Income Tax Severed Letters - 2003-08-29

Miscellaneous

2003 Miscellaneous 2003-00029710 - Supp Ruling - Takeover and Bump

Unedited CRA Tags
88(1)(d)

Principal Issues: Minor changes to ruling

Position: Ruling E amended. Other rulings not affected

Reasons: XXXXXXXXXX

2003 Miscellaneous 2003-00204010 - Supplemental Ruling

Principal Issues: Change in facts.

Position: Ok. Change accepted.

Reasons: Minor. No impact.

2003 Miscellaneous 2003-0002971 - Supp Ruling - Takeover and Bump

Unedited CRA Tags
88(1)(d)

Principal Issues: Minor changes to ruling

Position: Ruling E amended. Other rulings not affected

Reasons: XXXXXXXXXX

2003 Miscellaneous 2003-0020401 - Supplemental Ruling

Principal Issues: Change in facts.

Position: Ok. Change accepted.

Reasons: Minor. No impact.

Ruling

2003 Ruling 2003-00070930 - Gravel-Pit Dependent on use or production

Unedited CRA Tags
12(1)(g)

Principal Issues: Gravel Pit - Dependent on use or production
1) Does paragraph 12(1)(g) apply?
2) What is the cost of the property being sold?

Position:
1) Paragraph 12(1)(g) does not apply.
2) We are unable to rule on the value of the property being sold.

Reasons:
1) The company received a lump-sum payment for a one-time contract over a specified period of time for the removal of all of the gravel.
2) The Directorate does not comment on valuation issues.

2003 Ruling 2003-00205730 - RRSP TRANSFER AFTER DIVORCE

Unedited CRA Tags
146(16)

Principal Issues:
Will a transfer from an individual's RRSP to that of his former spouse, pursuant to an amended Separation Agreement, satisfy subsection 146(16)?

Position: Yes

Reasons:
The transfer will be made in accordance with an amendment of a separation agreement varying the terms of the original agreement relating to the division of property between spouses in settlement of rights arising out of, or on the breakdown of their marriage.

XXXXXXXXXX 2003-002057

2003 Ruling 2003-01812830 - Loss Utilization

Unedited CRA Tags
20(1)(c) 112(1)

Principal Issues: In-house loss utilization

Position: Favourable Rulings provided.

Reasons: The law. Fairly standard issues.

2003 Ruling 2003-0007093 - Gravel-Pit Dependent on use or production

Unedited CRA Tags
12(1)(g)

Principal Issues: Gravel Pit - Dependent on use or production
1) Does paragraph 12(1)(g) apply?
2) What is the cost of the property being sold?

Position:
1) Paragraph 12(1)(g) does not apply.
2) We are unable to rule on the value of the property being sold.

Reasons:
1) The company received a lump-sum payment for a one-time contract over a specified period of time for the removal of all of the gravel.
2) The Directorate does not comment on valuation issues.

2003 Ruling 2003-0020573 - RRSP TRANSFER AFTER DIVORCE

Unedited CRA Tags
146(16)

Principal Issues:
Will a transfer from an individual's RRSP to that of his former spouse, pursuant to an amended Separation Agreement, satisfy subsection 146(16)?

Position: Yes

Reasons:
The transfer will be made in accordance with an amendment of a separation agreement varying the terms of the original agreement relating to the division of property between spouses in settlement of rights arising out of, or on the breakdown of their marriage.

XXXXXXXXXX 2003-002057

2003 Ruling 2003-0181283 - Loss Utilization

Unedited CRA Tags
20(1)(c) 112(1)

Principal Issues: In-house loss utilization

Position: Favourable Rulings provided.

Reasons: The law. Fairly standard issues.

Technical Interpretation - External

25 August 2003 External T.I. 2003-0182835 - deduction for ira transfer

Unedited CRA Tags
60(1)(j)(ii) 126(1)(b)(i) 4(2)

Principal Issues:
1) Can an individual claim a deduction under subparagraph 60(j)(ii) for an amount transferred to an RRSP from an IRA where the amount was previously transferred to the IRA from a 401(k) plan ?

2) For purposes of the foreign tax deduction, is the total amount received from the IRA used in the calculation in 126(1)(b)(i) without adjustment for the deduction taken pursuant to subparagraph 60(j)(ii)?

Position: 1) Yes 2) Yes

Reasons: 1) Consistent with prior ruling. The Act does not prevent it and not offensive from a policy perspective. 2) Consistent with the wording of the Act

25 August 2003 External T.I. 2002-01733250 - 56(1)

Unedited CRA Tags
60(j)

Principal Issues:
Request for comments on the taxability of specific payments sourced in the U.K.

Position:
Provided very limited general commentary.

Reasons:
It is a question of fact whether the payments are taxable pension payments.

