Income Tax Severed Letters - 2004-01-02

Miscellaneous

2003 Miscellaneous 2003-00480910 - Butterfly

Unedited CRA Tags
55(3)(b)

Principal Issues: minor amendment

Position: No effect on the rulings

Reasons:

2003 Miscellaneous 2003-0048091 - Butterfly

Unedited CRA Tags
55(3)(b)

Principal Issues: minor amendment

Position: No effect on the rulings

Reasons:

Ruling

19 December 2003 Ruling 2003-00269630 - PENSION CORPORATION USE OF BORROWED FUNDS

Unedited CRA Tags
149(1)(o.2)

Principal Issues:
Does the position taken by CCRA at the 2002 CTF on deduction of interest, change our views on whether money borrowed to replace capital contributions meets the conditions set out in clause 149(1)(o.2)(ii)(C) or 149(1)(o.2)(ii.1)(C) of the Act?

Position: No

Reasons:
The CTF paper on deduction of interest does not apply for these purposes. The borrowing will not satisfy the requirements if it is for the purpose of replacing capital invested in real property.

2003-000727
XXXXXXXXXX 2003-002696
W. C. Harding
December 19, 2003

19 December 2003 Ruling 2003-0026963 - PENSION CORPORATION USE OF BORROWED FUNDS

Unedited CRA Tags
149(1)(o.2)

Principal Issues:
Does the position taken by CCRA at the 2002 CTF on deduction of interest, change our views on whether money borrowed to replace capital contributions meets the conditions set out in clause 149(1)(o.2)(ii)(C) or 149(1)(o.2)(ii.1)(C) of the Act?

Position: No

Reasons:
The CTF paper on deduction of interest does not apply for these purposes. The borrowing will not satisfy the requirements if it is for the purpose of replacing capital invested in real property.

2003-000727
XXXXXXXXXX 2003-002696
W. C. Harding
December 19, 2003

2003 Ruling 2003-00374530 - LOSS CONSOLIDATION

Unedited CRA Tags
20(1)(c) 245(2)

Principal Issues:
Loss consolidation carried out several times within related group

Position:
Similar to earlier rulings, with the exception that the full amount will not be borrowed up front and there will be a series of investments in preferred shares of Lossco and loans to Profitco using Profitco's current line of credit in order to minimize bank fees.

Reasons: ITA

2003 Ruling 2003-00456130 F - DISPOSITION-MANDANT/MANDATAIRE

Unedited CRA Tags
248(1) 69(1)

Principales Questions:
? Un contribuable transfère ses immeubles à une société qui agit à titre de mandataire et de prête-nom du contribuable à l'égard de ce transfert. Selon la convention de mandat, le contribuable demeure propriétaire des immeubles. Par la suite, le mandataire transfère les immeubles au contribuable. Est-ce qu'il y a une disposition aux fins de la Loi lors de ceux transferts?
? Dans le cadre de son mandat, le mandataire contracte un emprunt hypothécaire pour et au nom du mandant. Aux fins des alinéas 20(1)c) et e) de la Loi, est-ce que le contribuable sera considéré comme étant le débiteur hypothécaire?

Position Adoptée:
? Il n'y aura pas de disposition aux fins de la Loi lors des deux transferts et le paragraphe 69(1) de la Loi ne s'appliquera pas à l'égard de ces deux transferts. Par conséquent, en ce qui concerne le contribuable et le mandataire, il n'y aura pas de revenu, de gain en capital ni de récupération de l'allocation du coût en capital à inclure dans leur revenu en raison des transferts effectués entre eux dans le cadre du mandat. Aux fins de la Loi, le contribuable demeurera propriétaire des immeubles transférés au mandataire.
? Le contribuable sera considéré avoir contracté l'emprunt hypothécaire qui a été contracté par son mandataire au nom du mandant.

2003 Ruling 2003-0037453 - LOSS CONSOLIDATION

Unedited CRA Tags
20(1)(c) 245(2)

Principal Issues:
Loss consolidation carried out several times within related group

Position:
Similar to earlier rulings, with the exception that the full amount will not be borrowed up front and there will be a series of investments in preferred shares of Lossco and loans to Profitco using Profitco's current line of credit in order to minimize bank fees.

Reasons: ITA

2003 Ruling 2003-0045613 F - DISPOSITION-MANDANT/MANDATAIRE

Unedited CRA Tags
248(1) 69(1)

Principales Questions:
? Un contribuable transfère ses immeubles à une société qui agit à titre de mandataire et de prête-nom du contribuable à l'égard de ce transfert. Selon la convention de mandat, le contribuable demeure propriétaire des immeubles. Par la suite, le mandataire transfère les immeubles au contribuable. Est-ce qu'il y a une disposition aux fins de la Loi lors de ceux transferts?
? Dans le cadre de son mandat, le mandataire contracte un emprunt hypothécaire pour et au nom du mandant. Aux fins des alinéas 20(1)c) et e) de la Loi, est-ce que le contribuable sera considéré comme étant le débiteur hypothécaire?

