qui peuvent être inclus dans la catégorie 43 de l'Annexe II du Règlement ?

Position Adoptée:
Question de fait

18 July 2003 External T.I. 2003-00255250 - DEF'N AUTOMOBILE

Unedited CRA Tags
248(1)

Principal Issues: As a result of the proposed amendment to paragraph (e) of the definition of automobile in subsection 248(1) of the Act announced in the February 18, 2003 Budget, whether a pick-up truck would be excluded therefrom when it is used to earn income from a farming business, and the situation is such that the farm is located at least 30 kilometres from the nearest urban area having a population of at least 40,000 persons, but the individual who uses the pick-up truck lives on the farm.

Position: No.

Reasons: Subparagraph (e)(iii) of the definition of automobile in subsection 248(1) of the Act requires that the location also be a special work site described in subparagraph 6(6)(a)(i) or a remote work location described in subparagraph 6(6)(a)(ii). Since the individual who uses the pick-up truck lives on the farm, it cannot be a special work site or remote work location.

18 July 2003 External T.I. 2003-0025525 - DEF'N AUTOMOBILE

Unedited CRA Tags
248(1)

Principal Issues: As a result of the proposed amendment to paragraph (e) of the definition of automobile in subsection 248(1) of the Act announced in the February 18, 2003 Budget, whether a pick-up truck would be excluded therefrom when it is used to earn income from a farming business, and the situation is such that the farm is located at least 30 kilometres from the nearest urban area having a population of at least 40,000 persons, but the individual who uses the pick-up truck lives on the farm.

Position: No.

Reasons: Subparagraph (e)(iii) of the definition of automobile in subsection 248(1) of the Act requires that the location also be a special work site described in subparagraph 6(6)(a)(i) or a remote work location described in subparagraph 6(6)(a)(ii). Since the individual who uses the pick-up truck lives on the farm, it cannot be a special work site or remote work location.

14 July 2003 External T.I. 2003-00280650 - MASTER TRUST AND PART XI TAX

Unedited CRA Tags
149(1)(o.4) 206(2.1) 259

Principal Issues:
Is a master trust that has elected pursuant to section 259 of the Act required to file a taxation return?

Position:
Only for the year for which it first elects to be a master trust. Thereafter, if it has made a valid 259 election that applies to an entire taxation year, it will not be subject to Part XI tax, thus it need not file a return.

Reasons:
The law in 206(2.1) is clear as is the administrative policy in the T3 Trust Guide and IC78-14R3.

14 July 2003 External T.I. 2003-0028065 - MASTER TRUST AND PART XI TAX

Unedited CRA Tags
149(1)(o.4) 206(2.1) 259

Principal Issues:
Is a master trust that has elected pursuant to section 259 of the Act required to file a taxation return?

Position:
Only for the year for which it first elects to be a master trust. Thereafter, if it has made a valid 259 election that applies to an entire taxation year, it will not be subject to Part XI tax, thus it need not file a return.

Reasons:
The law in 206(2.1) is clear as is the administrative policy in the T3 Trust Guide and IC78-14R3.

8 July 2003 External T.I. 2003-00212550 - DEFERRED SALARY LEAVE PLAN

Unedited CRA Tags
REG 6801(a)(iii)

Principal Issues:
Can an employee teach a course and be paid for teaching the course from her employer while she is on leave under a DSLP.

Position: No

Reasons: It contravenes the provisions of 6801(a)(iii) of the Regulations

8 July 2003 External T.I. 2003-0021255 - DEFERRED SALARY LEAVE PLAN

Unedited CRA Tags
REG 6801(a)(iii)

Principal Issues:
Can an employee teach a course and be paid for teaching the course from her employer while she is on leave under a DSLP.

Position: No

Reasons: It contravenes the provisions of 6801(a)(iii) of the Regulations

Technical Interpretation - Internal

30 July 2003 Internal T.I. 2003-00240370 - ACB OF LAND & BUILDING

Unedited CRA Tags
54 9(1) 18(1)(A)

Principal Issues: Whether an outlay or expenses incurred in respect of land and building is an addition to the ACB of the properties.

Position: Question of fact.

Reasons: Definition of ACB in section 54.

