Income Tax Severed Letters - 2003-09-26

Miscellaneous

3 June 2003 2002-016643A50 - General Comments on 70(7)

Unedited CRA Tags
70(6) 70(7)

Principal Issues: (1) Would subsection 70(6) of the Act apply to a property where the property is used to secure a loan and only the proceeds of the loan, not the mortgaged property, is transferred to a spouse trust. (2) Would 70(6) of the Act apply where mechanisms are put in place to either have the estate or the surviving spouse assume the "non-qualifying debts" in order to circumvent the application of subsection 70(7) of the Act. (3) Can the executors use property that entered the estate after the individual passed away to make the election under subsection 70(7) of the Act.

Position: (1) and (2) Question of facts - maybe no transfer of property or income being paid out to a third party. The submitted scenarios might result in the replacement of a testamentary debt by a non-testamentary debt, thereby making subsection 70(7) of the Act inapplicable. (3) Taxpayer has submitted this question to the Department of Finance.

Reasons: Wording of the Act.

2003 Income Tax Severed Letter 2003-0030681 - DEBT FORGIVENESS LOANS SHARES

Unedited CRA Tags
6(15.1) 245(3) 20.2

Principal Issues:
Exchange of B Co shares for A Co shares was unrelated to this ruling - Employee was a minor shareholder of B Co.

Position: No impact on rulings

Reasons:

Ruling

2003 Ruling 2003-0015903 - XXXXXXXXXX

Unedited CRA Tags
84(2) 84(4.1)

Principal Issues: Spin-off of the shares of a subsidiary of a public corporation ("Parent") by way of a reduction of paid-up capital of the parent's shares. Whether subsection 84(4.1) applies or subsection 84(2).

Position: Favourable Rulings issued.

Reasons: In compliance with the law.

2003 Ruling 2003-0022423 - XXXXXXXXXX INTEREST DEDUCTIBILITY

Unedited CRA Tags
20(1)(c) 104(7.1)

Principal Issues:
1. XXXXXXXXXX
2. XXXXXXXXXX

Position:
1. XXXXXXXXXX .
2. XXXXXXXXXX .

Reasons:
XXXXXXXXXX .

Technical Interpretation - External

19 September 2003 External T.I. 2003-0024565 - PHSP-TRUSTEED PLAN

Unedited CRA Tags
248(1)

Principal Issues:
What is meant by the term "trusteed plan" as it is used in Interpretation Bulletin IT-399R2?

Position: General comments provided.

Reasons:

XXXXXXXXXX Shaun Harkin, CMA
2003-002456
September 19, 2003

18 September 2003 External T.I. 2003-0017295 - WRITE-OFF OF MORTGAGES HELD IN RRSP

Unedited CRA Tags
146 204.1

Principal Issues:
1. What are the tax implications of taking a mortgage out of an RRSP?
2. Can the annuitant of the RRSP claim the mortgage administration fees personally?
3. Will ATR-24 apply in these circumstances?
4. Can the annuitant claim the legal fees incurred on behalf of the RRSP in a lawsuit regarding damages claimed by the RRSP?

Position:
1. Outlined possible tax consequences and noted we do not provide opinions or rule on the valuation or propriety of such transactions.
2. No, the expenses are expenses of the RRSP.
3. Question of fact
4. No

Reasons:
Explained options available to the RRSP and annuitant in these circumstances.

18 September 2003 External T.I. 2003-0038345 - Character of Amount Received by a MFT

Unedited CRA Tags
39 132

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.

XXXXXXXXXX 							2003-003834

September 18, 2003

Dear XXXXXXXXXX:

Re: Characterization of Amount Received by a Mutual Fund Trust

This is further to our telephone conversation of September 4, 2003, regarding the above-noted subject.

18 September 2003 External T.I. 2003-0027745 - CORPORATE PARTNER

Unedited CRA Tags
112(1) 96(1)(F)

Principal Issues: Are corporate partners able to claim the deduction under subsection 112(1) of the Act in respect of dividends allocated from a partnership?

Position: Yes

Reasons: Administrative practice.

18 September 2003 External T.I. 2003-0035135 - Stop - Loss Rules

Unedited CRA Tags
40(3.6) 112(3)

Principal Issues: Addition to the adjusted cost base of remaining shares owned by an individual where paragraph 40(3.6)(a) applies to deny the loss on a redemption of such shares and the deemed dividend under 84(3) was subject to a subsection 83(2) election.

Position: No addition to the adjusted cost base under paragraph 40(3.6)(b) in this situation because the loss, as otherwise determined is deemed by subsection 112(3) to be nil as well. This result is based on the assumption that no taxable dividends have been received by the individual on the shares.

Reasons: The law.

17 September 2003 External T.I. 2003-0028885 - commissions earned in professional corp.

Unedited CRA Tags
9(1)

Principal Issues: Whether mutual fund salesperson could report their commissions through their corporation

Position: Question of fact.

Reasons: It must be determined whether the individual or the corporation is carrying on business. If the individual is legally precluded from operating through a corporation, then he or she must report the commissions personally.

17 September 2003 External T.I. 2003-0037685 - non-arm's length acquisition

Unedited CRA Tags
13(7)(e) Reg. 1100(2.2) Reg. 1102(3)

Principal Issues:
1. Whether paragraph 13(7)(e) of the Act applies to a disposition of property from a US sister company to a Canadian sister company.
2. Whether the half-year rule exception in subsection 1100(2.2) of the Regulations applies to the Canadian company when they acquire the property from the US company.

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

Reasons:
1. Paragraph 13(7)(e) of the Act only applies where the property acquired by the Canadian company is "capital property of the transferor".
2. The property is generally not "depreciable property" of the transferor, by virtue of subsection 1102(3) of the Regulations, such that the requirements in paragraph 1100(2.2)(f) of the Regulations are not satisfied and the exception to the half-year rule does not apply.

