Income Tax Severed Letters - 2004-03-05

Miscellaneous

3 March 2004 Miscellaneous 2004-0061781I7 F - Engagement de non-concurrence

Unedited CRA Tags
14(1)

Principales Questions: Est-ce que les sommes versées en vertu d'un engagement de non-concurrence constituent des montants en immobilisations admissibles dans la situation décrite ?

Position Adoptée: Oui.

Raisons: Les sommes se rattachent à l'achalandage associé à l'entreprise vendue.

3 March 2004 Miscellaneous 2004-0057251E5 - Definitions of passenger vehicle and automobile

Unedited CRA Tags
definition of automobile in 248(1) 6(6)(a) definition of passenger vehicle in 248(1) 13(7)(g)

Principal Issues: Whether or not a pick-up truck used by a self-employed farmer is excluded from the definition of an automobile, and therefore also excluded from the definition of a passenger vehicle, due to the remote location of a farm.

Position: It depends.

Reasons: It is a question of fact whether or not an occupant of a vehicle is an employee at a particular work location that is a "special work site" or "remote work location". There is no indication that the truck is being used to transport employees to a "special work site" or "remote work location". Accordingly, as a self-employed farmer, the truck used in the remote farming operation does not qualify for the exclusion from the definition of automobile. Thus the truck meets the definition of an automobile and also is a passenger vehicle.

2 March 2004 Miscellaneous 2003-0045921I7 F - 118(5) - impact d'une clause rétroactive

Unedited CRA Tags
118(1)b) 118(5)

Principales Questions: Est-ce que la clause d'un jugement indiquant que la pension alimentaire payée par un contribuable antérieurement était payée à l'égard d'un enfant uniquement permettrait à ce contribuable de modifier ses déclarations de revenus antérieures pour réclamer le crédit équivalent pour personnes entièrement à charge à l'égard de son autre enfant si le seul élément qui l'empêchait de réclamer un tel crédit à l'égard de cet enfant (au cours de ces années antérieures) était l'application du paragraphe 118(5) de la Loi?

Position Adoptée: Non.

Raisons: Le jugement initial indiquait clairement que la pension alimentaire était payée pour les deux enfants. Les documents que nous avons ne démontrent pas que la clause rétroactive est un simple éclaircissement de la première convention et qu'elle reflète l'intention initiale réelle des parties.

2 March 2004 Miscellaneous 2003-0042631E5 F - Déductibilité de dépenses

Unedited CRA Tags
18(1)a) 54 248(3)b)

Principales Questions: Est-ce que les taxes, assurances et frais d'entretien à l'égard d'un appartement en copropriété sont déductibles? S'ils ne sont pas déductibles, est-ce que ces frais peuvent réduire le gain en capital qui sera réalisé lors de la disposition de l'appartement.

Position Adoptée: Ces frais ne sont pas déductibles dans le calcul du revenu. Ce genre de frais ne réduira pas non plus le gain en capital.

Raisons: L'appartement en copropriété ne sert pas à gagner du revenu d'entreprise ni du revenu de bien. Par conséquent, l'alinéa 18(1)a) de la Loi empêche la déduction des frais encourus relativement à cet appartement.
Ce genre de frais ne réduit pas le gain en capital d'un bien puisque ce genre de frais n'est généralement pas ajouté au coût d'un bien et il ne s'agit pas de dépenses engagées en vue de réaliser la disposition.

1 March 2004 Miscellaneous 2003-0015041E5 - Gift From an Inter-Vivos Trust

Unedited CRA Tags
118.1

Principal Issues: Whether an inter-vivos trust may claim a donation tax credit under section 118.1 of the Act where, but for discretionary decisions made by the trustees, the gift would not have been made.

Position: Question of fact but generally yes.

Reasons: Previous positions

1 March 2004 Miscellaneous 2003-0060381E5 F - Police d'assurance exonérée

Unedited CRA Tags
12.2(11) 148(1)

Principales Questions: (1)Une police d'assurance-vie est-elle une police exonérée? (2) Comment doit-on traiter un remboursement de primes à l'échéance?

