Income Tax Severed Letters - 2003-10-17

Ruling

2003 Ruling 2003-0019263 - DEFERRED SHARE UNIT PLAN

Also released under document number 2003-00192630.
Unedited CRA Tags
REG 6801(d)

Principal Issues: Does the proposed plan satisfy 6801(d)?

Position: Yes

Reasons: 6801(d) provisions met

2003 Ruling 2003-0023853 F - ACTIVITE COMMERCIALE COMPLEMENTAIRE

Also released under document number 2003-00238530.
Unedited CRA Tags
149.1(2)a)

Position Adoptée : Non
RAISON POUR POSITION ADOPTÉE :
Selon les faits en l'espèce, la société en commandite exploitera une activité commerciale complémentaire de l'œuvre de bienfaisance. La détention d'actions par une œuvre de bienfaisance n'est pas en soi une activité commerciale. Les conditions prévues à l'alinéa 149.1(2)a) de la Loi ne sont pas rencontrées.

2003 Ruling 2003-0029053 - CEE Flow-Through Shares Donation

Also released under document number 2003-00290530.
Unedited CRA Tags
66(15) Reg. 6202 85(2), 85(3)

Principal Issues:
Does the Act allow CEE to be allocated and deducted by the Investors in the proposed series of transactions?

Position:
Yes.

Reasons:
Through the use of flow-through shares, the Act provides for the allocation and deduction of CEE by the Investors in the proposed series of transactions.

2003 Ruling 2003-0034073 - TAXABLE PREFERRED SHARES DIVIDEND POLICY

Also released under document number 2003-00340730.
Unedited CRA Tags
248(1)(T)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Taxable Preferred Share

Principal Issues:
Whether the policy of paying dividends in the future establishes a minimum for the Class B shares that have a preference over the Class A shares such that the Class B shares are taxable preferred shares

Position:
No,

Reasons:
Dividend policy is not part of the terms of the share

Technical Interpretation - External

15 October 2003 External T.I. 2003-0028875 - HEALTH CARE SPENDING

Also released under document number 2003-00288750.
Unedited CRA Tags
248(1)

Principal Issues: What is a reasonable period for the submission of claims to a health care spending account following the end of a particular plan year?

Position: Generally, a grace period that does not exceed 6 months would normally be considered acceptable. However, we would be willing to accept a longer time period if it is warranted by the circumstances.

Reasons: Question of fact

14 October 2003 External T.I. 2003-0042615 - MEDICAL EXPENSE

Also released under document number 2003-00426150.
Unedited CRA Tags
118.2(2)

Principal Issues: Do the costs relating to umbilical cord blood extraction and storage qualify as medical expenses?

Position: No.

Reasons: Umbilical cord blood extraction and storage is not made in respect of diagnostic, therapeutic or rehabilitative services relating to an existing medical condition.

14 October 2003 External T.I. 2003-0001375 - HEDGED INVESTMENT

Also released under document number 2003-00013750.
Unedited CRA Tags
39(4) 38

Principal Issues: How are hedged investments to be treated for purposes of the ITA?

Position: Unable to comment.

Reasons: Issue still before the courts.

9 October 2003 External T.I. 2003-0021535 - NON-CONFLICT RECREATION

Also released under document number 2003-00215350.
Unedited CRA Tags
149(5)

Principal Issues: Whether 149(5) applies

Position: Would appear to apply based on limited information available.

Reasons: Facts of the case

8 October 2003 External T.I. 2003-0038235 - Association Rules and Subsection 256(2)

Also released under document number 2003-00382350.
Unedited CRA Tags
256(2) 256(1)

Principal Issues: Can more than one subsection 256(2) election be made where there are more than three corporations in a corporate group?

Position: Yes.

Reasons: The law.

7 October 2003 External T.I. 2003-0041465 - Application of Reg. 105

Also released under document number 2003-00414650.
Unedited CRA Tags
Reg. 105

Principal Issues: Application of regulation 105 where non-resident seller has goods fire-proofed in Canada by a Canadian service provider prior to goods being delivered to final (Canadian) customer.

Position: Regulation 105 might apply in the circumstances. It will depend on the contract. General comments given as this is a specific, completed transaction.

