Income Tax Severed Letters - 2004-09-17

Principal Issues: 1) Deductibility of advertising place on company vehicle. 2) Whether standby charge is reduced because there is company advertising.

Position: 1) Should be capitalized unless of a recurring nature. 1) No, only exception is for clearly-marked emergency response vehicles.

Reasons: 1) Not of a current nature, part of cost of car. 2) No legislative expection in definition of automobile.

Principal Issues: 1) Whether the demolition of a rental property results in a capital gain for income tax purposes. 2) Whether there is a conversion of property from capital to inventory resulting in a disposition at fair market value? 3) Whether the sale of the real estate assets will result in a capital gain or business income.

Position: 1) Question of Fact. In this case no. 2) No. 3) Question of Fact.

Reasons: 1) The demolition will result in a disposition of the rental property with proceeds of disposition of nil. The terminal loss on the disposition of the rental property will be limited by paragraph 13(21.1)(b) of the Act. 2) Where real estate that is used for the purpose of gaining or producing income from a business or property is converted from capital property to inventory, the act of conversion does not constitute a disposition. 3) The ultimate sale of the real estate may give rise to a gain or loss on capital account or a gain or loss on income account depending on the facts of each situation.

Principal Issues: Would the employment income of status Indian employees of a remote store be tax exempt?

Position: Question of fact

Reasons: The TSO would have to determine whether any of the Guidelines are met, and if not, whether the "extenuating factors" analysis applicable to the donut stores or remote adjacent stores supports an exemption.