Position Adoptée:
? Il n'y aura pas de disposition aux fins de la Loi lors des deux transferts et le paragraphe 69(1) de la Loi ne s'appliquera pas à l'égard de ces deux transferts. Par conséquent, en ce qui concerne le contribuable et le mandataire, il n'y aura pas de revenu, de gain en capital ni de récupération de l'allocation du coût en capital à inclure dans leur revenu en raison des transferts effectués entre eux dans le cadre du mandat. Aux fins de la Loi, le contribuable demeurera propriétaire des immeubles transférés au mandataire.
? Le contribuable sera considéré avoir contracté l'emprunt hypothécaire qui a été contracté par son mandataire au nom du mandant.

Ministerial Correspondence

4 December 2003 Ministerial Correspondence 2003-00435640 - REGULATION 4900(1)(s)

Unedited CRA Tags
n/a

Principal Issues:
Will property held by an RRSP that was subject to Regulation 4900(1)(s), that ceases to be a qualified investment for the plan, be subjected to the various provisions of the Act that deal with the particular plan holding an investment that does not qualify as a qualified investment?

Position: Yes

Reasons:
The relevant provisions of the Act do not contain an exception for a property that ceases to be a qualified investment.

4 December 2003 Ministerial Correspondence 2003-0043564 - REGULATION 4900(1)(s)

Unedited CRA Tags
n/a

Principal Issues:
Will property held by an RRSP that was subject to Regulation 4900(1)(s), that ceases to be a qualified investment for the plan, be subjected to the various provisions of the Act that deal with the particular plan holding an investment that does not qualify as a qualified investment?

Position: Yes

Reasons:
The relevant provisions of the Act do not contain an exception for a property that ceases to be a qualified investment.

Technical Interpretation - External

30 December 2003 External T.I. 2003-0049105 - Non-Arm's Length Sale of Shares

Unedited CRA Tags
84.1 69(1)(b)

Principal Issues:
Aco controls Bco and Bco controls Cco. Individual D owns all of the non-voting shares of Cco ("Cco shares"). Individual D is not related to Aco, Bco or Cco. Where individual D sells ("sale") her Cco shares to Aco for cash consideration and Aco then gifts those Cco shares to Cco, whether subsection 84.1(1) will apply to deem Aco to have paid a dividend to individual D.

Position:
Subsection 84.1(1) may apply.

Reasons:
Aco may be considered not to be dealing at arm's length with individual D with respect to the sale.

30 December 2003 External T.I. 2003-0044095 - INDIAN EMPLOYMENT ADJACENT TO RESERVE

Unedited CRA Tags
81(1)(a)

Principal Issues:
Will employment income paid to status Indians working at a hospital near a reserve be tax-exempt?

Position: No

Reasons:
Application of the Guidelines - employment income would not be exempt in this situation. Furthermore, extenuating circumstances do not create additional connecting factors that would be significant enough to merit an exemption.

30 December 2003 External T.I. 2003-00490150 - Private Corporation - Dividend Refund

Unedited CRA Tags
129(1) 186

Principal Issues: 1. Whether a private corporation can choose whether or not to receive a dividend refund when it pays a taxable dividend and has RDTOH at the end of the year? 2. Does a corporate dividend recipient automatically get a refund of Part IV tax it paid on the taxable dividend it received from a connected payer corporation where the payer corporation was no longer entitled to receive a dividend refund as a result of a carry back of a net capital loss which reduced the particular payer corporations' RDTOH to nil?

Position: 1. No. 2. It is possible to get a refund but the refund is not automatic - see conditions in our response.

Reasons: The law.

30 December 2003 External T.I. 2003-00491050 - Non-Arm's Length Sale of Shares

Unedited CRA Tags
84.1 69(1)(b)

Principal Issues:
Aco controls Bco and Bco controls Cco. Individual D owns all of the non-voting shares of Cco ("Cco shares"). Individual D is not related to Aco, Bco or Cco. Where individual D sells ("sale") her Cco shares to Aco for cash consideration and Aco then gifts those Cco shares to Cco, whether subsection 84.1(1) will apply to deem Aco to have paid a dividend to individual D.

Position:
Subsection 84.1(1) may apply.

Reasons:
Aco may be considered not to be dealing at arm's length with individual D with respect to the sale.

30 December 2003 External T.I. 2003-00440950 - INDIAN EMPLOYMENT ADJACENT TO RESERVE

Unedited CRA Tags
81(1)(a)

Principal Issues:
Will employment income paid to status Indians working at a hospital near a reserve be tax-exempt?

Position: No

Reasons:
Application of the Guidelines - employment income would not be exempt in this situation. Furthermore, extenuating circumstances do not create additional connecting factors that would be significant enough to merit an exemption.

