Income Tax Severed Letters - 2004-05-14

Ruling

2004 Ruling 2003-0053731R3 - Gross Asset Butterfly

Unedited CRA Tags
55(3)(b)

Principal Issues: Gross asset butterfly.

Position: Favorable rulings given.

Reasons: Complies with the law.

2004 Ruling 2003-0054381R3 - Proposed variation of a trust

Unedited CRA Tags
56(2) 69(1) 248(1)

Principal Issues: Whether the proposed variation of a trust would result: (1) in the creation of a new trust; (2) in the disposition of part of one of the beneficiaries' capital interest in the trust; and (3) in the conferral of a taxable benefit by the trust on any of the beneficiaries.

Position: (1) No; (2) Yes; the disposition will occur at fair market value pursuant to 69(1)(b); (3) No.

Reasons: Previous positions.

XXXXXXXXXX 2003-005438

2004 Ruling 2004-0069151R3 - Transfer of a business

Unedited CRA Tags
256(7)

Principal Issues: An amendment to the proposed transactions that involves the composition of the board of directors.

Position: Does not affect the rulings given.

Reasons: As a result of the amendment, XCO will still not have de jure control of Aco. Consequently, the rulings given in the original ruling will continue to apply.

2004 Ruling 2003-0030731R3 - Employee Benefit PLan

Unedited CRA Tags
248(1)

Principal Issues:
Whether the funding of a survivor benefits plan would be an RCA or an EBP?

Position:
The Plan will constitute an EBP.

Reasons:
The benefits payable under the Plan are payable only upon death of a Plan member and are considered to be a "death benefit" as defined under subsection 248(1).

2004 Ruling 2003-0036291R3 - Gift and Leaseback

Unedited CRA Tags
110.1 149.1(2)(a)

Principal Issues:
Whether the proposed donation of commercial property to a Charity will result in a gift for income tax purposes when space is leased back to the donor.
Whether the fact that the Charity will be leasing space in the transferred property to the donor and XXXXXXXXXX other tenants will result in the Charity being considered to be carrying on a business for the purpose of paragraph 149.1(2)(a).

Position:
Question of fact. In this case, provided that the rent to the Charity represents fair market value, the lease with the donor would not be regarded as consideration or benefit received by the donor with the result that the proposed transfer would constitute a gift.
Question of fact. In this case, based on the facts as described and the terms of the draft lease with the donor and the existing leases that will be assigned to the Charity on the completion of the gift, it is our view that the Charity will not be carrying on a business for the purposes of paragraph 149.1(2)(a).

Reasons:
Meets the definition of a gift.
Based on the terms of the leases, the Charity is not providing any services to the tenants that would indicate that it is earning income from a business.

XXXXXXXXXX 2003-003629

2004 Ruling 2003-0052061R3 - 259(3) Election - 149(1)(o.2) Pension Corporation

Unedited CRA Tags
259(3) 259(1) 149(1)(o.2)

Principal Issues: Will a pension corporation for the purposes of paragraph 149(1)(o.2) of the Act be entitled to make an election under subsection 259(3)?

Position: Yes, provided the pension corporation is a qualified corporation as defined in subsection 259(5) of the Act.

Reasons: Provisions of 259(1), (3) and (5).

2004 Ruling 2003-0052973 - Carrying on business in Canada

Unedited CRA Tags
2(3)(6) 253 115.2

Principal Issues: Whether non-resident investment company carrying on business in Canada.

Position: No

Reasons: Paragraph 2(3)(b) and section 253 of the Act do not apply and if the non-resident were carrying on business in Canada section 115.2 would apply.

Ministerial Correspondence

30 April 2004 Ministerial Correspondence 2004-0069871M4 - Definition of person,resident,Canada & individual

Unedited CRA Tags
248(1) 104(1) 96(1)

Principal Issues: General questions with respect to the definitions of "person", "resident", "Canada" and "individual" for purposes of the Act.

Position: General information provided.

Technical Interpretation - External

13 May 2004 External T.I. 2004-0065251E5 - Exchange of employee stock options.

Unedited CRA Tags
7(1)(b) 7(1.4)

Principal Issues: Tax consequences relating to the replacement of an "underwater" option.

Position: General comments provided.

Reasons: Application of the provisions.

11 May 2004 External T.I. 2004-0064541E5 - Automobile - Meaning of Goods or Equipment

Unedited CRA Tags
248(1) automobile

Principal Issues: For the purpose of paragraph (e) in the definition of automobile in subsection 248(1) of the Act, does "goods or equipment" mean tools?

Position: Goods or equipment can include tools. General comments provided.

Reasons: Whether or not a particular truck is an automobile for purposes of the definition is a question of fact.