Reasons: n/a

6 October 2003 External T.I. 2003-0040145 F - TRANSFERT D'UNE POLICE D'ASSURANCE-VIE

Also released under document number 2003-00401450.
Unedited CRA Tags
148(7) 148(2) 148(9)
Summary Under
Tax Topics - Income Tax Act - Section 148 - Subsection 148(7)
loss on transfer of universal life policy to wholly-owned subsidiary not recognized
Summary Under
Tax Topics - Income Tax Act - Section 148 - Subsection 148(9) - Adjusted Cost Basis - Element A
no taxable benefit when life insurance policy transferred to wholly-owned corporation at less than its FMV
Summary Under
Tax Topics - Income Tax Act - Section 246 - Subsection 246(1)
no taxable benefit when life insurance policy transferred to wholly-owned corporation at less than its FMV

Principales Questions :
1. Quelles sont les conséquences fiscales résultant de la disposition par un actionnaire d'une police d'assurance-vie universelle en faveur d'une société détenue en totalité par l'actionnaire et dont la valeur de rachat de la police est inférieure à son coût de base rajusté?
2. Quelles seront les conséquences fiscales pour la société lors de la réception du produit d'assurance-vie?

3 October 2003 External T.I. 2003-0004575 F - ASSURANCE-INVALIDITE

Also released under document number 2003-00045750.
Unedited CRA Tags
18(1)a)
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose
premiums paid by corporation for disability policy on shareholder-employee are non-deductible
Summary Under
Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a)
disability benefits received by corporation for disability policy on shareholder-employee are not income

Principales Questions: Lorsqu'une société est le preneur et le bénéficiaire d'une police d'assurance-invalidité pour un employé-actionnaire, est-ce que les primes payées par la société sont déductibles de son revenu et est-ce que les prestations qui lui sont versées en raison de l'invalidité d'un de ses employés doivent être incluses dans son revenu dans la situation où l'employeur continue de verser le salaire à l'employé ?

Position Adoptée: Non aux deux questions.
RAISON POUR POSITION ADOPTÉE: Les primes d'assurance-invalidité ne constituent pas des dépenses qui ont été engagées ou effectuées par la société en vue de tirer un revenu de l'entreprise.

3 October 2003 External T.I. 2003-0028385 F - EXONERATION DU REVENU IMPOSABLE

Also released under document number 2003-00283850.
Unedited CRA Tags
149(1)(d.3) 149(1)(d.5) 149(1.3)
Summary Under
Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(d.3)
non-share corporations do not have shares

Principales Questions:
Questions générales sur les alinéas 149(1)d.3) et d.5) et sur le paragraphe 149(1.3) de la Loi.

3 October 2003 External T.I. 2003-0030585 F - PENSIONS ETRANGERES

Also released under document number 2003-00305850.
Unedited CRA Tags
56(1)(a) 153(1)(d) REG 200(1)
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 18
degree of exemption for social security pension payments from Germany, Belgium or France

Principales Questions :
1) Les montants de pension reçus de différents organismes étrangers par un résident canadien sont-ils imposables au Canada?
2) Les montants de pension versés par ces organismes constituent-ils des pensions de sécurité sociale?
3) Les autorités étrangères ont-elles à fournir quelconques documents faisant état des montants versés au contribuable?

3 October 2003 External T.I. 2003-0032295 - FINANCIALLY DEPENDENT CHILD

Also released under document number 2003-00322950.
Unedited CRA Tags
146(1)

Position:
Question of facts. It is assumed that, unless the contrary is established, a child or grandchild was not financially dependent on the annuitant at the time of the annuitant's death if the income of that child for the taxation year preceding the year of death exceeded the basic personal credit in subsection 118(1) of the Act
REASON: Wording of the Act

2 October 2003 External T.I. 2003-0035765 - DEFERRED SALARY LEAVE PLAN

Also released under document number 2003-00357650.
Unedited CRA Tags
REG 6801(a)(v)

Position: The conditions in subparagraph 6801(a)(v) would not be met.
REASON :
An unpaid leave does not satisfy the condition in subparagraph 6801(a)(v) of the Regulations.

XXXXXXXXXX 2003-003576
Michelle Desrosiers,
Notaire, M.Fisc.
October 2, 2003

2 October 2003 External T.I. 2003-0030815 - FINANCIALLY DEPENDENT CHILD

Also released under document number 2003-00308150.
Unedited CRA Tags
146(1)

Position:
Question of facts. It is assumed that, unless the contrary is established, a child or grandchild was not financially dependent on the annuitant at the time of the annuitant's death if the income of that child for the taxation year preceding the year of death exceeded the basic personal credit in subsection 118(1) of the Act
REASON: Wording of the Act

2 October 2003 External T.I. 2003-0033415 F - FRAIS D'ACCES INTERNET

Also released under document number 2003-00334150.
Unedited CRA Tags
6(1)a)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)
reimbursement of high-speed internet access fees to employees who must work from home likely not a taxable benefit

Position Adoptée:
Question de fait. Probablement qu'il n'y a pas d'avantage imposable pour les employés dans la situation présentée.
RAISON POUR POSITION ADOPTÉE:
Afin de déterminer s'il y a un avantage imposable pour les employés, il faut prendre en considération la raison pour laquelle l'employeur rembourse ces frais et qui bénéficie le plus de cet arrangement.