30 December 2003 External T.I. 2003-0049015 - Private Corporation - Dividend Refund

Unedited CRA Tags
129(1) 186

Principal Issues: 1. Whether a private corporation can choose whether or not to receive a dividend refund when it pays a taxable dividend and has RDTOH at the end of the year? 2. Does a corporate dividend recipient automatically get a refund of Part IV tax it paid on the taxable dividend it received from a connected payer corporation where the payer corporation was no longer entitled to receive a dividend refund as a result of a carry back of a net capital loss which reduced the particular payer corporations' RDTOH to nil?

Position: 1. No. 2. It is possible to get a refund but the refund is not automatic - see conditions in our response.

Reasons: The law.

22 December 2003 External T.I. 2003-00530050 F - transfert d'un reer a un ferr

Unedited CRA Tags
146(12) 146.3(11)

Position Adoptée: Question de fait..
RAISON POUR POSITION ADOPTÉE: Commentaires généraux

22 December 2003 External T.I. 2003-0053005 F - transfert d'un reer a un ferr

Unedited CRA Tags
146(12) 146.3(11)

Position Adoptée: Question de fait..
RAISON POUR POSITION ADOPTÉE: Commentaires généraux

22 December 2003 External T.I. 2003-00001250 F - TITRE DE CREANCE INDEXE

Unedited CRA Tags
REG 7001(1) 248(1) 16(6)

Principales Questions:
Application de l'article 7001 du Règlement à une situation particulière.

22 December 2003 External T.I. 2003-0000125 F - TITRE DE CREANCE INDEXE

Unedited CRA Tags
REG 7001(1) 248(1) 16(6)

Principales Questions:
Application de l'article 7001 du Règlement à une situation particulière.

19 December 2003 External T.I. 2002-01388750 - LEAVE VS SALE

Unedited CRA Tags
54

Principal Issues:
Whether an agreement between an automobile dealership and an individual is a lease or a sale

19 December 2003 External T.I. 2003-0050735 - Fair Market Value

Unedited CRA Tags
111(4)(c)

Principal Issues: Determination of fair market value under s. 111(4)(c) of the Act.

Position: A direct valuation of corporation's capital properties should be obtained, as per recommendation of Business Equity Valuations (Technical Applications and Valuations Division).

Reasons: Methodology used by taxpayer may be deficient and could understate fair market value of assets at time of change of control.

19 December 2003 External T.I. 2002-0138875 - LEAVE VS SALE

Unedited CRA Tags
54

Principal Issues:
Whether an agreement between an automobile dealership and an individual is a lease or a sale

19 December 2003 External T.I. 2003-00507350 - Fair Market Value

Unedited CRA Tags
111(4)(c)

Principal Issues: Determination of fair market value under s. 111(4)(c) of the Act.

Position: A direct valuation of corporation's capital properties should be obtained, as per recommendation of Business Equity Valuations (Technical Applications and Valuations Division).

Reasons: Methodology used by taxpayer may be deficient and could understate fair market value of assets at time of change of control.

18 December 2003 External T.I. 2003-00349950 - QSBC SHARES

Unedited CRA Tags
110.6(1) 110.6(2.1)

Principal Issues: Whether the shares owned by a taxpayer are considered to be "qualified small business corporation shares"?

Position: Question of fact, general comments provided.

Reasons: Question of fact, insufficient facts provided.

18 December 2003 External T.I. 2003-00386150 - INVESTMENS HELD BY A RRSP

Unedited CRA Tags
207.1(1)

Principal Issues:
Liability of an RRSP trust for tax on non-qualified investments in respect of shares of a corporation that has filed for reorganization under bankruptcy laws?

Position:
General explanation of the law was provided based on information provided which was not verified for accuracy.

Reasons:
Only very brief information is available. Liability for tax will be a question of fact.

18 December 2003 External T.I. 2003-0034995 - QSBC SHARES

Unedited CRA Tags
110.6(1) 110.6(2.1)

Principal Issues: Whether the shares owned by a taxpayer are considered to be "qualified small business corporation shares"?

Position: Question of fact, general comments provided.

Reasons: Question of fact, insufficient facts provided.

18 December 2003 External T.I. 2003-0038615 - INVESTMENS HELD BY A RRSP

Unedited CRA Tags
207.1(1)

Principal Issues:
Liability of an RRSP trust for tax on non-qualified investments in respect of shares of a corporation that has filed for reorganization under bankruptcy laws?

Position:
General explanation of the law was provided based on information provided which was not verified for accuracy.

Reasons:
Only very brief information is available. Liability for tax will be a question of fact.

17 December 2003 External T.I. 2003-00444950 - SPLIT INCOME

Unedited CRA Tags
120.4

Principal Issues: Does the collection and deposit of rental cheques by a parent on behalf of a trust owning rental property result in the income earned in the trust being "split income"?

Position: While it is question of fact whether the parent is carrying on a business, in the situation described it is unlikely that the income earned in the trust would be "split income".