17 September 2003 External T.I. 2003-0029555 - MEDICAL EXPENSE-DENTAL SERVICES

Unedited CRA Tags
118.2

Principal Issues: Does the cost of veneers qualify as a medical expense eligible for the medical expense tax credit?

Position: Yes - the cost of dental services performed by a dentist qualifies for the credit.

Reasons: Paragraph 118.2(2)(a) recognizes the cost of dental services performed by a dentist.

17 September 2003 External T.I. 2003-0033715 - EMPLOYER PAID TRAVEL OF SPOUSE

Unedited CRA Tags
6(1)(A) 6(16)

Principal Issues: Whether benefits received by a blind employee for spousal travel, is taxable when the spouse performs the functions of a travel guide that is normally provided to enable the employee to travel and assist him or her in performing the duties of employment.

Position: Yes, provided that the spouse is travelling solely to perform the functions of an attendant who is required to enable the employee to travel and provide assistance to the employee in the performance of other duties of employment during the trip.

Reasons: Subsection 6(16)

16 September 2003 External T.I. 2003-0038275 - Non-Arms Length Disposition of Prin Res

Unedited CRA Tags
54

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.

XXXXXXXXXX 2003-003827

September 16, 2003

Dear Sir:

Re: Sale or Transfer of your Principal Residence to your Son

16 September 2003 External T.I. 2003-0030245 - 14(1.01) Election and the CDA

Unedited CRA Tags
14(1.01) 89

Principal Issues: At what point in time is an amount added to the CDA, when a taxpayer elects under subsection 14(1.01) of the Act to treat the actual disposition of an ECP as a deemed disposition of capital property?

Position: No amount can be added to the CDA until the taxpayer files its election under subsection 14(1.01) of the Act with its return of income for the year.

Reasons: The property disposed of is still considered an eligible capital property until the taxpayer files its election under subsection 14(1.01) of the Act with its return of income for the year.

15 September 2003 External T.I. 2003-0036885 - FOREIGN UNIVERSITY TUITION CREDITS

Unedited CRA Tags
118.5(1) 118.6(1)

Principal Issues:
Can a taxpayer claim the tuition tax credit
1. for courses taken through a foreign university via the internet
2. for courses taken from a Canadian subsidiary of a foreign university that is registered and complies with provincial legislation via the internet ?
3. Can the taxpayer claim the education credit

Position:
1. No
2. Yes,
3. Yes

Reasons:
1. 118.5(1)(b) requires full-time attendance at a university outside Canada
2. 118.5(1)(a) applies - only needs to be enrolled
3. 118.6(2)

2003-003688
XXXXXXXXXX C. Tremblay, CMA
957-2139
September 15, 2003

15 September 2003 External T.I. 2003-0032225 - Motor Vehicle Allowances

Unedited CRA Tags
6(1)(b)

Principal Issues: The taxable status of motor vehicle allowances paid to employees in different situations.

Position: General comments provided.

Reasons: Question of fact.

15 September 2003 External T.I. 2003-0028805 - SALES TAX ON EMPLOYMENT BENEFITS

Unedited CRA Tags
6(1)(a) 6(4) 6(1)(f)

Principal Issues: (a) Is sales tax included in the value of a taxable benefit received by an employee with respect to an employer-paid group term life insurance policy? (b) Is the taxable status of an employee-pay-all wage loss replacement plan affected when the employer pays the sales tax on the premium?

Position: (a) Yes. (b) No.

Reasons: (a) Part XXVII of the Regulations (b) IT-428

3 June 2003 External T.I. 2002-016643A - General Comments on 70(7)

Unedited CRA Tags
70(6) 70(7)

Principal Issues: (1) Would subsection 70(6) of the Act apply to a property where the property is used to secure a loan and only the proceeds of the loan, not the mortgaged property, is transferred to a spouse trust. (2) Would 70(6) of the Act apply where mechanisms are put in place to either have the estate or the surviving spouse assume the "non-qualifying debts" in order to circumvent the application of subsection 70(7) of the Act. (3) Can the executors use property that entered the estate after the individual passed away to make the election under subsection 70(7) of the Act.

Position: (1) and (2) Question of facts - maybe no transfer of property or income being paid out to a third party. The submitted scenarios might result in the replacement of a testamentary debt by a non-testamentary debt, thereby making subsection 70(7) of the Act inapplicable. (3) Taxpayer has submitted this question to the Department of Finance.

Reasons: Wording of the Act.

Technical Interpretation - Internal

16 September 2003 Internal T.I. 2003-0034237 - Dist. of TCG from NRT to Can res Beneficiary

Unedited CRA Tags
104(13)

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.

								September 16, 2003
Mr. John Crowley						Annemarie Humenuk
	Manager							957-8585
	Income Tax Appeals
	Attention:  Ken Berini
									2003-003423

XXXXXXXXXX
XXXXXXXXXX

28 July 2003 Internal T.I. 2003-0013677 - Capital Distribution by a Non-resident Trust

Unedited CRA Tags
104(13)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(13)
trustee exercise of discretion to distribute trust capital rather than interest income to resident beneficiary was to be respected, and such distribution was not of a taxable capital gain

Principal Issues: Can the distributions from a trust to a beneficiary who is both an income and capital beneficiary be considered to be a distribution of income to the extent of the trust's income for the year?

Position: The trustee of a discretionary trust can normally choose to make a payment from the income or capital of the trust to the extent of the trust's income and capital at the time of the distribution.

Reasons: In the case under review, there appears to be sufficient capital available to be distributed to the beneficiary in accordance with the terms of the trust deed and the minutes of the trustee's decisions.