2 October 2003 External T.I. 2003-0028365 - RETIRING ALLOWANCE INSTALMENT OPTION

Also released under document number 2003-00283650.
Unedited CRA Tags
248(1)

Position:
Yes, provided the payment of the retiring allowance in instalments is made pursuant to the terms of the arbitration process agreement or the terms of an order or judgment of a competent tribunal.
REASON:
The retiring allowance is not payable to the employee until the settlement agreement or order or judgment of the tribunal is made, so the position would be similar to our position in paragraph 8 of IT-337R3.

1 October 2003 External T.I. 2003-0012415 - Canada-Luxembourg Treaty Art - 13 & 28

Also released under document number 2003-00124150.
Unedited CRA Tags
n/a

Principal Issues:
Whether capital gains realized by a corporation incorporated in Luxembourg that is a holding company covered by the law of 31 July 1929 are subject to article 13 of the Canada - Luxembourg Tax Convention.

Position:
No.

Reasons:
Wording of the Convention.

25 September 2003 External T.I. 2002-0180905 F - Cessation de résidence-Conséquences fiscales

Also released under document number 2002-01809050.
Unedited CRA Tags
84,110.6(2.1) 111(1), 114, 116 118.91, 128.1, 212(2)
Summary Under
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(4) - Paragraph 128.1(4)(b)
overview of consequences of emigration to Switzerland

Principales Questions: Conséquences fiscales pour un particulier qui devient non-résident du Canada en cours d'année.

Position Adoptée: Commentaires généraux.

23 September 2003 External T.I. 2003-0008285 - Spousal Trust - Entitlement - Payable

Also released under document number 2003-00082850.
Unedited CRA Tags
70(6)(b) 73(1.01) 104(13)

Principal Issues:
Whether the term "entitled" in subsections 70(6), 73(1.01) and 104(24) of the Act relates to a legal right to enforce payment of an amount?

Position:
Yes.

Reasons:
Current positions.

23 September 2003 External T.I. 2003-0009935 - Resident Contributor

Also released under document number 2003-00099350.
Unedited CRA Tags
94(1)

Principal Issues: Whether a natural person can be a "resident contributor" after death?

Position: No

Reasons: The concept of residence implies for an entity to be in existence.

23 September 2003 External T.I. 2002-0172175 F - Arrangements Funérailles - Provision 20(1)m)

Also released under document number 2002-01721750.
Unedited CRA Tags
20(1)(m) 12(1)(a) 9
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(m)
portion of prepaid funeral amount which the funeral home can use in its operations is income under s. 9, not s. 12(1)(a), for which no s. 20(1)(m) reserve can be claimed
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(a)
prepaid funeral amounts which a funeral home was not required to hold in trust were s. 9, not s. 12(1)(a), income

Principales Questions: Est-ce que le montant qu'un vendeur d'arrangements de services funéraires n'est pas tenu de verser en fidéicommis ou de rembourser au client en vertu de la Loi sur les arrangements préalables de services funéraires et de sépulture, L.R.Q., chapitre A-23.001 est admissible à la provision prévue à l'alinéa 20(1)m) de la Loi de l'impôt sur le revenu?

Whether the amount not deposited in trust by a seller of eligible funeral arrangements and which the seller may retain according to the Act Respecting Prearranged Funeral Services and Sepultures, L.R.Q., chapter A-23.001 can be deducted under paragraph 20(1)(m) of the Income Tax Act?

Position Adoptée: Non/No.

17 September 2003 External T.I. 2003-0027555 F - REER JUGES

Also released under document number 2003-00275550.
Unedited CRA Tags
146 REG 8309
Summary Under
Tax Topics - Income Tax Act - Section 146 - Subsection 146(1) - RRSP Deduction Limit
computation of RRSP deduction limit for federal judges

Position Adoptée: Application de la Loi et du Règlement.

12 September 2003 External T.I. 2003-0001335 F - Gain en Capital par une fiducie

Also released under document number 2003-00013350.
Unedited CRA Tags
104(6) 104(13) 104(21)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(21)
s. 104(21) designation can be made even if non-taxable half of capital gain is retained by trust

Principales Questions: Application des paragraphes 104(6), (13) et (21) de la Loi de l'impôt sur le revenu en regard du gain en capital réalisé par une fiducie.

Position Adoptée: Commentaires généraux.

