Income Tax Severed Letters - 2003-12-05

Ruling

2003 Ruling 2001-0114463 - OCCASIONALLY EMPLOYED

Unedited CRA Tags
212(1)(h)

Principal Issues:
Will non-resident members of a registered pension plan providing services, in Canada, to their foreign employer, be considered "only occasionally employed in Canada" for purposes of subparagraphs 212(1)(h)(v) and (vi) of the Act.

Position: Question of fact.

Reasons:
Applying the decision of the courts in the Louis V. Nanne v. The Queen 2000 DTC 1653 (TCC) case, an examination of the number of days the non-resident was employed in Canada, in relation to the total number of days employed with the employer in the year must be made to determine whether a person is "only occasionally employed in Canada", for purposes of subparagraphs 212(1)(h)(v) and (vi) of the Act.

2003 Ruling 2002-0162673 - Butterfly

Unedited CRA Tags
55(3)(b)

Principal Issues: Routine butterfly

Position: Acceptable

Reasons: Meets the requirements of the law.

2003 Ruling 2003-0024583 - XXXXXXXXXX

Unedited CRA Tags
Art. 23 French Treaty Reg. 890(ii)(a)

Principal Issues: (i) Whether the foreign affiliate of the taxpayer is a resident of France for the purposes of Article 4 of the Canada-France Income Tax Convention; (ii) Whether XXXXXXXXXX ; and (iii) Whether paragraph 5906(1)(a) and subparagraph (d)(i) of the definition of "exempt earnings" in subsection 5907 (1) of the Income Tax Regulations apply to the active business income earned XXXXXXXXXX by a branch of the foreign affiliate situated therein.

Position: (i) Yes; (ii) Yes; and (iii) yes.

Reasons: (i) The foreign affiliate of the taxpayer is liable to tax on as comprehensive a basis as it is imposed by France; (ii) XXXXXXXXXX has no policy concern with respect to the XXXXXXXXXX ; and (iii) This is a meaningful interpretation of XXXXXXXXXX .

2003 Ruling 2003-0039193 - Public Company PUC Reduction

Unedited CRA Tags
84(2) 84(4.1)

Principal Issues: Whether a public company PUC reduction qualifies for the "reorganization of business" exemption under 84(2).

Position: Yes.

Reasons: Reorganization and sale of substantially all of its business.

2003 Ruling 2003-0043013 - GIFT SUBJECT TO CONDITIONS

Unedited CRA Tags
110.1 248(31) 15(1)

Principal Issues:
1. Whether a donation constitutes a gift for income tax purposes when the donation is subject to various conditions.
2. Where a corporation, its controlling shareholder and a charitable organization enter into an agreement with respect to a donation, will subsection 15(1) apply to include the amount of the donation made by the corporation in the shareholder's income?
3. Whether the amount of the advantage in respect of the naming rights granted to the shareholder is nil for the purposes of draft subsection 248(31).

Position:
1. Based on the facts, the donation would constitute a gift for income tax purposes.
2. Not in this case. The terms of the agreement provide that the corporation will make the gift.
3. Factual determination. In this case, the scholarships, funds, etc., will be named after the shareholder and other individuals. Provided that there is no prospective economic benefit associated with the naming rights, it is our opinion that the amount of the advantage would be nil.

Reasons:
1. In previous files, we concluded that the fact that there are conditions attached to a gift similar to those present in this case does not, itself, negate the gift.
2. The corporation, the shareholder and the charitable organization are all parties to the agreement.
3. We consulted with the Valuations Section on this issue and were advised that in order to have value, there must be a prospective, quantifiable economic benefit associated with the naming rights.

2003 Ruling 2003-0046093 - AMENDMENT TO THE TERMS OFTHE DEBT

Unedited CRA Tags
212(1)(b)(vii) 39(2) 248(1)

Position:
Amendment to the terms of the Credit Agreement do not result in a new obligation.
REASON:
The change is not sufficiently fundamental as to bring into existence a new obligation.

XXXXXXXXXX 2003-004609

Technical Interpretation - External

3 December 2003 External T.I. 2003-0024435 - EBC SHARES UNDER SBVC ACT IF BC

Unedited CRA Tags
REG 4900(12) 12(1)(x)

Principal Issues:
Are EBC shares acquired under SBVCA of BC qualified investments.

Position: General comments provided.

Reasons:
They will likely be eligible as small business corporations if the tests in 4900(12)(a) are satisfied. The treatment of the related tax credits could cause some unexpected tax consequences.

2 December 2003 External T.I. 2003-0011625 - EXEMPTION TEST POLICY DEATH BENEFIT

Unedited CRA Tags
REG 306(3)

Principal Issues: Calculation of death benefit in Regulation 306(3).