Position Adoptée: (1) Aucune (2) C'est un produit de disposition

Raisons: (1)Cette détermination doit être faite par l'émetteur de la police d'assurance-vie puisque les renseignements nécessaires à une telle détermination ne figurent pas dans les polices proprement dites. (2) Définition de produit de disposition au paragraphe 148(1) de la Loi.

1 March 2004 Miscellaneous 2003-0017861E5 F - Bien agricole admissible

Unedited CRA Tags
110.6(1) 110.6(2)

Principales Questions: 1. Est-ce que la terre agricole du contribuable est un bien agricole admissible pour les fins de la déduction pour gains en capital tel que défini au paragraphe 110.6(2) de la Loi ?
2. Est-ce que le contribuable aurait pu transférer sa terre agricole à ses enfants selon les modalités du paragraph 73(3) de la Loi ?

Position Adoptée: 1. Compte tenu des informations fournies, il est probable que oui. 2. En théorie, probablement.

Raisons: 1. Question de fait. Commentaires généraux expliquant les conditions prévues aux sous-alinéas a)(vi) et (vii) de la définition de "bien agricole admissible" énoncée au paragraphe 110.6(1).
2. Le contribuable n'a pas transféré la terre agricole à ses enfants à lépoque. Commentaires généraux concernant 73(3).

1 March 2004 Miscellaneous 2004-0059151E5 F - Déduction des intérêts

Unedited CRA Tags
20(1)c)

Principales Questions: Un contribuable peut-il déduire les intérêts sur un emprunt auprès d'une banque américaine lorsque le produit de l'emprunt a servi à acquérir des actions d'une société privée américaine?

Position Adoptée: Question de fait. Le fait que l'emprunt soit contracté auprès d'une banque étrangère ne constitue pas un élément déterminant pour établir si les intérêts sont déductibles.

Raisons: Libellé du paragraphe 20(1)c) de la Loi. Dans Shell la Cour suprême a statué que les intérêts sur des emprunts en devises auprès d'institutions financières non-résidente étaient déductibles.

27 February 2004 Miscellaneous 2003-0051671E5 - Convertible preferred shares - whether QI

Unedited CRA Tags
146(1)(a R4900 R5100

Principal Issues: Whether convertible preferred shares and warrants to be issued by a particular corporation would be considered "qualified investments" for a trust governed by an RRSP.

Position: General comments only.

Reasons: Whether particular investments are qualified investments is a question of fact.

27 February 2004 Miscellaneous 2003-0032911E5 - Structured Settlement - Non-insurance Assignee

Unedited CRA Tags
12.2 20(7)(c) 1400(3) 9(1)

Principal Issues: Can a non-insurance corporation have access to reserves under a structured settlement arrangement?

Position: No

Reasons: no "reported reserves" or "policy reserves"

27 February 2004 Miscellaneous 2003-0054241E5 - Convertible shares -whether qualified investments

Unedited CRA Tags
146(1)(b)(i)

Principal Issues: Whether convertible debentures of a company that trade on the TSX Venture Exchange are qualified investments for a trust governed by an RRSP.

Position: Question of fact. However, since the Department of Finance proposes to add the TSX Venture Exchange to the list of prescribed stock exchanges in Canada, the debentures will likely qualify as qualified investments.

Reasons: Debentures of a company whose shares are listed on a prescribed stock change are explicitly included in the definition of qualified investment pursuant to subparagraph 146(1)(b)(i).

26 February 2004 Miscellaneous 2003-0053511E5 - Social Assistance

Unedited CRA Tags
56(1)(u) Reg 233

Principal Issues: Are amounts excluded from T5007 reporting by subsection 233(2) of the Regulations, still social assistance for purposes of paragraph 56(1)(u)?

