Income Tax Severed Letters - 2004-04-23

Ruling

14 April 2004 Ruling 2004-0062833I7 - Recharacterization of amounts-EPSP-clarification

Unedited CRA Tags
144(1) 6(1)(d)

Principal Issues: This is a clarification of our previous opinion.

Position: Our previous opinion describes the mechanism of the EPSP provisions and does not preclude the application of any other provision of the Act.

Reasons: As per definitions in subsection 144(1).

2003 Ruling 2003-0051283 - XXXXXXXXXX ATR

Unedited CRA Tags
Art. XIII(4) U.S. 247(2) 245(2)

Principal Issues: (i) Whether the value of the shares of Financeco is derived principally from real property situated in Canada? (ii) Whether Article XIII of the Canada-United States Income Tax Convention is applicable where the gain arose as a result of the application of subsection 40(3) of the Income Tax Act (the "Act")? XXXXXXXXXX

Position: (i) No. (ii) Yes. XXXXXXXXXX

Reasons: (i) XXXXXXXXXX ; The gain that arose as a consequence of the application of subsection 40(3) of the Act does not have anything to do with the value of these shares. (ii) The gain is deemed to be a gain from disposition of property under paragraph 40(3)(c). XXXXXXXXXX

2002 Ruling 2002-0169123 - PHANTOM STOCK UNITS

Unedited CRA Tags
REG 6801(d)

Principal Issues:
Will the proposed amendment to a deferred share unit plan to add units with values that are tied to the values of special redeemable preferred shares of a subsidiary, that derive their values from earmarked portfolio investments, violate 6801(d)?

Position: No.

Reasons:
The proposed amendments do not cause the conditions in paragraph 6801(d) to not be satisfied. The condition that the value of units be based on the FMV of shares of the corporation or of a related corporation is not offended by the amendments.

Technical Interpretation - External

19 April 2004 External T.I. 2004-0056871E5 - PHSP and Health and Welfare Trust

Unedited CRA Tags
248(1)

Principal Issues: The deductibility of contributions to a health and welfare trust set up as a PHSP for a corporate employer and a sole proprietor with employees.

Position: General comments provided.

19 April 2004 External T.I. 2004-0063851E5 F - Année d'imposition du revenu d'entreprise

Unedited CRA Tags
34.1 249.1
Summary Under
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(4)
s. 249.1(1)(b) requires inclusion of partnership income in current calendar year where it ceases to carry on business in the year

Principales Questions: Un particulier est associé d'une société de personnes qui exploite une entreprise. Le particulier a fait un choix en vertu du paragraphe 249.1(4) de la Loi afin que la société de personnes ait un exercice financier ne correspondant pas à l'année civile. La société de personnes dispose du fonds de commerce et cesse d'exploiter son entreprise avant la fin de l'année civile 2003. Dans quelle année civile seront inclus les revenus de l'exercice financier qui commence au cours de 2003?

Position Adoptée: Les revenus de la société de personnes pour l'exercice financier qui commence en 2003 et qui comprennent les revenus d'entreprise provenant de la disposition de l'entreprise seront ajoutés aux revenus du particulier en 2003.

Raisons: Puisque l'entreprise de la société de personnes n'a pas été exploitée tout au long de la période qui commence au début de l'exercice financier et qui se termine à la fin de l'année civile, le paragraphe 249.1(4) de la Loi ne s'applique plus. L'alinéa 249.1(1)b) de la Loi s'applique de sorte que l'exercice financier ne se termine pas au-delà de la fin de l'année civile.

19 April 2004 External T.I. 2004-0065551E5 - Retirement Allowance - by instalments

Unedited CRA Tags
248(1)

Principal Issues: What is the basis for the CRA's position in paragraph 17 of Interpretation Bulletin IT-337R4?

Position: Question of fact and question of law in each particular case.

Reasons: In the example cited in the bulletin, the employee must choose the instalment feature before he is legally entitled to receive the retiring allowance.

16 April 2004 External T.I. 2003-0046111E5 - Taxation of IRA upon Death

Unedited CRA Tags
70(2) 56(1)a)(i)(C.1) 128.1(10)

Principal Issues: Tax treatment of IRA upon death of a resident of Canada who recently immigrated to Canada.

Position: Subsections 70(2) and 70(3) would apply.