Reasons: The collection and deposit of rent cheques does not, in and of itself, result in a parent carrying on a business.

17 December 2003 External T.I. 2003-0044495 - SPLIT INCOME

Unedited CRA Tags
120.4

Principal Issues: Does the collection and deposit of rental cheques by a parent on behalf of a trust owning rental property result in the income earned in the trust being "split income"?

Position: While it is question of fact whether the parent is carrying on a business, in the situation described it is unlikely that the income earned in the trust would be "split income".

Reasons: The collection and deposit of rent cheques does not, in and of itself, result in a parent carrying on a business.

16 December 2003 External T.I. 2002-01336650 - CONDITIONAL SALES AGREEMENTS

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

Principal Issues:
Whether a particular agreement would be considered a lease such that the payments made under the terms of the said agreement would be deductible in computing income for purposes of the Act.

Position: Question of fact.

Reasons:
See ITTN - 21 - Question of fact to be determined based on the legal relationship created by the terms of the agreement.

16 December 2003 External T.I. 2003-00272450 F - MCIA-ACQUIS. D'UNE PERSONNE LIEE

Unedited CRA Tags
14(5)

Principales Questions:
Lors du calcul du montant cumulatif des immobilisations admissibles, est-ce que la fraction de la dépense en capital admissible, calculée à l'élément A de ce compte, sera réduite par le résultat de la nouvelle formule proposée par le ministère des Finances dans les propositions législatives du 20 décembre 2002?

Position Adoptée:
Dans la situation soumise, l'élément A.1 de la nouvelle formule réduirait la fraction de 3/4 de la dépense en capital admissible, et ce, même après la vente des actions du détenteur de l'immobilisation admissible à une personne sans lien de dépendance avec le vendeur.

16 December 2003 External T.I. 2002-0133665 - CONDITIONAL SALES AGREEMENTS

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

Principal Issues:
Whether a particular agreement would be considered a lease such that the payments made under the terms of the said agreement would be deductible in computing income for purposes of the Act.

Position: Question of fact.

Reasons:
See ITTN - 21 - Question of fact to be determined based on the legal relationship created by the terms of the agreement.

16 December 2003 External T.I. 2003-0027245 F - MCIA-ACQUIS. D'UNE PERSONNE LIEE

Unedited CRA Tags
14(5)

Principales Questions:
Lors du calcul du montant cumulatif des immobilisations admissibles, est-ce que la fraction de la dépense en capital admissible, calculée à l'élément A de ce compte, sera réduite par le résultat de la nouvelle formule proposée par le ministère des Finances dans les propositions législatives du 20 décembre 2002?

Position Adoptée:
Dans la situation soumise, l'élément A.1 de la nouvelle formule réduirait la fraction de 3/4 de la dépense en capital admissible, et ce, même après la vente des actions du détenteur de l'immobilisation admissible à une personne sans lien de dépendance avec le vendeur.

15 December 2003 External T.I. 2003-0043525 - T5 REPORTING SLIP

Unedited CRA Tags
12.2

Principal Issues:
Must a life insurance company issue a T5 slip in respect of an annuity contract issued by the life insurer and owned by a property and casualty insurer who acquired the contract to create a structured settlement?

Position:
Yes, a T5 must be prepared with respect to income accruing pursuant to subsection 12.2(1) of the Act and to be included in computing the income of the property and casualty insurer.

Reasons: Subsection 201(5) of the Income Tax Regulations.

15 December 2003 External T.I. 2003-0050485 - RRIF ROLLOVER TO TRUST

Unedited CRA Tags
60(l)

Principal Issues:
Can a RRIF be rolled over to an irrevocable trust upon the death of the RRIF annuitant?

Position:
Only if the beneficiary is the mentally or physically infirm spouse, common law partner or child of the annuitant

Reasons: Clear from the legislation.

15 December 2003 External T.I. 2003-00297650 F - FRAIS LORS D'UNE ADOPTION INTERNATIONALE

Unedited CRA Tags
118.2

Principales Questions:
1. Est-ce que le crédit d'impôt pour les frais médicaux prévu à l'article 118.2 de la Loi peut être accordé à l'égard d'un enfant pour lequel il n'y a pas encore de jugement final d'adoption?
2. Est-ce que les frais pour adopter un enfant et identifiés comme étant des frais d'adoption sont des frais admissibles au crédit d'impôt pour frais médicaux prévu à l'article 118.2 de la Loi?
3. Est-ce que les frais de déplacement d'un parent adoptif sont des frais médicaux admissibles au crédit d'impôt non remboursable?

Position Adoptée:
1. Un enfant pourrait être une personne à charge aux fins de l'article 118.2 de la Loi même si le jugement final d'adoption n'a pas encore été prononcé au cours de l'année d'imposition où les frais médicaux admissibles ont été engagés si une adoption de fait a eu lieu au cours de cette année.
2. Non.
3. Non.