Position: It is the practise of the CRA not to include these amounts in the net income of the recipients.

Reasons: It is our understanding that the purpose of subsection 233(2) of the Regulations is to exclude those amounts from the calculation of income-tested benefits.

26 February 2004 Miscellaneous 2004-0063471E5 - Employer-Paid Health Club Membership

Unedited CRA Tags
6(1)(a)

Principal Issues: Whether an employer-paid health club membership is a taxable employment benefit.

Position: Yes.

Reasons: Employee is the primary beneficiary notwithstanding that there may be incidental benefits to the employer.

26 February 2004 Miscellaneous 2003-0045471E5 F - Prêt à un actionnaire

Unedited CRA Tags
15(2) 15(2.4) 80.4(2) 80(1)

Principales Questions: Diverses questions relatives à l'application du paragraphe 15(2) et des articles 80 et 80.4 de la Loi à un prêt ne portant pas intérêt consenti par une société à un actionnaire/employé pour l'achat d'une résidence pour l'usage personnel de ce dernier.

Position Adoptée: Commentaires généraux.

Raisons: Application de la Loi.

25 February 2004 Miscellaneous 2004-0059251E5 - Para. 88(1)(c.3)-Substituted Property

Unedited CRA Tags
88(1)(c.3) 88(1)(c)(vi) 88(1)(c.4)

Principal Issues: Whether the partnership interest acquired by the individual is "substituted property" within the extended definition in paragraph 88(1)(c.3) for the purposes of the bump denial rules.

Position: Yes

Reasons: Legislation

25 February 2004 Miscellaneous 2004-0056741E5 - Qualified Farm Property

Unedited CRA Tags
110.6(1)

Principal Issues: Clarification concerning the 2-year gross revenue test in the definition of "qualified farm property" in subsection 110.6(1) of Act.

Position: General comments provided.

Reasons: General comments provided.

25 February 2004 Miscellaneous 2003-0042461E5 F - Invalidité d'un actionnaire/admin./employé

Unedited CRA Tags
9 18(1)a)

Principales Questions: Lorsqu'une société est le preneur et le bénéficiaire d'une police d'assurance-invalidité pour un actionnaire/administrateur/employé, est-ce que les primes payées par la société sont déductibles de son revenu ?
Un avantage imposable doit-il être inclus sur le T4 de l'employé étant donné qu'il continue d'être payé par la société en cas d'invalidité ?

Position Adoptée: Non à la première question.
Le montant payé à l'actionnaire/administrateur/employé par la société en cas d'invalidité doit être inclus dans le revenu de l'individu. Toutefois, il n'y a pas d'avantage imposable en vertu de l'alinéa 6(1)a) de la Loi ni d'avantage conféré à un actionnaire en vertu du paragraphe 15(1) de la Loi relativement au paiement des primes à l'assureur par la société.

Raisons: 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. L'individu reçoit un montant qui s'apparente à un salaire qu'il continue de recevoir. La société est bénéficiaire des prestations.

24 February 2004 Miscellaneous 2003-0049741E5 - Property Distribution

Unedited CRA Tags
73(1) 74.1 74.2 54

Principal Issues: Can an individual transfer a rental property to the individual's spouse or common-law partner on a "rollover" basis so as to defer taxation on capital gains?

Position: Yes , but attribution will apply.

Reasons: ITA 73(1) provides for an automatic rollover, unless an election is made not to have the ITA 73(1) provisions apply.

24 February 2004 Miscellaneous 2004-0056861E5

Unedited CRA Tags
18(3.1) 20(1)(e) 20(29)

Principal Issues: Whether financing costs ("Financing Expenses") incurred in the course of a borrowing of money used to fund the construction costs of a building may be: capitalized in full in the year incurred pursuant to subsection 18(3.1); or capitalized in equal portions over a five year period pursuant to the subparagraph 20(1)(e)(iii) and subsection 18(3.1)?.