8 September 2003 External T.I. 2002-0163705 F - Choix Tardif

Also released under document number 2002-01637050.
Unedited CRA Tags
132.11(6) 220(3.21)
Summary Under
Tax Topics - Income Tax Act - Section 132.11 - Subsection 132.11(6)
late designation can be requested pursuant to s. 220(3.2) in light of s. 220(3.21)(b)
Summary Under
Tax Topics - Income Tax Act - Section 220 - Subsection 220(3.21) - Paragraph 220(3.21)(b)
s. 220(3.21)(b) brings s. 132.11(6) within the s. 220(3.2) regime

Principales Questions:
Peut-on effectuer un choix tardif concernant un revenu supplémentaire visé par le paragraphe 132.11(6) de la Loi?

Position Adoptée:
Oui.

Technical Interpretation - Internal

2 October 2003 Internal T.I. 2003-0031747 F - paiement pour service de volontaire

Also released under document number 2003-00317470.
Unedited CRA Tags
81(4)
Summary Under
Tax Topics - Income Tax Act - Section 81 - Subsection 81(4)
$1,000 cap is multiplied by the number of payers

Principales Questions:
Le montant à exclure du revenu d'un particulier en vertu du paragraphe 81(4) de la Loi se limite-t-il à 1 000 $ au total ou à 1 000 $ fois le nombre de municipalités ou de gouvernements payeurs?

Position Adoptée:
Il s'agit de 1 000 $ par municipalité ou gouvernement payeur pour une année donnée.

30 September 2003 Internal T.I. 2003-0022487 - Section 241

Also released under document number 2003-00224870.
Unedited CRA Tags
241

Principal Issues:
Where a taxpayer resides in the Province of New Brunswick and is mentally incompetent, and the taxpayer's father appointed a guardian for the taxpayer under his will, whether the guardian would qualify as a "legal representative" of the taxpayer and, consequently, would fall within the ambit of "person" for the purposes of subsection 241(5) of the Income tax Act.

Position:
Where the guardian of the taxpayer has the power to manage but has no power to sell, convey or encumber of the taxpayer's property under the New Brunswick Guardian of Children Act, the issue as to whether the guardian has the power to administer, wind up, control or otherwise deal in a representative or fiduciary capacity with the taxpayer's property involves an interpretation of the New Brunswick law, which is outside the scope of our expertise.

Reasons:
See above.

29 September 2003 Internal T.I. 2003-0027347 F - FRAIS MEDICAUX DEPLACEMENT

Also released under document number 2003-00273470.
Unedited CRA Tags
118.2(2)(g) 118.2(2)(h)
Summary Under
Tax Topics - Income Tax Act - Section 118.2 - Subsection 118.2(2) - Paragraph 118.2(2)(h)
travel and accommodation expenses of parents in order to be near their hospitalized child were not covered

Principales Questions:
Des frais de transport et de déplacement, encourus par des parents au cours de la période où leur enfant était hospitalisé, sont-ils des frais médicaux aux fins des alinéas 118.2(2)g) et 118.2(2)h) de la Loi?

Position Adoptée:
Non.

24 September 2003 Internal T.I. 2003-0184097 F - perte au titre de placement

Also released under document number 2003-01840970.
Unedited CRA Tags
39(1)(c) 40(2)(g)(ii) 50(1)(a)
Summary Under
Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(g) - Subparagraph 40(2)(g)(ii)
Byram accepted: NIB loan can be made with a view to dividends

Principales Questions:
1. Est-ce que la créance a été acquise en vue de tirer un revenu d'entreprise ou de bien?
2. Est-ce que l'actionnaire peut réclamer une perte au titre d'un placement d'entreprise?

Position Adoptée:
1. Oui.
2. Les renseignements sont insuffisants pour répondre.

8 September 2003 Internal T.I. 2003-0010407 F - Gains et pertes sur change étranger

Also released under document number 2003-00104070.
Unedited CRA Tags
39(1) 39(2)
Summary Under
Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(i)
Gaynor applies in computing gain on disposition of US securities
Summary Under
Tax Topics - Income Tax Act - Section 39 - Subsection 39(2)
s. 39(2) applies to interest on US mortgage

Principales Questions : Déterminer si l'analyse présentée dans un article paru dans la revue CGA Magazine concernant les gains réalisés ou les pertes encourues sur change étranger est conforme à la Loi de l'impôt sur le revenu.
Whether the analysis in an article published in the CGA Magazine on foreign exchange profits and losses is in accordance with the Income Tax Act.

Position Adoptée : L'analyse est en majeure partie erronée en droit/The analysis is, for the most part, wrong in law.