Income Tax Severed Letters - 2003-10-10

Ruling

2003 Ruling 2003-00275130 - AMENDED DSU PLAN

Unedited CRA Tags
REG 6801(d)

Principal Issues:
Will the proposed amendments to an existing DSU plan result in the plan ceasing to qualify under paragraph 6801(d) of the Regulations?

Position: No

Reasons: The requirements of paragraph 6801(d) are still met.

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2003 Ruling 2003-00284030 - INDIAN BAND AS PUBLIC BODY

Unedited CRA Tags
149(1)(c)

Principal Issues: Does a particular First Nation qualify as a public body performing a function of government for purposes of paragraph 149(1)(c)?

Position: Yes

Reasons: . The First Nation has entered into and/or is negotiating agreements with the federal government with respect to various subjects including a land settlement claim, health care and fishing. The First Nation provides schooling for its Members up to grade 6. The First Nation provides and administers a fairly extensive list of public works, social services and infrastructure programs. The First Nation has passed by-laws under section 81 of the Indian Act.

2003 Ruling 2003-0027513 - AMENDED DSU PLAN

Unedited CRA Tags
REG 6801(d)

Principal Issues:
Will the proposed amendments to an existing DSU plan result in the plan ceasing to qualify under paragraph 6801(d) of the Regulations?

Position: No

Reasons: The requirements of paragraph 6801(d) are still met.

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XXXXXXXXXX , 2003

2003 Ruling 2003-0028403 - INDIAN BAND AS PUBLIC BODY

Unedited CRA Tags
149(1)(c)

Principal Issues: Does a particular First Nation qualify as a public body performing a function of government for purposes of paragraph 149(1)(c)?

Position: Yes

Reasons: . The First Nation has entered into and/or is negotiating agreements with the federal government with respect to various subjects including a land settlement claim, health care and fishing. The First Nation provides schooling for its Members up to grade 6. The First Nation provides and administers a fairly extensive list of public works, social services and infrastructure programs. The First Nation has passed by-laws under section 81 of the Indian Act.

Technical Interpretation - External

8 October 2003 External T.I. 2003-00405950 - MEDICAL EXPENSES SPECIAL ATHLETIC SHOE

Unedited CRA Tags
REG 5700 118.2(2)

Principal Issues:
Is the cost of cross training athletic shoes with special motion control support a medical expense for purposes of the Income Tax Act?

Position: No.

Reasons:
The cost of shoes will qualify as a medical expense only where the shoe or boot is made to order for an individual in accordance with a prescription to overcome a physical disability as required under paragraph 5700(e) of the Regulations for purposes of paragraph 118.2(2)(m). "Non-made-to-order" running shoes would not meet the requirement.

8 October 2003 External T.I. 2003-0040595 - MEDICAL EXPENSES SPECIAL ATHLETIC SHOE

Unedited CRA Tags
REG 5700 118.2(2)

Principal Issues:
Is the cost of cross training athletic shoes with special motion control support a medical expense for purposes of the Income Tax Act?

Position: No.

Reasons:
The cost of shoes will qualify as a medical expense only where the shoe or boot is made to order for an individual in accordance with a prescription to overcome a physical disability as required under paragraph 5700(e) of the Regulations for purposes of paragraph 118.2(2)(m). "Non-made-to-order" running shoes would not meet the requirement.

7 October 2003 External T.I. 2003-0034225 - northern residents deduction

Unedited CRA Tags
1107.7(1)

Principal Issues: Is a prospective re-characterization of an existing salary an acceptable method to calculate the amount of northern travel benefit reported on employee T4 slips for purposes of claiming the northern residents deduction?

Position: It depends.

Reasons: Acceptable where the facts support that part of an employee's hourly wage or a specified percentage of salary was originally intended to be compensation in respect of travel expenses (e.g. where the employment contract provides that a portion of the hourly wage/salary is compensation in respect of travel expenses).

7 October 2003 External T.I. 2003-00342250 - northern residents deduction

Unedited CRA Tags
1107.7(1)

Principal Issues: Is a prospective re-characterization of an existing salary an acceptable method to calculate the amount of northern travel benefit reported on employee T4 slips for purposes of claiming the northern residents deduction?

Position: It depends.

Reasons: Acceptable where the facts support that part of an employee's hourly wage or a specified percentage of salary was originally intended to be compensation in respect of travel expenses (e.g. where the employment contract provides that a portion of the hourly wage/salary is compensation in respect of travel expenses).

6 October 2003 External T.I. 2003-00380250 - PRE-JUDGEMENT INTEREST

Unedited CRA Tags
12(1)(c)

Principal Issues: Pre-judgment interest - is it taxable?

6 October 2003 External T.I. 2003-0038025 - PRE-JUDGEMENT INTEREST

Unedited CRA Tags
12(1)(c)

Principal Issues: Pre-judgment interest - is it taxable?

