Income Tax Severed Letters - 2004-10-15

Ruling

2004 Ruling 2004-0080321R3 - Paragraph 149(1)(c)

Unedited CRA Tags

149(1)(c)

Principal Issues: Whether paragraph 149(1)(c) will apply to exempt the fishing income to be received by the First Nation from a limited partnership.

Position: Yes.

Reasons: The First Nation can be considered a public body performing a function of government in Canada within the meaning of paragraph 149(1)(c).

XXXXXXXXXX 2004-008032

2004 Ruling 2003-0038011R3 - Interpretation of "Occasionally Employed"

Unedited CRA Tags

212(1)(h)

Principal Issues: Will non-resident members of a registered pension plan providing services, in Canada, to their foreign employer, be considered "only occasionally employed in Canada" for purposes of subparagraphs 212(1)(h)(v) and (vi) of the Act.

Position: Question of fact.

Reasons: Applying the decision of the courts in the Louis V. Nanne v. The Queen 2000 DTC 1653 (TCC) case, an examination of the number of days the non-resident was employed in Canada, in relation to the total number of days employed with the employer in the year must be made to determine whether a person is "only occasionally employed in Canada", for purposes of subparagraphs 212(1)(h)(v) and (vi) of the Act.

2004 Ruling 2004-0080501R3 - Single-wing butterfly

Unedited CRA Tags

55(3)(b) 55(3.1)(a) 40(3.4)

Principal Issues: Standard butterfly

2004 Ruling 2003-0051111R3 - DSU plan, treasury shares

Unedited CRA Tags

6801(d) 248(1)

Principal Issues: 1) Will a deferred share unit plan qualify as a prescribed plan under paragraph 6801(d) of the Regulations? 2) Will the issuance of treasury shares result in the application of section 7?

Position: 1) Yes 2) Yes

Reasons: 1) The plan satisfies the conditions in paragraph 6801(d) 2) prior positions

XXXXXXXXXX 2003-005111

2004 Ruling 2004-0082601R3 F - Don à une municipalité

Unedited CRA Tags

110.1(1)a)(iv)

Principales Questions: Une municipalité régionale de comté peut-elle émettre des reçus pour don si, par ailleurs toutes les conditions prévues dans la Loi et applicables aux donations sont respectées?

Position Adoptée: Oui

Raisons: Selon l'interprétation retenue du mot "municipalité", une municipalité régionale de comté constitue une municipalité pour les fins du paragraphe 110.1(1) de la Loi.

2004 Ruling 2004-0065611R3 - Single-wing Butterfly

Unedited CRA Tags

55(3)b) 55(3.1)(a)

Principal Issues: Whether proceeds from sale of XXXXXXXXXX prior to the distribution may be considered to be a business asset.

Position: Yes.

Reasons: Transferee has entered into sufficient commitments to use proceeds to acquire another business asset.

2004 Ruling 2004-0092271R3 - Supplemental Ruling

Unedited CRA Tags

55(3)(b) 55(3.1)(a) 40(3.4)

Principal Issues: Minor changes to share structure to avoid corporate incest problem.

Position: Amended

Reasons: Changes do not affect rulings provided.

2004 Ruling 2004-0067521R3 - Amended DSU Plan

Unedited CRA Tags

6801(d)

Principal Issues: 1. Will certain amendments to the Plan affect its status as a Plan that complies with paragraph 6801(d)?
2. Does the amendment to the formula for calculating additional DSUs offend the postamble to paragraph 6801(d)?

Position: 1. No.
2.No.
REASONS: 1. The Plan continues to comply with the requirements of 6801(d) of the Regulations.
2.The amendments to the formula, which determines how many units are issued are based on future awarding of units and are based on targets and performance of the corporation.

XXXXXXXXXX 2004-006752

2004 Ruling 2004-0069011R3 - Incorporating a Partnership

Unedited CRA Tags

125(7)

Principal Issues: Whether a professional corporation, providing medical 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 that are providing services through a "Contracting Company" do not provide services to Newco in his/her capacity as an employee or officer of Newco.

2004 Ruling 2004-0075211R3 - stock options; employee benefit plans

Unedited CRA Tags

248(1) 6(1) 104 32.1

Principal Issues:
1. Will the SDA rules not apply because of the 3-year bonus payment rule?
2. Can all amounts retain their identity as they flow from the mutual fund trust through the EBP to the corporation?

Position:
1. Yes.
2. No.