Position: The Financing Expense amount capitalized in a taxation year pursuant to subsection 18(3.1) will be equal to the amount of the Financing Expense that is deductible in the taxation year pursuant to paragraph 20(1)(e).

Reasons: Paragraph 18(3.1)(a) of the Act is not an enabling section with respect to the deductibility of amounts. Instead, it precludes a deduction for certain outlays and expenses, generally referred to as construction period soft costs (including interest and Financing Expenses) that would have been otherwise deductible. Therefore, until an amount that is a Financing Expense described in subparagraph 20(1)(e)(ii) is deductible pursuant to paragraph 20(1)(e), subsection 18(3.1) of the Act will not have any application.

23 February 2004 Miscellaneous 2004-0057051E5 F - RAP - Personne séparée

Unedited CRA Tags
146.01

Principales Questions: Un particulier qui vit séparé de son époux peut-il bénéficier du Régime d'accession à la propriété si son époux possède une habitation à titre de propriétaire -occupant?

Position Adoptée: Question de fait. Notamment, l'époux ne doit pas avoir possédé une habitation à titre de propriétaire-occupant au cours de la période visée par la Loi qui était une habitation que le particulier occupait pendant le mariage.

Raisons: Alinéa d.1) de la définition de "montant admissible principal" au paragraphe 146.01(1) de la Loi.

23 February 2004 Miscellaneous 2003-0050641E5 F - Fiducie

Unedited CRA Tags
149.1(1)

Principales Questions: (1) Une fondation publique de bienfaisance peut-elle recevoir un don sous forme de participation résiduaire au capital d'une fiducie? (2) Quelle table de mortalité faut-il utiliser pour établir la juste valeur marchande d'un intérêt résiduel dans une participation au capital d'une fiducie?

Position Adoptée: (1) Oui, si la fondation ne contracte pas, entre autres, une dette. (2) L'ARC ne préconise aucune table en particulier.

Raisons: (1) L'alinéa 149.1(3) d) de la Loi prévoit que le Ministre peut révoquer l'enregistrement d'une fondation si elle contracte une dette. (2) Il faut tenir compte de tous les faits pertinents pour établir la juste valeur marchande d'un intérêt résiduaire dans une participation au capital d'une fiducie.

23 February 2004 Miscellaneous 2003-0051371E5 F - Déduction des intérêts

Unedited CRA Tags
20(1)c) 73(1)

Principales Questions: Les intérêts sont-ils déductibles par suite d'une série de transactions effectuées dans le but de rendre les intérêts déductibles?

Position Adoptée: Oui.

Raisons: Les conditions d'application du sous-alinéa 20(1)c)(i) de la Loi sont satisfaites.

20 February 2004 Miscellaneous 2003-0045561E5 - Medical Expense

Unedited CRA Tags
118.2(2)(a) 118.2(2)(o)

Principal Issues: Whether the cost of a weight management program would qualify as a medical expense where the program is run by a corporation.

Position: Where payments are in respect of medical services performed by medical practitioners, as defined in the Act, they would qualify as medical expenses

Reasons: Allowed under 118.2(2)(a)

17 February 2004 Miscellaneous 2003-0054301I7 - Reimbursing an employee's pilot training

Principal Issues: Whether reimbursements paid to an aviation and avionics technician for civilian pilot training is a taxable benefit.

Position: Question of fact, but likely not.

Reasons: According to the employer, there is no benefit to them.

16 February 2004 Miscellaneous 2003-0054091E5 F - Rollover for Contractors

Unedited CRA Tags
85(1) 56(4)

Principales Questions: A) Whether rights to holdbacks of an individual carrying on a construction business and using the progress billing method for the computation of his income are considered to be eligible property for the purposes of section 85 of the Act.
B) Whether subsection 56(4) applies in such a situation.

Position Adoptée: A) Yes.
B) No

Raisons: Previous positions.