11 May 2004 External T.I. 2004-0064701E5 - LCT and Partnership Earnings

Unedited CRA Tags
181

Principal Issues: Clarification of comments in document 2003-018169. (1) What amounts are used under subsection 181(3) if the financial statements presented to the corporation's shareholders were not prepared in accordance with GAAP? (2) What did we mean by "earnings" in document 2003-018169?

Position: (1) Amounts used are the amounts that would have been reflected on the balance sheet if it had been prepared in accordance with GAAP. (2) Income and losses.

Reasons: The legislation

11 May 2004 External T.I. 2004-0069521E5 F - Don de biens culturels

Unedited CRA Tags
248(32) 118.1 39(1)a)(i.1)
s. 248(32) inapplicable where contract of sale rather than deed of gift
no donation of an object where donation of an interest therein

Principales Questions: 1) Les dispositions des nouveaux paragraphes 248(30) à (36) de la Loi proposés sont-elles indistinctement applicables à une donation indirecte et à une vente à prix avantageux? 2) Peut-on considérer dans les deux scénarios en question, qu'il y a don d'un objet tel qu'exigé à la définition de "total des dons de biens culturels" à l'article 118.1 de la Loi?

Position Adoptée: 1) Non; 2) Seulement dans le scénario où le contrat entre les parties constitue une donation.

Raisons: Texte de la Loi.

10 May 2004 External T.I. 2004-0060621E5 - Donation from an Alter Ego Trust

Unedited CRA Tags
118.1(3) 118.1(13) 118.1(18) 118.1(15)

Principal Issues: Confirmation of the tax implications of the donation of non-qualified securities by an alter ego trust subsequent to the death of the settlor.

Position: See response for comments provided

Reasons: See response for comments provided

10 May 2004 External T.I. 2003-0039151E5 - Taxation of Lump-sum Settlement in Lieu of Pension

Unedited CRA Tags
56(1)(a) (o.1)

Principal Issues: Is there any provision for relief under the Income Tax Act for the taxation of amounts received by the taxpayer in 2002.

Position: No.

Reasons: Section 120.31 calculates the tax which is the total of the additional taxes that would be triggered for each relevant preceding year if the portion of the lump-sum payment that relates to that preceding year were added to the individual's taxable income for that year. The lump-sum payment in this scenario relates to subsequent years.

6 May 2004 External T.I. 2003-0039621E5 - RRIF - Claim against the estate

Unedited CRA Tags
146.3(1) 60(l)

Principal Issues:
Whether an amount paid to the surviving spouse pursuant to a claim that she made against the estate as a dependant spouse who has not been adequately provided for under the will be a designated benefit as defined in subsection 146.3(1) of the Act?

Position:
Question of fact but if the RRIF is transferred pursuant to a court order given under the legislation such as dependants relief or family law statute, it is the Agency view that the property transfer could be a designated benefit.

Reasons:
Amount must be paid as a consequence of death.

XXXXXXXXXX 2003-003962
L. J. Roy, CGA
May 6, 2004

30 April 2004 External T.I. 2004-0066811E5 - Pension income on marriage breakdown

Unedited CRA Tags
56(1)(a)(i) 56(4)

Principal Issues:
1. Is the portion of the pension benefits received from an RPP, by a former spouse of a pension plan member, as a result of marriage breakdown, included in the former spouse's income?
2. Does the same position apply when pension benefits are paid from an unfunded supplemental pension plan?

Position:
1. Yes, under subsection 56(1)(a)(i) of the Act if the relevant provincial law legislation confers title to an undivided interest in each family asset to each spouse as provided in a separation agreement, a divorce decree or court order.
2. Yes, for the same reasons as stated above if the unfunded supplemental pension plan is not an RCA, EBP or SDA.

Reasons:
1. Legal entitlement to the pension income as stated in the CRA's position in paragraph 11 of IT-499R.
2. Same as above.

29 April 2004 External T.I. 2003-0049291E5 - Revocable gift from non-resident

Unedited CRA Tags
69(1) 233.3 248(1)

Principal Issues: Whether a resident of Canada who receives a revocable gift of marketable securities from a non-resident is required to report the income earned on the gifted securities and whether it should report such securities in accordance with section 233.3 of the Act.

Position: In the hypothetical situation outlined in the request, the income would have to be reported by the Canadian resident, who would also have to report the gifted securities in accordance with section 233.3 of the Act (assuming their cost amount to him exceeds $100,000).

Reasons: Case law and CRA publications

27 April 2004 External T.I. 2004-0070551E5 - Taxation of Armed Forces Personnel Aboard Ship

Unedited CRA Tags
250(1)(b)

Principal Issues: Could a Canadian Armed Forces person stationed on a ship be exempt from Canadian tax?