30 July 2003 Internal T.I. 2003-0024037 - ACB OF LAND & BUILDING

Unedited CRA Tags
54 9(1) 18(1)(A)

Principal Issues: Whether an outlay or expenses incurred in respect of land and building is an addition to the ACB of the properties.

Position: Question of fact.

Reasons: Definition of ACB in section 54.

24 July 2003 Internal T.I. 2003-0029727 - Net Capital Loss Carryback

Unedited CRA Tags
54 111(1)(b)

Principal Issues: (1) The timing of a disposition in the context of a share-for-share exchange where the shares of the acquiror corporation must be held by the exchanging shareholder for a minimum period of time due to applicable securities laws and (2) Whether a net capital loss arising in the 2001 taxation year may be deducted against capital gains arising in the 1996 taxation year on an administrative basis?

Position: (1) The disposition of the target's shares occurs when the exchanging shareholder becomes entitled to the shares of the acquiror. (2) Paragraph 111(1)(b) clearly provides that net capital losses may only be carried back to the three immediately preceding taxation years.

Reasons: The law.
SECTION: s. 54 "disposition"

24 July 2003 Internal T.I. 2003-00297270 - Net Capital Loss Carryback

Unedited CRA Tags
54 111(1)(b)

Principal Issues: (1) The timing of a disposition in the context of a share-for-share exchange where the shares of the acquiror corporation must be held by the exchanging shareholder for a minimum period of time due to applicable securities laws and (2) Whether a net capital loss arising in the 2001 taxation year may be deducted against capital gains arising in the 1996 taxation year on an administrative basis?

Position: (1) The disposition of the target's shares occurs when the exchanging shareholder becomes entitled to the shares of the acquiror. (2) Paragraph 111(1)(b) clearly provides that net capital losses may only be carried back to the three immediately preceding taxation years.

Reasons: The law.
SECTION: s. 54 "disposition"

23 July 2003 Internal T.I. 2003-0028517 - COMMISSION INCOME ASSIGNED TO A CORPORATION

Unedited CRA Tags
9(1)

Principal Issues: Follow-up inquiry to 2003-000908. Issue in this inquiry is whether the professional corporation or individual shareholder is carrying on the business of mutual fund sales.

Position: No conclusive evidence. However, the written agreement between the individual, company and dealer, may support the viewpoint that the company is carrying on the business.

Reasons: The facts as presented.

23 July 2003 Internal T.I. 2003-00285170 - COMMISSION INCOME ASSIGNED TO A CORPORATION

Unedited CRA Tags
9(1)

Principal Issues: Follow-up inquiry to 2003-000908. Issue in this inquiry is whether the professional corporation or individual shareholder is carrying on the business of mutual fund sales.

Position: No conclusive evidence. However, the written agreement between the individual, company and dealer, may support the viewpoint that the company is carrying on the business.

Reasons: The facts as presented.

21 July 2003 Internal T.I. 2003-01836570 - Section 217 Election & Workers Comp217

Unedited CRA Tags
56(1)(v) 110(1)(f)(ii)

Principal Issues: Whether worker's compensation is included in a "person's income" in subparagraph 217(3)(b)(ii) of the Act if the person is a resident of Portugal who elects, pursuant to section 217 of the Act, to file a return of income pursuant to Part I of the Act, in respect of CPP.

Position: No

Reasons: The CPP is not taxable in Canada, pursuant to the Canada-Portugal Income Tax Convention, Article 18, paragraph 2. Therefore there is no need to elect pursuant to section 217 to file a return of income pursuant to Part I in respect of the CPP. XXXXXXXXXX

21 July 2003 Internal T.I. 2003-0183657 - Section 217 Election & Workers Comp217

Unedited CRA Tags
56(1)(v) 110(1)(f)(ii)

Principal Issues: Whether worker's compensation is included in a "person's income" in subparagraph 217(3)(b)(ii) of the Act if the person is a resident of Portugal who elects, pursuant to section 217 of the Act, to file a return of income pursuant to Part I of the Act, in respect of CPP.