15 December 2003 External T.I. 2003-0029765 F - FRAIS LORS D'UNE ADOPTION INTERNATIONALE

Unedited CRA Tags
118.2

Principales Questions:
1. Est-ce que le crédit d'impôt pour les frais médicaux prévu à l'article 118.2 de la Loi peut être accordé à l'égard d'un enfant pour lequel il n'y a pas encore de jugement final d'adoption?
2. Est-ce que les frais pour adopter un enfant et identifiés comme étant des frais d'adoption sont des frais admissibles au crédit d'impôt pour frais médicaux prévu à l'article 118.2 de la Loi?
3. Est-ce que les frais de déplacement d'un parent adoptif sont des frais médicaux admissibles au crédit d'impôt non remboursable?

Position Adoptée:
1. Un enfant pourrait être une personne à charge aux fins de l'article 118.2 de la Loi même si le jugement final d'adoption n'a pas encore été prononcé au cours de l'année d'imposition où les frais médicaux admissibles ont été engagés si une adoption de fait a eu lieu au cours de cette année.
2. Non.
3. Non.

15 December 2003 External T.I. 2003-00435250 - T5 REPORTING SLIP

Unedited CRA Tags
12.2

Principal Issues:
Must a life insurance company issue a T5 slip in respect of an annuity contract issued by the life insurer and owned by a property and casualty insurer who acquired the contract to create a structured settlement?

Position:
Yes, a T5 must be prepared with respect to income accruing pursuant to subsection 12.2(1) of the Act and to be included in computing the income of the property and casualty insurer.

Reasons: Subsection 201(5) of the Income Tax Regulations.

15 December 2003 External T.I. 2003-00504850 - RRIF ROLLOVER TO TRUST

Unedited CRA Tags
60(l)

Principal Issues:
Can a RRIF be rolled over to an irrevocable trust upon the death of the RRIF annuitant?

Position:
Only if the beneficiary is the mentally or physically infirm spouse, common law partner or child of the annuitant

Reasons: Clear from the legislation.

11 December 2003 External T.I. 2003-0015975 F - calcul du gain/perte sur disposition

Unedited CRA Tags
40(1)a)(i) 40(1)b)(i)

Principales Questions:
Est-ce qu'un montant qu'un contribuable s'est engagé à verser suite à la disposition de ses actions peut être pris en considération dans le calcul du gain/perte relatif à ces actions, à titre de "dépenses engagées ou effectuées en vue de réaliser la disposition"?

Position Adoptée:
Commentaires généraux. Probablement que non.

11 December 2003 External T.I. 2003-0031495 - DISBURSEMENT QUOTA - 10 YEAR DIRECTIONS

Unedited CRA Tags
149.1(1)

Principal Issues:
Ramifications to disbursement quota of private foundation if it expends a "10 year" gift prior to end of 10 year period with donor's consent.

Position: Charity cannot expend property prior to 10-year period.

Reasons: A charity may not expend property in violation of the terms of a trust.

11 December 2003 External T.I. 2003-01829050 - GIFTS OF INTEREST IN ALTER EGO TRUST

Unedited CRA Tags
118.1(3)

Principal Issues:
Can an alter ego trust claim a tax credit under subsection 118.1(3) when it distributes property to a charity in respect of the charity's capital interest, after the death of the income beneficiary?

Position:
No, unless the trustees may reasonably be viewed to have discretion, under the terms of the trust, whether or not to distribute property to the charity.

Reasons:
If the charity receives property in satisfaction of its interest in the trust, the distribution of property is not a gift. However, the charity's interest in the trust may have been a gift. If the donor did not receive a tax credit when the trust was created because the charity's interest could not be valued (e.g., because of the income beneficiary's right to encroach), the donor's tax return for that year and for the following five taxation years could be amended once the gift can reasonably be valued provided the relevant taxation years are still open. If the charity receives property as a consequence of the trustee exercising discretion to distribute property to it, the distribution of property is gift.

11 December 2003 External T.I. 2003-0182905 - GIFTS OF INTEREST IN ALTER EGO TRUST

Unedited CRA Tags
118.1(3)

Principal Issues:
Can an alter ego trust claim a tax credit under subsection 118.1(3) when it distributes property to a charity in respect of the charity's capital interest, after the death of the income beneficiary?

Position:
No, unless the trustees may reasonably be viewed to have discretion, under the terms of the trust, whether or not to distribute property to the charity.

Reasons:
If the charity receives property in satisfaction of its interest in the trust, the distribution of property is not a gift. However, the charity's interest in the trust may have been a gift. If the donor did not receive a tax credit when the trust was created because the charity's interest could not be valued (e.g., because of the income beneficiary's right to encroach), the donor's tax return for that year and for the following five taxation years could be amended once the gift can reasonably be valued provided the relevant taxation years are still open. If the charity receives property as a consequence of the trustee exercising discretion to distribute property to it, the distribution of property is gift.