25 August 2003 External T.I. 2002-0173325 - 56(1)

Unedited CRA Tags
60(j)

Principal Issues:
Request for comments on the taxability of specific payments sourced in the U.K.

Position:
Provided very limited general commentary.

Reasons:
It is a question of fact whether the payments are taxable pension payments.

25 August 2003 External T.I. 2003-00315850 - REPAYMENT OF CONTRIBUTED SURPLUS

Unedited CRA Tags
15(1) 84(1)(C.3)

Principal Issues: Whether a private corporation can return contributed surplus to a shareholder on a tax-free basis.

Position: Not in the situation described.

Reasons: In circumstances where contributed surplus is paid directly to the shareholder and is not converted into paid-up capital in accordance with paragraph 84(1)(c.3) so that the amount could be returned to the shareholder on a reduction of paid-up capital and where the amount paid to the shareholder would not constitute a dividend under corporate law, subsection 15(1) would require that the amount paid by the corporation to the shareholder be included in computing the shareholder's income.

25 August 2003 External T.I. 2003-0031585 - REPAYMENT OF CONTRIBUTED SURPLUS

Unedited CRA Tags
15(1) 84(1)(C.3)

Principal Issues: Whether a private corporation can return contributed surplus to a shareholder on a tax-free basis.

Position: Not in the situation described.

Reasons: In circumstances where contributed surplus is paid directly to the shareholder and is not converted into paid-up capital in accordance with paragraph 84(1)(c.3) so that the amount could be returned to the shareholder on a reduction of paid-up capital and where the amount paid to the shareholder would not constitute a dividend under corporate law, subsection 15(1) would require that the amount paid by the corporation to the shareholder be included in computing the shareholder's income.

25 August 2003 External T.I. 2003-01828350 - deduction for ira transfer

Unedited CRA Tags
60(1)(j)(ii) 126(1)(b)(i) 4(2)

Principal Issues:
1) Can an individual claim a deduction under subparagraph 60(j)(ii) for an amount transferred to an RRSP from an IRA where the amount was previously transferred to the IRA from a 401(k) plan ?

2) For purposes of the foreign tax deduction, is the total amount received from the IRA used in the calculation in 126(1)(b)(i) without adjustment for the deduction taken pursuant to subparagraph 60(j)(ii)?

Position: 1) Yes 2) Yes

Reasons: 1) Consistent with prior ruling. The Act does not prevent it and not offensive from a policy perspective. 2) Consistent with the wording of the Act

14 August 2003 External T.I. 2002-01674650 - Stock options - ACB After Amalgamation

Unedited CRA Tags
47 87(4)

Principal Issues: Will the CCRA administer subsection 87(4) to reflect the amendments to section 47 that allow for the separate pooling of the ACBs of shares acquired through stock options?

Position: No

Reasons: The legislation is clear. Finance would have to provide a legislative amendment.

14 August 2003 External T.I. 2002-0167465 - Stock options - ACB After Amalgamation

Unedited CRA Tags
47 87(4)

Principal Issues: Will the CCRA administer subsection 87(4) to reflect the amendments to section 47 that allow for the separate pooling of the ACBs of shares acquired through stock options?

Position: No

Reasons: The legislation is clear. Finance would have to provide a legislative amendment.

14 August 2003 External T.I. 2003-00203050 - Cumulative Foreign Resource Expense

Unedited CRA Tags
66.21 66(15) 128.1(1)

Principal Issues:
1) Is the deemed cost of a foreign resource property included as a foreign resource expense in the determination of a taxpayer's cumulative foreign resource expense at any particular time?
2) Is the cost of the foreign resource property determined pursuant to 128.1(1)?

Position:
1) The deemed cost under paragraph 128.1(1)(c) of the Act of a foreign resource property can not be included as a foreign resource expense in the determination of a taxpayer's cumulative foreign resource expense at any particular time.
2) The deemed cost of the foreign resource property is calculated pursuant to 128.1(1)(c).

Reasons: Specific wording in the calculation of CFRE variable "A".

14 August 2003 External T.I. 2003-0020305 - Cumulative Foreign Resource Expense

Unedited CRA Tags
66.21 66(15) 128.1(1)

Principal Issues:
1) Is the deemed cost of a foreign resource property included as a foreign resource expense in the determination of a taxpayer's cumulative foreign resource expense at any particular time?
2) Is the cost of the foreign resource property determined pursuant to 128.1(1)?

Position:
1) The deemed cost under paragraph 128.1(1)(c) of the Act of a foreign resource property can not be included as a foreign resource expense in the determination of a taxpayer's cumulative foreign resource expense at any particular time.
2) The deemed cost of the foreign resource property is calculated pursuant to 128.1(1)(c).

Reasons: Specific wording in the calculation of CFRE variable "A".