Position: No.

Reasons: Either the person retains enough ties to be factually resident in Canada or the person is a deemed resident pursuant to 250(1)(b). Either way he or she is fully liable to tax in Canada. Moreover, tax treaties would not limit Canada's right to tax. Income that qualifies as a "special allowance" under 6(1)(b)(iii) would be tax exempt.

24 March 2004 External T.I. 2003-0034311E5 - "liquidation and a dissolution": What does it mean

Unedited CRA Tags
95(2)(e.1)
process of distributing the assets and satisfying the liabilities is "liquidation"
Words and Phrases
liquidation
Czech liquidation procedure compared to Canadian winding-up procedures

Principal Issues: "liquidation and a dissolution": What does it mean?

Position: The meaning derived from Canadian Law

Reasons: Interpretation of the Income Tax Act

Technical Interpretation - Internal

11 May 2004 Internal T.I. 2004-0071401I7 - RRSP benefit - annuitant deceased in 1988

Unedited CRA Tags
104(6) 104(24) 146(4)(c) 146(8.8)

Principal Issues: Tax implications of amounts received from a trusteed RRSP where the last annuitant died in 1988.

Position: Provided general comments.

Reasons: Tax treatment will be fact driven.

7 May 2004 Internal T.I. 2004-0073411I7 - Employer-Provided Meals:Benefits&Deductibility

Unedited CRA Tags
6(1)(a) 6(1)(b) 6(6) 67.1(2)

Principal Issues: In several examples where a trucking company pays for the meals of truck drivers who travel on in-town and out-of-town trips, whether the employees are required to include the value of the meals in income as a taxable benefit under paragraph 6(1)(a) of the Act and whether the employer's deduction is restricted under subsection 67.1(1).

Position: (A) On in-town trips there is a taxable benefit to the employees and the employer's deduction is not restricted. (B) On out-of-town trips there is no taxable benefit to the employees and the employer's deduction is restricted.

Reasons: (A) On in-town trips, the employer is paying for the meal expenses of employees who are not traveling away from the municipality and the metropolitan area where the employer's establishment is located at which they ordinarily report to work. Consequently, the employees are in receipt of a taxable benefit under paragraph 6(1)(a) of the Act for the value of the meals. Because the employees are required to include the value of the meals in their income under section 6 of the Act, the exception in paragraph 67.1(2)(d) applies and therefore, subsection 67.1(1) will not restrict the employer's deduction. (B) On out-of-town trips, the employees are not in receipt of a taxable benefit. The amounts received or benefits enjoyed by the employees in respect of the employer-provided meals are not required to be included in computing their income under paragraph 6(1)(a) of the Act because the expenses are incurred while they are travelling in the course of employment away from the municipality and the metropolitan area where the employer's establishment is located at which they ordinarily reported to work. The employer's deduction is restricted under subsection 67.1(1) of the Act to 50% of the amount paid. The exceptions in paragraphs 67.1(2)(d) and (e) of the Act are not applicable. For these exceptions to apply, the meals paid for by the employer would have to be excluded from the employees' income because of the special work site or remote work location exclusion in subsection 6(6) of the Act. The meals are not excluded from the employees' income because of subsection 6(6) of the Act, but are excluded based on what constitutes a benefit for purposes of paragraph 6(1)(a).

30 April 2004 Internal T.I. 2004-0068251I7 - internal reorganizations

Principal Issues: Whether subsection 69(5) applies to the series of transactions? Whether subsection 55(2) applies to the series of transactions?

Position: No. No.

Reasons: Subsection 84(3) applies to the redemption of the preferred shares and subsection 88(1) applies to the wind-up of Subco into Bco. Subsection 55(2) does not apply by virtue of the exemption under paragraph 55(3)(a).

29 April 2004 Internal T.I. 2003-0048331I7 - Dealer's equipment rental

Unedited CRA Tags
248(1) 1102(1)(b) 20(1)(a)

Principal Issues:
Whether the leased equipment of a dealer in heavy equipment is classified as inventory or depreciable property?

Position:
Probably classified as inventory.

Reasons:
Based on the particular facts and the jurisprudence

28 April 2004 Internal T.I. 2004-0071191I7 F - À quoi se rattache l'élément contrôle/propriété?

Unedited CRA Tags
104(1)
ownership or control test relates to all the listed persons

Principales Questions: L'expression "ayant la propriété ou le contrôle des biens de la fiducie" se rattache à quoi?/the expression "having ownership or control of the trust property" relates to what?

Position Adoptée: L'expression se rapporte aux éléments qui précèdent/ The expression relates to elements preceeding it.

Raisons: Interprétation législative/ Statutory interpretation