3 October 2003 External T.I. 2003-0026865 - STANDBY CHARGE

Unedited CRA Tags
6(1)(e) 6(2) 153(1)

Principal Issues:
What are the responsibilities with respect to the accuracy of the information provided by employees regarding the personal use of an employer-provided automobile?

Position TAKEN:
The employer should make a reasonable effort to determine that the information is accurate and complete.

Reasons:
The employer is responsible for reporting the correct amounts on the T4 slip. Further, the amount of the benefit impacts the employee's taxable income, CPP pensionable income and could affect provincial or territorial payroll levies. As a result, the employer could be subject to interest and penalties related to the failure to withhold the sufficient tax.

3 October 2003 External T.I. 2003-00207650 - CAREGIVER CREDIT-PARENT

Unedited CRA Tags
118(1)(c.1) 118(4)(a.1) 118(4)

Principal Issues:
Can an adult child claim the caregiver amount for a parent whom the parent's spouse has claimed the spouse or common-law partner amount?

Position TAKEN:
Yes.

Reasons:
Although the determination is a question of fact, there is nothing in the Act to deny the credit if the requirements of the provision are otherwise met.

3 October 2003 External T.I. 2003-0020765 - CAREGIVER CREDIT-PARENT

Unedited CRA Tags
118(1)(c.1) 118(4)(a.1) 118(4)

Principal Issues:
Can an adult child claim the caregiver amount for a parent whom the parent's spouse has claimed the spouse or common-law partner amount?

Position TAKEN:
Yes.

Reasons:
Although the determination is a question of fact, there is nothing in the Act to deny the credit if the requirements of the provision are otherwise met.

3 October 2003 External T.I. 2003-00268650 - STANDBY CHARGE

Unedited CRA Tags
6(1)(e) 6(2) 153(1)

Principal Issues:
What are the responsibilities with respect to the accuracy of the information provided by employees regarding the personal use of an employer-provided automobile?

Position TAKEN:
The employer should make a reasonable effort to determine that the information is accurate and complete.

Reasons:
The employer is responsible for reporting the correct amounts on the T4 slip. Further, the amount of the benefit impacts the employee's taxable income, CPP pensionable income and could affect provincial or territorial payroll levies. As a result, the employer could be subject to interest and penalties related to the failure to withhold the sufficient tax.

2 October 2003 External T.I. 2003-00126650 - private health services plan

Unedited CRA Tags
6(1)(a)(i) 15(1) 248(1)

Principal Issues: 1. Whether proposed arrangement established for a sole shareholder/employee would qualify as a private health services plan.
2. If so, whether benefit is derived by virtue of employment or shareholdings.

Position: 1. Question of fact but it is possible.
2. Question of fact but generally would be employment-related where actively engaged as employee and plan benefits are reasonable under the circumstances.

Reasons: 1. Paragraph 7 of Interpretation Bulletin IT-339R2
2. The factors noted suggest benefits probably received in capacity as employee rather than shareholder.

2 October 2003 External T.I. 2003-0012665 - private health services plan

Unedited CRA Tags
6(1)(a)(i) 15(1) 248(1)

Principal Issues: 1. Whether proposed arrangement established for a sole shareholder/employee would qualify as a private health services plan.
2. If so, whether benefit is derived by virtue of employment or shareholdings.

Position: 1. Question of fact but it is possible.
2. Question of fact but generally would be employment-related where actively engaged as employee and plan benefits are reasonable under the circumstances.

Reasons: 1. Paragraph 7 of Interpretation Bulletin IT-339R2
2. The factors noted suggest benefits probably received in capacity as employee rather than shareholder.

2 October 2003 External T.I. 2003-00249550 - Logging Tax Credit and Minimum Tax

Unedited CRA Tags
127(1) 127.531

Principal Issues: Does Form T691 calculate the correct amount of additional taxes paid for minimum tax carryover?

Position: Yes.

Reasons: Since section 127.531 restricts the tax credits that may be claimed in the computation of the AMT, certain tax credits, including the federal logging tax credit, are not used in the computation of the AMT. In addition, pursuant to subsection 120.2(3) of the Act, the amount of AMT available to be applied to other years is calculated without reference to the tax credits described in sections 126,127 and 127.2 through 127.4 of the Act.

2 October 2003 External T.I. 2003-0024955 - Logging Tax Credit and Minimum Tax

Unedited CRA Tags
127(1) 127.531

Principal Issues: Does Form T691 calculate the correct amount of additional taxes paid for minimum tax carryover?

Position: Yes.

Reasons: Since section 127.531 restricts the tax credits that may be claimed in the computation of the AMT, certain tax credits, including the federal logging tax credit, are not used in the computation of the AMT. In addition, pursuant to subsection 120.2(3) of the Act, the amount of AMT available to be applied to other years is calculated without reference to the tax credits described in sections 126,127 and 127.2 through 127.4 of the Act.