10 February 2004 Miscellaneous 2003-0052621A11 F - Régime de pension étranger

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

Principales Questions:
Est-ce que des prestations de pension reçues par un résident du Canada provenant d'un régime étranger (XXXXXXXXXX ) sont imposables au Canada?

Position Adoptée: Oui.

Raisons: Les prestations de pension ne sont pas sujettes au paragraphe 1 de l'article 18 de la convention fiscale entre le Canada et la France parce qu'elles ne sont pas "versées au titre d'un emploi antérieur". Le contribuable était un travailleur indépendant lorsqu'il contribuait à ce régime.

2004 Miscellaneous 2003-00538110 - Loss Consolidation - Supplementary Ruling

Unedited CRA Tags
20(1)(c) 245

Principal Issues: Minor changes to proposed transactions

Position: Confirmed rulings granted in ruling 2002-013308

Reasons: Minor changes do not affect rulings

2004 Miscellaneous 2003-0053811 - Loss Consolidation - Supplementary Ruling

Unedited CRA Tags
20(1)(c) 245

Principal Issues: Minor changes to proposed transactions

Position: Confirmed rulings granted in ruling 2002-013308

Reasons: Minor changes do not affect rulings

2003 Miscellaneous 2003-0050211 - Supplementary Ruling Re: Butterfly

Unedited CRA Tags
55(3)(b)

Principal Issues: Change in facts and proposed transactions

Position: Ruling confirmed

Reasons: Minor changes

2003 Miscellaneous 2003-00502110 - Supplementary Ruling Re: Butterfly

Unedited CRA Tags
55(3)(b)

Principal Issues: Change in facts and proposed transactions

Position: Ruling confirmed

Reasons: Minor changes

2 December 2002 Miscellaneous 2003-0048571C6 - TEI 2003 QUESTION 16

Unedited CRA Tags
251(5)(b) 256(1.4)

Principal Issues: In applying 251(5)(b)(i) and 256(1.4)(a), whether the determination of control is made assuming that (1) all the rights owned by all persons are considered "exercised" jointly at a single time and tested together for control or (2) the individual shareholder's rights are deemed exercised separately and tested separately for control.

Position: When 251(5)(b)(i) applies, for each person that has a right, a distinct determination of "control" of the corporation must be made on the assumption that that person owned the shares of the corporation which the person has the right to, or the right to acquire, or the right to control the voting rights of such shares. When 256(1.4)(a) applies, the "control" of a corporation must be determined once, taking into account all the shares that all the persons with a right are deemed to own and that are deemed to be issued and outstanding.

Reasons: The law and positions taken in previous technical interpretations.

Ruling

2004 Ruling 2003-00187830 - DEFERRED SHARE UNITS ISSUE OF SHARES

Unedited CRA Tags
7(1) 7(3)(a)

Principal Issues: Will section 7 apply to the proposed DSU plan that will issue shares from treasury to settle any DSU obligations?

Position: Yes.

Reasons: The proposed plan will constitute an agreement to issue shares to employees, therefore, the provisions of section 7 will prevail.

2004 Ruling 2003-0018783 - DEFERRED SHARE UNITS ISSUE OF SHARES

Unedited CRA Tags
7(1) 7(3)(a)

Principal Issues: Will section 7 apply to the proposed DSU plan that will issue shares from treasury to settle any DSU obligations?

Position: Yes.

Reasons: The proposed plan will constitute an agreement to issue shares to employees, therefore, the provisions of section 7 will prevail.

2003 Ruling 2002-01703530 - EMPLOYEE STOCK OPTION PRESCRIBED SHARES

Unedited CRA Tags
7(1) 110(1)

Principal Issues:
Is the plan, as amended, an employee stock option plan that is subject to section 7(1) and will the shares be prescribed shares?

Position: Yes

Reasons:
The amendments to the plan will ensure the prescribed share rules will apply.