11 December 2003 External T.I. 2003-00159750 F - calcul du gain/perte sur disposition

Unedited CRA Tags
40(1)a)(i) 40(1)b)(i)

Principales Questions:
Est-ce qu'un montant qu'un contribuable s'est engagé à verser suite à la disposition de ses actions peut être pris en considération dans le calcul du gain/perte relatif à ces actions, à titre de "dépenses engagées ou effectuées en vue de réaliser la disposition"?

Position Adoptée:
Commentaires généraux. Probablement que non.

11 December 2003 External T.I. 2003-00314950 - DISBURSEMENT QUOTA - 10 YEAR DIRECTIONS

Unedited CRA Tags
149.1(1)

Principal Issues:
Ramifications to disbursement quota of private foundation if it expends a "10 year" gift prior to end of 10 year period with donor's consent.

Position: Charity cannot expend property prior to 10-year period.

Reasons: A charity may not expend property in violation of the terms of a trust.

10 December 2003 External T.I. 2003-0023335 F - COUT D'UN BIEN REMIS EN RECOMPENSE

Unedited CRA Tags
6(1)(a)

Principales Questions:
Est-ce qu'un bien remis par une société-mère à un employé de sa filiale à titre de récompense pourrait être remis en franchise d'impôt?
Est-ce que les droits de douane et les frais de transport payés par la filiale feraient partie du coût total du bien qui est comparé à la limite de 500 $?

Position Adoptée:
Nous serions généralement prêts à tenir compte de la politique sur les récompenses dans une situation où c'est la société-mère qui remet la récompense à un employé de sa filiale en autant qu'il ne s'agit pas d'un moyen pour dépasser le nombre de récompenses (ainsi que la limite de 500 $) prévu dans la politique.
Les droits de douane et les frais de transport feraient partie du coût total.

10 December 2003 External T.I. 2003-0026385 - CRITICAL ILLNESS INSURANCE

Unedited CRA Tags
N/A

Principal Issues:
Will a critical illness policy be a sickness policy for purposes of the Act if the premiums are paid over a shorter time period than the related coverage?

Position:
The funding of the policy is not determinative, in and of itself, of the policy's character for purposes of the Act.

Reasons:
The characterization of a critical illness policy for purposes of the Act will depend upon all the terms and conditions of the contract and the applicable insurance legislation.

10 December 2003 External T.I. 2003-00233350 F - COUT D'UN BIEN REMIS EN RECOMPENSE

Unedited CRA Tags
6(1)(a)

Principales Questions:
Est-ce qu'un bien remis par une société-mère à un employé de sa filiale à titre de récompense pourrait être remis en franchise d'impôt?
Est-ce que les droits de douane et les frais de transport payés par la filiale feraient partie du coût total du bien qui est comparé à la limite de 500 $?

Position Adoptée:
Nous serions généralement prêts à tenir compte de la politique sur les récompenses dans une situation où c'est la société-mère qui remet la récompense à un employé de sa filiale en autant qu'il ne s'agit pas d'un moyen pour dépasser le nombre de récompenses (ainsi que la limite de 500 $) prévu dans la politique.
Les droits de douane et les frais de transport feraient partie du coût total.

10 December 2003 External T.I. 2003-00263850 - CRITICAL ILLNESS INSURANCE

Unedited CRA Tags
N/A

Principal Issues:
Will a critical illness policy be a sickness policy for purposes of the Act if the premiums are paid over a shorter time period than the related coverage?

Position:
The funding of the policy is not determinative, in and of itself, of the policy's character for purposes of the Act.

Reasons:
The characterization of a critical illness policy for purposes of the Act will depend upon all the terms and conditions of the contract and the applicable insurance legislation.

9 December 2003 External T.I. 2003-0034505 - CRITICAL ILLNESS INSURANCE

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

Principal Issues:
1. Is the payment of premiums on critical illness insurance for employees a taxable benefit?
2. Are lump sum payments paid under a critical illness insurance policy taxable?
3. Can a self-employed taxpayer deduct the cost of business attire?

Position TAKEN:
1. No taxable benefit if provided as part of a group sickness or accident insurance plan.
2. Not taxable unless the lump sum payment is in lieu of periodic payments.
3. No.

Reasons:
1. Exempt under subparagraph 6(1)(a)(i).
2. No taxing provision.
3. Personal expenses.

9 December 2003 External T.I. 2003-00345050 - CRITICAL ILLNESS INSURANCE

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

Principal Issues:
1. Is the payment of premiums on critical illness insurance for employees a taxable benefit?
2. Are lump sum payments paid under a critical illness insurance policy taxable?
3. Can a self-employed taxpayer deduct the cost of business attire?

Position TAKEN:
1. No taxable benefit if provided as part of a group sickness or accident insurance plan.
2. Not taxable unless the lump sum payment is in lieu of periodic payments.
3. No.