Reasons:
1. The Plan awards a deferred unit in a year that is paid out within 3 years.
2. Amounts can only retain their character as interest, dividends or capital as provided under the Act. There is no provision that allows the flow through of capital amounts paid to the employer in the present case.

2004 Ruling 2004-0072041R3 - Deferred Shares Unit

Unedited CRA Tags

7(1)(a) 6(1)(c) Reg. 6801(d)

Summary Under

Tax Topics - Income Tax Regulations - Regulation 6801 - Paragraph 6801(d)

additional units credited when dividends, open market purchases

Principal Issues:
1. Whether the deferred share unit plan satisfies the conditions in paragraph 6801(d)?
2. Whether the issuance of treasury shares in satisfaction of the DSU's results in the application of section 7?

Position:
1. Yes.
2. Yes.

Reasons:
Previous positions.

Ministerial Correspondence

30 September 2004 Ministerial Correspondence 2004-0096351M4 - Taxation of status Indian employment income

Unedited CRA Tags

81(1)(a)

Principal Issues: Would particular individuals be exempt from tax on their employment income?

Position: Question of Fact

Reasons: General information provided about the Indian Act Exemption for Employment Income Guidelines.

2004-009635
XXXXXXXXXX Renée Shields
(613) 948-5273
September 30, 2004

Technical Interpretation - External

14 October 2004 External T.I. 2004-0097951E5 - Home Buyers' Plan - Divorce

Unedited CRA Tags

146.01

Principal Issues: Whether an individual who jointly owned a home with her separated or former husband can participate in the HBP if she is separated or divorced at the time of withdrawal.

Position: No as she is not a first-time home buyer if the withdrawal is within the required period.

Reasons: Application of the Act

14 October 2004 External T.I. 2004-0089921E5 F - Disposition d'une police d'assurance-vie

Unedited CRA Tags

148(1) 148(9)

Summary Under

Tax Topics - Income Tax Act - Section 148 - Subsection 148(9) - Adjusted Cost Basis - Element L

deduction of net cost of pure insurance effectively renders return of premiums partially taxable

Principales Questions:
Un remboursement de primes à l'échéance d'une police d'assurance-vie est-il imposable?

Position Adoptée:
Oui si le produit de disposition excède le coût de base rajusté de la police.

Raisons:
Application de la Loi.

XXXXXXXXXX 2004-008992
L. J. Roy, CGA
Le 14 octobre 2004

12 October 2004 External T.I. 2004-0086331E5 F - Allocation de retraite

Unedited CRA Tags

248(1)

Summary Under

Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Retiring Allowance

instalments paid to terminated employee will be treated as s. 5 income if they are treated as employment income for CPP/EI purposes or as eligible for pension plan service years

Principales Questions: Est-ce que des montants versés sous forme de versements échelonnés et sous forme d'un paiement forfaitaire sont considérés comme une allocation de retraite ou un salaire lorsque l'employé continue de participer au régime d'assurance-maladie de l'employeur?

Position Adoptée: Aucune

Raisons: Question de fait.

12 October 2004 External T.I. 2004-0097271E5 - XXXXXXXXXX as instrumentality

Unedited CRA Tags

Article XI 212(1)(b)

Principal Issues: Whether the XXXXXXXXXX is an instrumentality for purposes of the US Convention.

Position: Yes.

Reasons: Although the enabling legislation states that the XXXXXXXXXX is not an agent of Her Majesty, the XXXXXXXXXX appears to be effectively controlled by the Crown and its activities are of a governmental nature. It does not appear to carry on business. The XXXXXXXXXX is a corporation that is not a Crown corporation, but it has no issued share capital and is not authorized to issue shares. XXXXXXXXXX .

XXXXXXXXXX 2004-009727
Eliza Erskine
October 12, 2004

7 October 2004 External T.I. 2004-0093391E5 - RRSP over-contribution and subsequent withdrawal

Unedited CRA Tags

40(2)(g)(iv)(B) 204.1(2.1) 204.2(1.1) 204.2(1.2)

Principal Issues: 1) Can the taxpayer transfer shares from an unregistered employee share purchase plan account to an RRSP account? 2) Can the taxpayer then withdraw an amount from another RRSP for which he is the annuitant to avoid the tax on over-contributions to RRSP?

Position: 1) Yes, it will constitute a premium in kind. 2) Yes, the Act does not require a withdrawal be from the same plan in order to reduce the cumulative excess amount; however, there would be adverse tax consequences to the individual.