Position: No

Reasons: The CPP is not taxable in Canada, pursuant to the Canada-Portugal Income Tax Convention, Article 18, paragraph 2. Therefore there is no need to elect pursuant to section 217 to file a return of income pursuant to Part I in respect of the CPP. XXXXXXXXXX

10 July 2003 Internal T.I. 2003-00188970 F - INTERET-REVENU RAJUSTE TIRE ENTREPRISE

Unedited CRA Tags
125.1 REG 5202

Principales Questions:
1. Est-ce que le revenu d'intérêts sur les remboursements d'impôt fait partie du revenu rajusté tiré d'une entreprise, tel que défini à l'article 5202 du Règlement?

2. Est-ce que le revenu d'intérêts sur les avances ou prêts à des sociétés associées fait partie du revenu rajusté tiré d'une entreprise, tel que défini à l'article 5202 du Règlement?

Position Adoptée:
1. Oui.

10 July 2003 Internal T.I. 2003-0018897 F - INTERET-REVENU RAJUSTE TIRE ENTREPRISE

Unedited CRA Tags
125.1 REG 5202

Principales Questions:
1. Est-ce que le revenu d'intérêts sur les remboursements d'impôt fait partie du revenu rajusté tiré d'une entreprise, tel que défini à l'article 5202 du Règlement?

2. Est-ce que le revenu d'intérêts sur les avances ou prêts à des sociétés associées fait partie du revenu rajusté tiré d'une entreprise, tel que défini à l'article 5202 du Règlement?

Position Adoptée:
1. Oui.

8 July 2003 Internal T.I. 2003-00159970 - Classification of Internet Equipment

Unedited CRA Tags
Class 10(f) Regulation 1104(2) Class 8(i)

Principal Issues: classification of Internet equipment in the telecommunications industry

Position: generally excluded from class 10(f) as being electronic communications control equipment

Reasons: analysis of use of equipment

8 July 2003 Internal T.I. 2003-0015997 - Classification of Internet Equipment

Unedited CRA Tags
Class 10(f) Regulation 1104(2) Class 8(i)

Principal Issues: classification of Internet equipment in the telecommunications industry

Position: generally excluded from class 10(f) as being electronic communications control equipment

Reasons: analysis of use of equipment

8 July 2003 Internal T.I. 2003-00241570 - REPLACEMENT PROPERTY RULES BUS EXPANSION

Unedited CRA Tags
44(5) 44(6)

Principal Issues: Application of the replacement property rules to a situation in which a larger farm property is acquired to replace a smaller property.

Position: Property can still be considered a replacement property under subsection 44(5) of the Act.

Reasons: The fact that a property is purchased under a business expansion will not, in and by itself, mean that it cannot be considered a replacement property.

8 July 2003 Internal T.I. 2003-0024157 - REPLACEMENT PROPERTY RULES BUS EXPANSION

Unedited CRA Tags
44(5) 44(6)

Principal Issues: Application of the replacement property rules to a situation in which a larger farm property is acquired to replace a smaller property.

Position: Property can still be considered a replacement property under subsection 44(5) of the Act.

Reasons: The fact that a property is purchased under a business expansion will not, in and by itself, mean that it cannot be considered a replacement property.

25 June 2003 Internal T.I. 2003-00218170 - DEDUCTIBILITY OF LUMP-SUM PAID IN YEAR

Unedited CRA Tags
20(1)(bb)

Principal Issues:
Whether the trustee fees (the "Fee") paid by an Estate in a taxation year for services performed over a XXXXXXXXXX year period ending in the year are deductible under paragraph 20(1)(bb) of the Act?

Position:
Any portion of the Fee (other than a commission) that is attributable to the administration or management of shares or securities of the Estate would be deductible in the taxation year in which the Fee is paid under paragraph 20(1)(bb) of the Act.

Reasons:
There is no time limit in paragraph 20(1)(bb).

25 June 2003 Internal T.I. 2003-0021817 - DEDUCTIBILITY OF LUMP-SUM PAID IN YEAR

Unedited CRA Tags
20(1)(bb)

Principal Issues:
Whether the trustee fees (the "Fee") paid by an Estate in a taxation year for services performed over a XXXXXXXXXX year period ending in the year are deductible under paragraph 20(1)(bb) of the Act?

Position:
Any portion of the Fee (other than a commission) that is attributable to the administration or management of shares or securities of the Estate would be deductible in the taxation year in which the Fee is paid under paragraph 20(1)(bb) of the Act.

Reasons:
There is no time limit in paragraph 20(1)(bb).