2003 Ruling 2003-0045173 - health spending account

Unedited CRA Tags
5(1) 6(1)(a)

Principal Issues: 1. Whether health spending account offered to senior executives who are already covered by two other corporate group phsp's, would qualify as a phsp;
2. whether the allocation of credits, which is linked to the bonus the executive is entitled to receive, would result in employment income to the executives.

Position: 1. Plan would qualify as a phsp
2. Allocation of credits would not result in employment income to the executive.

Reasons: 1. The plan falls within the definition of phsp, and meets the guidelines set out in IT-529 for health spending accounts.
2. The allocation of credits falls within the guidelines for flex plans set out in IT-529 in that there is an irrevocable election made prior to the plan year, and prior to the executive being entitled to receive any bonus.

2003 Ruling 2003-0050493 - INCORPORATING A PARTNERSHIP

Unedited CRA Tags
85(3) 125(7)

Principal Issues:
Whether a professional corporation, providing XXXXXXXXXX services to another corporation, will be carrying on a "personal services business" within the meaning of subsection 125(7) of the Act.

Position: No.

Reasons: The former partners are providing services through a "Contracting Company". They do not provide services to "Newco" in his/her capacity as an employee or officer of Newco.

2003 Ruling 2003-00451730 - health spending account

Unedited CRA Tags
5(1) 6(1)(a)

Principal Issues: 1. Whether health spending account offered to senior executives who are already covered by two other corporate group phsp's, would qualify as a phsp;
2. whether the allocation of credits, which is linked to the bonus the executive is entitled to receive, would result in employment income to the executives.

Position: 1. Plan would qualify as a phsp
2. Allocation of credits would not result in employment income to the executive.

Reasons: 1. The plan falls within the definition of phsp, and meets the guidelines set out in IT-529 for health spending accounts.
2. The allocation of credits falls within the guidelines for flex plans set out in IT-529 in that there is an irrevocable election made prior to the plan year, and prior to the executive being entitled to receive any bonus.

2003 Ruling 2003-0054013 - Assumption of Debt

Unedited CRA Tags
85(1)(b)

Principal Issues: Whether a subsidiary that becomes a co-obligor of a parent's debts on a subsection 85(1) transfer of property from the parent to the subsidiary, but is fully indemnified by the parent, is considered to have assumed the parent's liabilities as consideration for the transfer.

Position: No.

Reasons: The parent will remain liable for the debt and the subsidiary will be fully indemnified by the parent for any liabilities it sustains as a result of agreeing to become a co-obligor of the parents debts. This position is consistent with a previous ruling.

2003 Ruling 2003-00504930 - INCORPORATING A PARTNERSHIP

Unedited CRA Tags
85(3) 125(7)

Principal Issues:
Whether a professional corporation, providing XXXXXXXXXX services to another corporation, will be carrying on a "personal services business" within the meaning of subsection 125(7) of the Act.

Position: No.

Reasons: The former partners are providing services through a "Contracting Company". They do not provide services to "Newco" in his/her capacity as an employee or officer of Newco.

2003 Ruling 2003-00540130 - Assumption of Debt

Unedited CRA Tags
85(1)(b)

Principal Issues: Whether a subsidiary that becomes a co-obligor of a parent's debts on a subsection 85(1) transfer of property from the parent to the subsidiary, but is fully indemnified by the parent, is considered to have assumed the parent's liabilities as consideration for the transfer.

Position: No.

Reasons: The parent will remain liable for the debt and the subsidiary will be fully indemnified by the parent for any liabilities it sustains as a result of agreeing to become a co-obligor of the parents debts. This position is consistent with a previous ruling.

2003 Ruling 2002-0170353 - EMPLOYEE STOCK OPTION PRESCRIBED SHARES

Unedited CRA Tags
7(1) 110(1)

Principal Issues:
Is the plan, as amended, an employee stock option plan that is subject to section 7(1) and will the shares be prescribed shares?

Position: Yes

Reasons:
The amendments to the plan will ensure the prescribed share rules will apply.