11 August 2003 External T.I. 2002-01764650 - QFP USED BY INLAWS & DEATH OF SPOUSE

Unedited CRA Tags
110.6 70(10)

Principal Issues: Can the farming use by an individual who was the father-in-law of the taxpayer prior to the taxpayer's spouse's death satisfy the test in ITA 110.6(1)(a)(vi)(A) of the definition of Qualified Farm Property (QFP) in respect of land acquired by the taxpayer from the individual after June 17, 1987 (and not pursuant to an agreement entered into before June 17, 1987) and after the taxpayer's spouse's death?

Position: No.
REASONS: The 2-year gross revenue test in ITA 110.6(1)(a)(vi)(A) must be satisfied by an eligible individual within the time period included in the ownership test (i.e., "while the property was so owned"). After the death of the taxpayer's spouse, the spouse's father ceased to be the taxpayer's father-in-law (parent) for purposes of the ownership test, which requires that the property be owned by an eligible individual "throughout" at least 24 months.

11 August 2003 External T.I. 2002-0176465 - QFP USED BY INLAWS & DEATH OF SPOUSE

Unedited CRA Tags
110.6 70(10)

Principal Issues: Can the farming use by an individual who was the father-in-law of the taxpayer prior to the taxpayer's spouse's death satisfy the test in ITA 110.6(1)(a)(vi)(A) of the definition of Qualified Farm Property (QFP) in respect of land acquired by the taxpayer from the individual after June 17, 1987 (and not pursuant to an agreement entered into before June 17, 1987) and after the taxpayer's spouse's death?

Position: No.
REASONS: The 2-year gross revenue test in ITA 110.6(1)(a)(vi)(A) must be satisfied by an eligible individual within the time period included in the ownership test (i.e., "while the property was so owned"). After the death of the taxpayer's spouse, the spouse's father ceased to be the taxpayer's father-in-law (parent) for purposes of the ownership test, which requires that the property be owned by an eligible individual "throughout" at least 24 months.

31 July 2003 External T.I. 2003-00173650 - PORTABLE BRIDGES - CCA CLASS

Unedited CRA Tags
SCH. II

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:

What is the CCA class for portable bridges rented by the taxpayer to others?

Position TAKEN:

Class 1.

Reasons FOR POSITION TAKEN:

Paragraph (a) of Class 1 of Schedule II. No other class

31 July 2003 External T.I. 2003-0017365 - PORTABLE BRIDGES - CCA CLASS

Unedited CRA Tags
SCH. II

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:

What is the CCA class for portable bridges rented by the taxpayer to others?

Position TAKEN:

Class 1.

Reasons FOR POSITION TAKEN:

Paragraph (a) of Class 1 of Schedule II. No other class

Technical Interpretation - Internal

12 August 2003 Internal T.I. 2003-0029717 - Stock Dividends

Unedited CRA Tags
245

Principal Issues: (1) Whether series of transactions resulting in creation of non-capital loss subject to GAAR and (2) whether losses which arose from sale of shares could be characterized as capital loss in the alternative even though taxpayer carried on business as a securities trader.

Position: (1) Yes and (2) Yes.

Reasons: (1) Transactions are very similar to transactions that were successfully challenged under former s. 55(1), which was replaced by GAAR. Therefore, GAAR should be applied to the series of transactions in question. (2) The sale of shares in question can be distinguished from the taxpayer's trading activities and are therefore capital in nature.

12 August 2003 Internal T.I. 2003-00297170 - Stock Dividends

Unedited CRA Tags
245

Principal Issues: (1) Whether series of transactions resulting in creation of non-capital loss subject to GAAR and (2) whether losses which arose from sale of shares could be characterized as capital loss in the alternative even though taxpayer carried on business as a securities trader.

Position: (1) Yes and (2) Yes.

Reasons: (1) Transactions are very similar to transactions that were successfully challenged under former s. 55(1), which was replaced by GAAR. Therefore, GAAR should be applied to the series of transactions in question. (2) The sale of shares in question can be distinguished from the taxpayer's trading activities and are therefore capital in nature.

11 August 2003 Internal T.I. 2003-0015787 - STOCK OPTION BENEFIT DEFERRALS

Unedited CRA Tags
7(1)(a) 7(1)(b) 7(1.1)

Principal Issues: Can a deferral of a stock option benefit be claimed where there is a holdback on the proceeds on the redemption of the Shares?

Position: Not in this case.

Reasons: The provisions of 7(1.1) and 7(8) do not provide a deferral in the circumstances.

11 August 2003 Internal T.I. 2003-00157870 - STOCK OPTION BENEFIT DEFERRALS

Unedited CRA Tags
7(1)(a) 7(1)(b) 7(1.1)

Principal Issues: Can a deferral of a stock option benefit be claimed where there is a holdback on the proceeds on the redemption of the Shares?

Position: Not in this case.