Position:
If the death benefit under the life insurance policy has not changed, there is no legislative basis to adjust the death benefits of the exemption test policies.

Reasons: Legislation.

2 December 2003 External T.I. 2003-0047035 - MEDICAL EXPENSES

Unedited CRA Tags
118.2(2)

Principal Issues: Does the cost of a health-related service offered by a licensed pharmacist qualify as a medical expense eligible for the medical expense tax credit?

Position: Yes, provided the service in question is a medical service.

Reasons: For the purpose of paragraph 118.2(2)(a) of the Act, a licensed pharmacist qualifies as a medical practitioner. Accordingly, an amount paid by an individual to a pharmacist in respect of a medical service provided to that individual qualifies as a medical expense.

28 November 2003 External T.I. 2003-0046025 F - CONVENTION DE RETRAITE DEDUCTIONS

Unedited CRA Tags
20(1)(r) 152(3.1)(b)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(r)
s. 20(1)(r) deduction is limited by s. 67

Principales Questions:
1. Le contribuable a-t-il droit à une déduction en vertu de l'alinéa 20(1)r) de la Loi à l'égard de ses cotisations?
2. Le paragraphe 152(3.1) s'applique-t-il à une déduction réclamée selon l'alinéa 20(1)r) de la Loi

Position Adoptée :
1. Aucune
2. Oui

28 November 2003 External T.I. 2003-0047255 - RETIRING ALLOWANCE FOREIGN EMPLOYER

Unedited CRA Tags
60(j.1)

Principal Issues:
Will years of employment with a foreign employer be eligible for purposes of the paragraph 60(j.1) transfer?

Position: Yes, subject to the conditions of paragraph 60(j.1).

Reasons:
If the foreign employer is considered a person related to the employer for purposes of 60(j.1) the years of employment with the foreign employer may be included for purposes of calculating the amount that can be transferred under 60(j.1).

28 November 2003 External T.I. 2003-0032215 - Gift to Pre-1972 Trust

Unedited CRA Tags
122(2)

Principal Issues: Whether a distribution from a trust to another trust as beneficiary would be viewed as a gift for purposes of paragraph 122(2)(d)?

Position: No.

Reasons: The distribution would not be a gift where the distribution is made to a beneficiary pursuant to the beneficiary's interest in the trust.

26 November 2003 External T.I. 2003-0046105 - PARTNERSHIP TAXATION

Unedited CRA Tags
98(5)

Principal Issues: Is a sole proprietor precluded from the rollover provided in subsection 98(5) if the business of the partnership involves the trading of marketable securities?

Position: No

Reasons: Rollover is available provided the trading of marketable securities constitutes a business and all other requirements in subsection 98(5) are met.

XXXXXXXXXX Daryl Boychuk, LL.B
2003-004610
November 26, 2003

26 November 2003 External T.I. 2003-0037535 - DAMAGES-EMPLOYMENT TERMINATION

Unedited CRA Tags
56(1)(a)(ii)

Principal Issues: Whether damages received in 2003 in respect of a loss of employment, which occurred on XXXXXXXXXX , would be subject to tax.

Position: Not taxable

Reasons: The Act did not contain any provisions dealing with the taxation of damages received in respect of terminations of employment occurring before November 16, 1978. Existing jurisprudence at the time held that such damages were not taxable.

24 November 2003 External T.I. 2003-0028155 - Option on Real Property - Art 6 (UK)

Unedited CRA Tags
Art. 6 (UK) 253(c)(iii)

Principal Issues: Would the disposition of an option to acquire land in Ontario by a U.K. resident subject to tax in Canada?

Position: Yes.

Reasons: Paragraph 1 to 3 of Article 6 of the Canada-United Kingdom Income Tax Convention would apply.

21 November 2003 External T.I. 2003-0023925 F - Distribution non-admissible au sens de 86.1

Unedited CRA Tags
86.1 90 52(2)
Summary Under
Tax Topics - Income Tax Act - Section 86.1 - Subsection 86.1(2) - Paragraph 86.1(2)(b)
distribution did not qualify because distributed shares were not pre-owned by Mexican distributor
Summary Under
Tax Topics - Income Tax Act - Section 52 - Subsection 52(2)
distributed shares had ACB equal to the s. 90 inclusion of their FMV

Principales Questions: Conséquences fiscales applicables à l'égard de la réorganisation d'une société étrangère avec dérivation qui ne se qualifie pas à titre de distribution admissible aux fins de l'article 86.1 de la Loi.

Position Adoptée: Commentaires généraux.