Reasons:
1. Exempt under subparagraph 6(1)(a)(i).
2. No taxing provision.
3. Personal expenses.

8 December 2003 External T.I. 2003-00484250 - FOREIGN OWNERSHIP OF NEWSPAPERS

Unedited CRA Tags
19(1) 19(5) 19(7)

Principal Issues: What are the tax implications under subsection 19(1) of the Income Tax Act when a newspaper ceases to be a "Canadian newspaper"?

Position: There is twelve-month "grace period" in which a newspaper that was previously considered a Canadian newspaper will continue to be considered so for purposes of subsection 19(1) of the Act. Once the twelve-month grace period expires, otherwise deductible advertising expenses incurred for advertisements directed at the Canadian market that are placed in such a newspaper, will be prohibited by virtue of subsection 19(1) of the Act.

Reasons: Section 19 of the Act.

8 December 2003 External T.I. 2003-0048425 - FOREIGN OWNERSHIP OF NEWSPAPERS

Unedited CRA Tags
19(1) 19(5) 19(7)

Principal Issues: What are the tax implications under subsection 19(1) of the Income Tax Act when a newspaper ceases to be a "Canadian newspaper"?

Position: There is twelve-month "grace period" in which a newspaper that was previously considered a Canadian newspaper will continue to be considered so for purposes of subsection 19(1) of the Act. Once the twelve-month grace period expires, otherwise deductible advertising expenses incurred for advertisements directed at the Canadian market that are placed in such a newspaper, will be prohibited by virtue of subsection 19(1) of the Act.

Reasons: Section 19 of the Act.

5 December 2003 External T.I. 2002-01575750 - LEASES

Unedited CRA Tags
20(1)(c) 13(5.2) 16(1)

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 Issues

1. Does the existence of a bargain purchase option, supercede the legal relationship such that it is considered a sale?

2. What would be an avoidance transaction?.

Position TAKEN

1. Per ITTN 21, a lease is a lease and a sale is a sale.

5 December 2003 External T.I. 2002-0157575 - LEASES

Unedited CRA Tags
20(1)(c) 13(5.2) 16(1)

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 Issues

1. Does the existence of a bargain purchase option, supercede the legal relationship such that it is considered a sale?

2. What would be an avoidance transaction?.

Position TAKEN

1. Per ITTN 21, a lease is a lease and a sale is a sale.

4 December 2003 External T.I. 2003-00399750 - SPECIAL EVENTS

Unedited CRA Tags
67.1(2)(f)

Principal Issues:
1. Can paragraph 67.1(2)(f) apply to a special event that is also attended by clients?
2. Does the answer change if there are more clients than employees in attendance?
3. What is an acceptable method of allocating the costs?

Position TAKEN:
1. Yes.
2. Question of fact.
3. General information provided.

Reasons:
1. Wording of paragraph 67.1(2)(f) does not restrict special events to employees-only events.
2. Question of fact.
3. Question of fact.

4 December 2003 External T.I. 2003-0039975 - SPECIAL EVENTS

Unedited CRA Tags
67.1(2)(f)

Principal Issues:
1. Can paragraph 67.1(2)(f) apply to a special event that is also attended by clients?
2. Does the answer change if there are more clients than employees in attendance?
3. What is an acceptable method of allocating the costs?

Position TAKEN:
1. Yes.
2. Question of fact.
3. General information provided.

Reasons:
1. Wording of paragraph 67.1(2)(f) does not restrict special events to employees-only events.
2. Question of fact.
3. Question of fact.

3 December 2003 External T.I. 2003-00351150 - SDA (K) EXEMPTION

Unedited CRA Tags
248(1)(k)

Position: No.
REASON:
The law requires that the amount has to be paid within the three years period following the calendar year in which the right to receive the bonus arose.

3 December 2003 External T.I. 2003-0035115 - SDA (K) EXEMPTION

Unedited CRA Tags
248(1)(k)

Position: No.
REASON:
The law requires that the amount has to be paid within the three years period following the calendar year in which the right to receive the bonus arose.

2 December 2003 External T.I. 2003-00485850 - Cost of Property Acquired for Shares

Unedited CRA Tags
85

Principal Issues: Cost of property acquired by corporation in exchange for the issuance of corporation's treasury shares.

Position: Cost of the property should generally reflect the price agreed to between the parties. However, where no price is ascertainable, the amount added to the stated capital account maintained for the class or series of shares issued on the exchange is relevant to determining cost.

Reasons: Implication of the decision of the Federal Court of Appeal in Teleglobe Canada Inc. v. R..

2 December 2003 External T.I. 2003-0048585 - Cost of Property Acquired for Shares

Unedited CRA Tags
85

Principal Issues: Cost of property acquired by corporation in exchange for the issuance of corporation's treasury shares.

Position: Cost of the property should generally reflect the price agreed to between the parties. However, where no price is ascertainable, the amount added to the stated capital account maintained for the class or series of shares issued on the exchange is relevant to determining cost.