Reasons: The provisions of 7(1.1) and 7(8) do not provide a deferral in the circumstances.

30 July 2003 Internal T.I. 2003-0027717 - NURSING BURSARY PROGRAM

Unedited CRA Tags
5(1) 6(3) 56(1)(N)

Principal Issues: Follow-up inquiry to 2003-000491, the employer is proposing to add an additional amount to an amount received under a government sponsored and funded bursary program. The issue is whether this additional amount is employment income under subsection 5(1) or is also considered bursary income under paragraph 56(1)(n).

Position: Employment income under subsection 5(1).

Reasons: This additional amount is not received under the government sponsored and funded bursary program. It is an initiative funded and sponsored by the employer.

30 July 2003 Internal T.I. 2003-00277170 - NURSING BURSARY PROGRAM

Unedited CRA Tags
5(1) 6(3) 56(1)(N)

Principal Issues: Follow-up inquiry to 2003-000491, the employer is proposing to add an additional amount to an amount received under a government sponsored and funded bursary program. The issue is whether this additional amount is employment income under subsection 5(1) or is also considered bursary income under paragraph 56(1)(n).

Position: Employment income under subsection 5(1).

Reasons: This additional amount is not received under the government sponsored and funded bursary program. It is an initiative funded and sponsored by the employer.

28 July 2003 Internal T.I. 2003-00149170 - OETC-INSPECTION SERVICES

Unedited CRA Tags
122.3(1)(B)(I)(A)

Principal Issues: Determine if the specified employer carried on business outside Canada with respect to the exploration for or exploitation of petroleum, natural gas, minerals or other similar resources.
SECTION: ITA 122.3(1)(b)(i)(A)

Position: Yes. The specified employer carries on business outside Canada, subcontracting inspection services to a company exploring for and exploiting petroleum.

Reasons: The broad meaning of the words "exploitation" and "with respect to".

28 July 2003 Internal T.I. 2003-0014917 - OETC-INSPECTION SERVICES

Unedited CRA Tags
122.3(1)(B)(I)(A)

Principal Issues: Determine if the specified employer carried on business outside Canada with respect to the exploration for or exploitation of petroleum, natural gas, minerals or other similar resources.
SECTION: ITA 122.3(1)(b)(i)(A)

Position: Yes. The specified employer carries on business outside Canada, subcontracting inspection services to a company exploring for and exploiting petroleum.

Reasons: The broad meaning of the words "exploitation" and "with respect to".

15 January 2003 Internal T.I. 2002-01682170 - LCT LIFE INSURANCE RESERVES

Unedited CRA Tags
181.1(c)(ii) 138(3)(a)(i) 20(7)(c)

Principal Issues:
1. Whether for the purposes of 181.3(1)(c)(ii)(B)(II) and (III) the comparison of book reserves to the reserves claimed under 20(7)(c) and 138(3)(a)(i) is to be made on a line by line basis or a global basis.
2. Whether the capital of a resident life insurance corporation may be reduced as a result of the inclusion of a negative amount obtained as a result of the calculation prescribed in 181.3(1)(c)(ii)(B).
3. In situations where tax reserves exceed book reserves, should taxable capital be reduced as a result of the deduction of policy loans provided for in 181.3(1)(c)(ii)(B)(IV).

Position:
1. Global basis.
2. No.
3. In the situation where the tax reserves exceed book reserves to the extent that the total determined under subclause (III) is reduced because of the limitation internal to subclause (III), which limits the amount to the amount included by virtue of subclause (I), it is our view that the policy loans would not be deducted in computing the total determined under subclause (III).

Reasons:
1. Legislation.
2. Legislation.
3. Legislation

15 January 2003 Internal T.I. 2002-0168217 - LCT LIFE INSURANCE RESERVES

Unedited CRA Tags
181.1(c)(ii) 138(3)(a)(i) 20(7)(c)

Principal Issues:
1. Whether for the purposes of 181.3(1)(c)(ii)(B)(II) and (III) the comparison of book reserves to the reserves claimed under 20(7)(c) and 138(3)(a)(i) is to be made on a line by line basis or a global basis.
2. Whether the capital of a resident life insurance corporation may be reduced as a result of the inclusion of a negative amount obtained as a result of the calculation prescribed in 181.3(1)(c)(ii)(B).
3. In situations where tax reserves exceed book reserves, should taxable capital be reduced as a result of the deduction of policy loans provided for in 181.3(1)(c)(ii)(B)(IV).

Position:
1. Global basis.
2. No.
3. In the situation where the tax reserves exceed book reserves to the extent that the total determined under subclause (III) is reduced because of the limitation internal to subclause (III), which limits the amount to the amount included by virtue of subclause (I), it is our view that the policy loans would not be deducted in computing the total determined under subclause (III).

Reasons:
1. Legislation.
2. Legislation.
3. Legislation