21 November 2003 External T.I. 2003-0010195 F - Etablissement Stable

Unedited CRA Tags
400(2)(e)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 400 - Subsection 400(2) - Paragraph 400(2)(e)
use of substantial equipment in a province for even one day triggers a PE

Principales Questions:
La condition relative à l'utilisation des machines ou du matériel substantiels à un endroit, à l'alinéa 400(2)e) du Règlement, dans le cas de quatre machines, serait-elle rencontrée si leur utilisation était effectuée à plusieurs endroits d'une province?

Position Adoptée:
Oui

14 November 2003 External T.I. 2003-0013445 F - Application de 94(1) et 128.1(1)

Unedited CRA Tags
94(1) 128.1(1) 115(1)
Summary Under
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(1) - Paragraph 128.1(1)(a)
application of s. 94 subject to prior to application of s. 128.1(a)(a)

Principales Questions: Est-ce que le paragraphe 128.1(1) de la Loi s'applique à l'égard d'une fiducie qui devient résidente de fait au cours d'une année d'imposition et qui était réputée résidente du Canada en vertu du paragraphe 94(1) tout au long de son année d'imposition précédente?

Position Adoptée: Oui

14 November 2003 External T.I. 2003-0015635 - Legal Fees

Unedited CRA Tags
18(1)(a)

Principal Issues:
Whether Accounting and legal fees paid with respect of court's orders under Mental Competency Act are deductible?

Position:
No.

Reasons:
Fees are not related to a property or business, and there is no specific provision in the Act to allow their deduction.

7 November 2003 External T.I. 2003-0023435 - Definition of "Participating Interest"

Unedited CRA Tags
Proposed 94.1(i)

Principal Issues: Would the cash-settled derivative transaction described in technical opinion #2003-0008355 be subject to the proposed foreign investment entity rules?

Position: No, based on the amended legislative proposals of October 30, 2003.

Reasons: It is because the words in brackets "(other than money)" have been added after the word "property" to subparagraph (d)(ii) of the definition of "participating interest" in proposed subsection 94.1(1) of the Income Tax Act.

6 November 2003 External T.I. 2003-0042855 - Dual Residence

Unedited CRA Tags
250(J)

Principal Issues: General residence question from Canadian citizen now working in Australia.

Position: Question of fact. Contact ITSO.

Reasons: n/a

29 September 2003 External T.I. 2003-0013435 F - Pension Belge

Unedited CRA Tags
56(1)(a)(i) 110(1)(f)(i)
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 18
Belgian National Pensions Office was a Belgian government instrumentality for purposes of the former Art. 18(2) exemption

Principales Questions:
Une pension de retraite belge payée par l'Office national des pensions est-elle imposable au Canada?

Position Adoptée:
Non.

Conference

10 October 2003 Roundtable, 2003-0030175 F - NON-RESIDENT-PBR PART DANS SOCIETE PERS

Unedited CRA Tags
53(1) 53(2)

Principales Questions:
Quel est le prix de base rajusté d'une participation dans une société de personnes détenue par un non-résident aux fins de la Loi?

Position Adoptée:
Le prix de base rajusté est calculé conformément aux règles prévues aux alinéas 53(1)e) et 53(2)c) de la Loi. Il ne faut pas tenir compte uniquement de la part de revenu ou de la part de perte qui a été imposée ou déduite par l'associé aux fins de l'impôt canadien mais de la part de tout revenu ou de toute perte de la société de personnes provenant de toute source.

10 October 2003 Roundtable, 2003-0030035 F - IT 426

Unedited CRA Tags
12(1)(g) 39(1)

Principal Issues: See below

Position: See below

Reasons: See below

10 October 2003 Roundtable, 2003-0030195 F - FONDATION PRIVEE PLACEMENT NON ADMISSIBLE

Unedited CRA Tags
149.1(1) 18(9.1) REG 6203(1)

Principales Questions:
Est-ce que l'exclusion au préambule du paragraphe 6203(1) R.I.R. s'applique seulement à une action émise à une fondation privée dans les circonstances décrites à cette exclusion ou est-ce que cette dernière peut aussi viser une action qui avait été émise auparavant au donateur dans les circonstances qui y sont décrites?

Position Adoptée:
L'exclusion au préambule du paragraphe 6203(1) vise aussi une action qui avait été émise auparavant au donateur dans les circonstances décrites à cette exclusion.

10 October 2003 Roundtable, 2003-0030055 F - DEDUCTIBILITY PENALITE REDUCTION TAUX

Unedited CRA Tags
18(9.1) 20(1)(c)

Principales Questions:
Est-ce que la pénalité payée pour réduire le taux d'intérêt payable sur un emprunt (utilisé en vue de tirer un revenu de bien) continue d'être déductible en vertu du paragraphe 18(9.1) L.I.R.et de l'alinéa 20(1)c) L.I.R. par le contribuable lorsque le bien est vendu et que l'emprunt est pris en charge par l'acheteur?