Reasons: Implication of the decision of the Federal Court of Appeal in Teleglobe Canada Inc. v. R..

10 October 2003 External T.I. 2003-00300850 F - Part IV Circularity Problem

Unedited CRA Tags
186(1) 129(1)

Principal Issues: Whether the CCRA has an administrative position providing Part IV tax relief when the cross-redemption of shares of connected corporations with RDTOH creates a circularity problem in computing Part IV tax ?

Position: No.

Reasons: The provisions of sections 186 and 129 are clear and must apply to the transactions as they were carried out.

10 October 2003 External T.I. 2003-00301450 F - Convertible Property- Bien Convertible

Unedited CRA Tags
51(1)

Principal Issues:
(1) Whether ss. 51(1) applies when, on the exchange of convertible property, the taxpayer receives shares that the corporation is not legally authorized to issue ? (2) In this situation, whether there are conditions under which ss. 51(1) could apply?

Position: (1) (2) No.

Reasons: (1) (2) The taxpayer must acquire the shares from the corporation on the exchange.

10 October 2003 External T.I. 2003-0030085 F - Part IV Circularity Problem

Unedited CRA Tags
186(1) 129(1)

Principal Issues: Whether the CCRA has an administrative position providing Part IV tax relief when the cross-redemption of shares of connected corporations with RDTOH creates a circularity problem in computing Part IV tax ?

Position: No.

Reasons: The provisions of sections 186 and 129 are clear and must apply to the transactions as they were carried out.

10 October 2003 External T.I. 2003-0030145 F - Convertible Property- Bien Convertible

Unedited CRA Tags
51(1)

Principal Issues:
(1) Whether ss. 51(1) applies when, on the exchange of convertible property, the taxpayer receives shares that the corporation is not legally authorized to issue ? (2) In this situation, whether there are conditions under which ss. 51(1) could apply?

Position: (1) (2) No.

Reasons: (1) (2) The taxpayer must acquire the shares from the corporation on the exchange.

Technical Interpretation - Internal

18 December 2003 Internal T.I. 2003-00452270 F - FRAIS JURIDIQUES-PENSION

Unedited CRA Tags
18(1)a) 18(1)b)

Position Adoptée:
Non.

18 December 2003 Internal T.I. 2003-0045227 F - FRAIS JURIDIQUES-PENSION

Unedited CRA Tags
18(1)a) 18(1)b)

Position Adoptée:
Non.

10 December 2003 Internal T.I. 2003-00474670 F - DESENREGISTREMENT D'UN REER

Unedited CRA Tags
146(12) 153(1)(j) REG 214(3)

Position Adoptée:
Non, il doit utiliser la juste valeur marchande.
RAISON POUR POSITION ADOPTÉE:
Analyse législative

Le 10 décembre 2003

10 December 2003 Internal T.I. 2003-0047467 F - DESENREGISTREMENT D'UN REER

Unedited CRA Tags
146(12) 153(1)(j) REG 214(3)

Position Adoptée:
Non, il doit utiliser la juste valeur marchande.
RAISON POUR POSITION ADOPTÉE:
Analyse législative

Le 10 décembre 2003

20 November 2003 Internal T.I. 2003-00362370 - DEDUCTIBILITY OF HST ASSESSMENT

Unedited CRA Tags
18(1)(a)

Principal Issues: Deductibility for income tax purposes of HST, interest and penalties assessed under the Excise Tax Act, in a situation where the reassessment is under appeal and the taxpayer has filed a waiver regarding deductibility that is subject to the outcome of the appeal.

Position: Subject to the amount of the reassessment being upheld after the final resolution of the appeal process, the HST, interest and penalties are deductible in the taxation year in which the notice of assessment was received.

Reasons: The amounts were generally incurred for the purpose of gaining or producing income from the business and therefore, in accordance with the CCRA's longstanding position outlined in IC 77-11, and consistent with the principles enunciated in the SCC decision in 65302 British Columbia Limited, the amounts are deductible in the year the notice of reassessment was received.

20 November 2003 Internal T.I. 2003-0036237 - DEDUCTIBILITY OF HST ASSESSMENT

Unedited CRA Tags
18(1)(a)

Principal Issues: Deductibility for income tax purposes of HST, interest and penalties assessed under the Excise Tax Act, in a situation where the reassessment is under appeal and the taxpayer has filed a waiver regarding deductibility that is subject to the outcome of the appeal.

Position: Subject to the amount of the reassessment being upheld after the final resolution of the appeal process, the HST, interest and penalties are deductible in the taxation year in which the notice of assessment was received.

Reasons: The amounts were generally incurred for the purpose of gaining or producing income from the business and therefore, in accordance with the CCRA's longstanding position outlined in IC 77-11, and consistent with the principles enunciated in the SCC decision in 65302 British Columbia Limited, the amounts are deductible in the year the notice of reassessment was received.