Reasons: Interpretation of the law.

16 April 2004 External T.I. 2004-0056431E5 - Commission Rebates - RRSP Advantage

Unedited CRA Tags
146(2)(c.4) 146(13.1)

Principal Issues: Will we consider that an RRSP advantage has been conferred where a commission rebate is allocated by a broker to a client's non-registered account in a situation where the rebate is computed by reference to the client's total holdings in both his RRSP and his non-registered accounts.

Position: Yes.

Reasons: The amount of the rebate is linked to the existence of an RRSP. Because the advantage is conferred outside of the RRSP, it does not fall under the exceptions to the RRSP advantage provision in subparagraph 146(2)(c.4)(ii).

2004-005643
XXXXXXXXXX C. Lalonde
(613) 957-2060
April 16, 2004

14 April 2004 External T.I. 2004-0058301E5 - Employer Paid Professional Member Initiation Fees

Unedited CRA Tags
6(1)(a) 9(1) 18(1)(a)

Principal Issues: 1. Whether professional initiation or admission fees paid by an employer on behalf of its employee is a taxable benefit to the employee. 2. Whether such fees paid by an employer on behalf of its employee are deductible by the employer.

Position: 1. The payment of professional initiation or admission fees is a taxable employment benefit to the employee under paragraph 6(1)(a). 2. The professional initiation or admission fees paid by an employer on behalf of its employee are deductible by the employer.

Reasons: 1. The payment of professional initiation or admission fees confers an economic advantage which is primarily for the employee's benefit. 2. The professional initiation or admission fees paid on behalf of an employee are a deductible business expense of the employer where the amount of the payment is included in the employee's income under paragraph 6(1)(a).

8 April 2004 External T.I. 2003-0044841E5 - Canada Council Grants - Income inclusion

Unedited CRA Tags
12(1)(x) 9(1)

Principal Issues: 1) When does a recipient recognize in income a grant
received from the Canada Council; 2) How to report income grants received by an artist in collaborations with other artists?

Position: 1) Income is reported in the year received pursuant to
paragraph 12(1)(x), subject to an election under subsection 12(2.2) of the Act. 2) Generally, the grant will be recognized in income in the year received, subject to an election under subsection 12(2.2) and dependant on the underlying legal relationship between the collaborators.

Reasons: In each case, consistent with the wording of the
legislation. In the case of artist collaborations, the determination can only be made following a review of all the facts and underlying circumstances.

Technical Interpretation - Internal

15 April 2004 Internal T.I. 2004-0062451I7 F - Résidence principale

Unedited CRA Tags
54
Summary Under
Tax Topics - Income Tax Act - Section 54 - Principal Residence - Paragraph (c)
no need to file form for principal residence portion of disposed-of property if it was fully exempted

Principales Questions:
1. Est-ce que la disposition de la partie du fonds de terre excédant un demi-hectare doit être déclarée séparément de la disposition de celle qui se qualifie comme résidence principale?
2. Selon notre pratique administrative, est-ce que le contribuable devait produire un formulaire T2091 à l'égard de la partie du bien qui est admissible comme résidence principale?

Position Adoptée:
1. La partie du fonds de terre excédant un demi-hectare ne répond pas à la définition de résidence principale. Sa disposition doit être déclarée séparément de la disposition de la partie qui est admissible comme résidence principale et le gain en capital doit être calculé séparément.
2. Si le contribuable n'a pas de gain résultant de la disposition du bien par ailleurs admissible comme résidence principale après l'utilisation de la formule d'exemption pour résidence principale et si la situation décrite au paragraphe 7b) du Bulletin d'interprétation IT-120R6 ne s'applique pas, il n'était pas obligé, selon notre pratique administrative, de produire un formulaire T2091.

Raisons:
1. Paragraphe 19 du Bulletin d'interprétation IT-120R6.
2. Paragraphe 7 du Bulletin d'interprétation IT-120R6.

15 April 2004 Internal T.I. 2004-0064661I7 - Registered Investment Year-end

Principal Issues: Can a mutual fund trust that is a registered investment that has elected pursuant to subsection 132.11(1) of the Income Tax Act to have a December 15th year-end also file its T3-RI return with a December 15th year-end?

Position: Yes.

Reasons: There is nothing in the law to prevent it.