Position Adoptée: Non.

10 October 2003 Roundtable, 2003-0030225 F - Computation of Safe Income on Hand-ITCs

Unedited CRA Tags
55(2) 55(5)

Principal Issues: What will be CCRA's position with respect to the computation of income earned or realized for the purposes of subsection 55(2) of the ITA and the impact of investment tax credits ("ITC") in light of the Federal Court of Appeal's decision in Kruco?

Position: The treatment of ITCs for the purpose of safe income and safe income on hand, adopted by the CCRA in Kruco, was the approach taken by the CCRA prior to the adoption in 1991 of the current position in this regard. The CCRA's current position is that, in the taxation year in which the ITCs are claimed, the amount of safe income on hand is reduced by the amount of tax owing, determined without considering the ITCs claimed; only in the taxation years following the year they were claimed can the ITCs have the effect of increasing the amount of safe income on hand. There is some inconsistency between the principles used for computing safe income on hand as established by the Federal Court of Appeal, namely in The Queen v. Brelco Drilling Ltd., and the application of these principles by the same Federal Court of Appeal in Kruco. Consequently, the CCRA continues to apply its current position in the computation of the safe income on hand of a corporation in situations where ITCs are being claimed.

Reasons: Wording of the Act and current position.

10 October 2003 Roundtable, 2003-0030065 F - PERTE AU TITRE D'UN PLACEMENT ENTREPRISE

Unedited CRA Tags
39(1)c) 248(1)

Position Adoptée:
1) oui
2) non

10 October 2003 Roundtable, 2003-0033235 F - Refund of Overpayments

Unedited CRA Tags
164(1) 164(1.5)

Principal Issues: See below

Position: See below

Reasons: See below

10 October 2003 Roundtable, 2003-0030115 F - INCORPORATION DES PROFESSIONNELS

Unedited CRA Tags
9(1) 56(2)

Principales Questions: Est-ce qu'un contrat doit être signé entre un professionnel et sa société pour que les revenus soient imposables au niveau de la société dans la situation où, légalement, la société peut exercer une profession libérale ?
Si les exigences du paragraphe 1 du IT-189R2 ne sont pas rencontrées comment seront imposés les revenus de profession ?

10 October 2003 Roundtable, 2003-0030135 F - CHOIX ARTICLE 34

Unedited CRA Tags
34

Position Adoptée: Oui si la société est reconnue comme exerçant la profession libérale puisqu'elle est la bénéficiaire des revenus. Sinon, c'est le particulier qui peut faire le choix à l'article 34 L.I.R. étant donné qu'il exerce personnellement la profession libérale et reçoit les revenus.
RAISON POUR POSITION ADOPTÉE:
Bulletin d'interprétation IT-189R2 et IT-457R

10 October 2003 Roundtable, 2003-0030155 F - EMPLOI ASSURABLE

Position Adoptée: Le pourcentage de contrôle (plus de 40 %) se calcule en fonction du nombre d'actions votantes. Nous devons toutefois tenir compte de tous les facteurs importants qui permettent d'établir qui contrôle effectivement les actions de la société.
RAISON POUR POSITION ADOPTÉE: Notion de contrôle

Technical Interpretation - Internal

4 November 2003 Internal T.I. 2003-0015117 - Reacquisition of seized property during WWII

Unedited CRA Tags
69(1) 81(1)(g)

Principal Issues: Tax consequences on the sale of property that was previously seized during WWII. Tax treatment of payment received on account of the rent generated by the property while seized.

Position: Question of facts but in similar situations the cost of the property to the taxpayer would generally correspond to the property's fair market value on the day it was reacquired by the taxpayer and the return of the property in and by itself would not be taxable. As for the payment on account of rent, it could amount to damage the payment of which does not have to be included in income.

Reasons: Paragraph 69(1)(c). Documents # E 9226011, E 9226015, E 9228116, E 9329505, E 9600925, E 2002-017626A and E 2002-0176265.

31 October 2003 Internal T.I. 2003-0040887 - Luxembourg - Social Security Tax

Unedited CRA Tags
126(1)

Principal Issues: Whether social security contributions made by a resident of Canada to the government of Luxembourg are mandatory and thus eligible for the foreign tax credit in subsection 126(1) for 2003 and previous taxation years?

Position: Yes, but there may be exceptions.

Reasons: Social Security Legislation of Luxembourg