25 September 2003 External T.I. 2003-0029165 - employer provided gifts

Unedited CRA Tags
6(1)(a)

Principal Issues: Whether awards program falls within gifts and awards policy where employees can choose a non-cash gift from one of several major retailers instead of receiving the cash award.

Position: Awards program does not fall within policy, and FMV of non-cash item selected, less amount paid by employee, must be included on employee's T4 slip as a taxable employment benefit.

Reasons: The non-cash item is clearly part of the employee's remuneration package because it replaces his or her entitlement to cash. Furthermore, it is essentially equivalent to cash since the employee can select the item he or she wants, and have the dollar value of the award applied against its cost.

25 September 2003 External T.I. 2003-00224050 - CONTINGENT LIABILITY INCOME INCLUSION

Unedited CRA Tags
18(1)(c) 9(1)

Principal Issues:
1) Is a returnable membership fee that is only returnable when a fixed number of membership fees are sold included in income and is the event a contingency.

25 September 2003 External T.I. 2003-0022405 - CONTINGENT LIABILITY INCOME INCLUSION

Unedited CRA Tags
18(1)(c) 9(1)

Principal Issues:
1) Is a returnable membership fee that is only returnable when a fixed number of membership fees are sold included in income and is the event a contingency.

25 September 2003 External T.I. 2003-00291650 - employer provided gifts

Unedited CRA Tags
6(1)(a)

Principal Issues: Whether awards program falls within gifts and awards policy where employees can choose a non-cash gift from one of several major retailers instead of receiving the cash award.

Position: Awards program does not fall within policy, and FMV of non-cash item selected, less amount paid by employee, must be included on employee's T4 slip as a taxable employment benefit.

Reasons: The non-cash item is clearly part of the employee's remuneration package because it replaces his or her entitlement to cash. Furthermore, it is essentially equivalent to cash since the employee can select the item he or she wants, and have the dollar value of the award applied against its cost.

Technical Interpretation - Internal

8 October 2003 Internal T.I. 2003-00293970 - FACTUAL ARMS LENGTH DETERMINATION

Unedited CRA Tags
25(1)(c)

Principal Issues: Are there any income tax implications when unrelated persons are deemed not to be dealing with each other for EI purposes?

Position: There may be income tax implications. Question of fact

Reasons: Since the EI Act uses the income tax definition of arm's length, there may be implications when persons are considered not to be dealing at arm's length for EI purposes. Audit may want to review transactions between the persons for any tax implications.

8 October 2003 Internal T.I. 2003-0029397 - FACTUAL ARMS LENGTH DETERMINATION

Unedited CRA Tags
25(1)(c)

Principal Issues: Are there any income tax implications when unrelated persons are deemed not to be dealing with each other for EI purposes?

Position: There may be income tax implications. Question of fact

Reasons: Since the EI Act uses the income tax definition of arm's length, there may be implications when persons are considered not to be dealing at arm's length for EI purposes. Audit may want to review transactions between the persons for any tax implications.

25 September 2003 Internal T.I. 2003-00328370 F - Market Maker: Reserve Account for Losses

Unedited CRA Tags
153(1)(a)

Principal Issues: Whether a payment made in order to transfer a reserve account for contingent losses of a market maker employee to another similar account administered by another employer for the benefit of the particular employee is subject to withholding under subsection 153(1) of the Act.

Position: Yes.

Reasons: The payment is in respect of salary or wages and it is beneficially received or receivable by the employee under the constructive receipt doctrine.

25 September 2003 Internal T.I. 2003-0032837 F - Market Maker: Reserve Account for Losses

Unedited CRA Tags
153(1)(a)

Principal Issues: Whether a payment made in order to transfer a reserve account for contingent losses of a market maker employee to another similar account administered by another employer for the benefit of the particular employee is subject to withholding under subsection 153(1) of the Act.

Position: Yes.

Reasons: The payment is in respect of salary or wages and it is beneficially received or receivable by the employee under the constructive receipt doctrine.

11 September 2003 Internal T.I. 2003-00262170 F - Report de Pertes du de Cujus

Unedited CRA Tags
111(2) 111(1)(b)

Principales Questions : Un contribuable décédé a-t-il l'obligation de déduire ses pertes en capital nettes durant l'année du décès et l'année qui précède le décès.
Whether a deceased taxpayer has the obligation to deduct its net capital losses in the year of death and the year immediately preceding the year of death.

Position Adoptée : Non/No

11 September 2003 Internal T.I. 2003-0026217 F - Report de Pertes du de Cujus

Unedited CRA Tags
111(2) 111(1)(b)

Principales Questions : Un contribuable décédé a-t-il l'obligation de déduire ses pertes en capital nettes durant l'année du décès et l'année qui précède le décès.
Whether a deceased taxpayer has the obligation to deduct its net capital losses in the year of death and the year immediately preceding the year of death.

Position Adoptée : Non/No