Reasons: 1) Paragraph 24 of IT-124R6. 2) The wording in subsections 204.2(1.1) and (1.2); the withdrawal would be included in income pursuant to subsection 146(8).

6 October 2004 External T.I. 2004-0093211E5 - Lifelong Learning Plan - Full-time student

Unedited CRA Tags

146.02(1)

Principal Issues: Is a student enrolled in an education program at an educational institution that requires the student to spend 16 hours per week on the program, considered to be a full-time student for purposes of participating in the lifelong learning plan (LLP)

Position: Question of fact.

Reasons: The student must be enrolled in a qualifying educational program at a designated educational institution as a full-time student. If the educational institution considers the student to be enrolled full-time, then the full-time requirement for purposes of participation in the LLP is satisfied.

5 October 2004 External T.I. 2004-0067741E5 F - Indemnités aux jurés

Unedited CRA Tags

3 4

Summary Under

Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a)

juror and witness compensation includible in income - but not allowances to cover reasonable expenses

Principales Questions:
Est-ce que les indemnités et les allocations versées en vertu du Règlement sur les indemnités et les allocations des jurés et du Règlement sur les indemnités et les allocations payables aux témoins assignés devant les cours de justice sont imposables aux fins de la Loi de l'impôt sur le revenu ?

Position Adoptée:
1. L'indemnité quotidienne versée à un juré et à un témoin doit être incluse dans le revenu du contribuable.
2. Les allocations raisonnables pour couvrir les dépenses encourues par le juré et par le témoin aux fins de rendre ces services n'ont pas à être incluses dans leur revenu respectif.

Raisons:
1. L'indemnité constitue des honoraires pour services rendus.
2. Ces allocations servent à rembourser des dépenses du contribuable qu'il n'aurait normalement pas encourues mais qu'il a dû encourir du fait de sa participation au procès. Ces allocations semblent raisonnables dans les circonstances.

5 October 2004 External T.I. 2004-0090911E5 - Canadian Employee working in US

Unedited CRA Tags

2(3) 115 250(5) Article XV

Principal Issues: Whether employee working in US would be fully liable for US tax.

Position: If employee severs ties to Canada and is a non-resident of Canada then could be fully liable for US taxes, however, we cannot confirm the US tax implications. The Presence test is a US test and beyond our scope to discuss. Generally, an employee is only eligible to contribute funds to the CPP or any RRSP if he or she is resident in Canada.

Reasons: General comments. See the Canada Pension Plan Act.

XXXXXXXXXX 2004-009091
Eliza Erskine
October 5, 2004

5 October 2004 External T.I. 2004-0073631E5 - Principal Residence-two condominiums

Unedited CRA Tags

Principal Issues: Can two condomimiuns units be considered one single residence for purposes of the definition of "principal residence" in section 54 of the Act?

Position: No.

Reasons: The two condominiums units are two separate legal properties, each of which would be considered housing units and each owned by a different spouse.

4 October 2004 External T.I. 2004-0077371E5 - Health care spending account-home care

Unedited CRA Tags

118.2(2)

Principal Issues: Does an amount paid by an individual for home care, in the form of cleaning and cooking provided to the individual's parents in law, who occupy a self contained residence on the individual's property, qualify as a medical expense eligible for reimbursement under a health care spending account?

Position: An amount paid in respect of home care for an elderly parent qualifies as a medical expense where: 1) the elderly parent is dependent on the individual for support at some time in the year; 2) a medical practitioner has certified (in writing or completion of Form T2201) that the parent is and will likely continue for a prolonged period of indefinite duration to be dependent on others for personal needs and care and as a result requires a full-time attendant; 3) the attendant is neither the individual's spouse nor under 18 years of age; and 4) the payee provides receipts including social insurance number to the payer.

Reasons: The determination is a question of fact.

Bob Naufal, CMA
XXXXXXXXXX (613) 957-2744
2004-007737
October 4, 2004

1 October 2004 External T.I. 2004-0088421E5 - Replacement Property Rules

Unedited CRA Tags

13(4) 44(1) 44(5) 248(1)

Principal Issues: Can a taxpayer use the replacement property rules on the sale of vacant land to a municipality where the property is held as a capital property and sold by way of exchange or outright purchase?

Position: No.

Reasons: One of the requirements of the definition of replacement property is that the property "was acquired by the taxpayer and used by the taxpayer or a person related to the taxpayer for a use that is the same as or similar to the use to which the taxpayer or a person related to the taxpayer put the former property". Vacant land cannot meet this requirement since it is not "used" by the taxpayer.

30 September 2004 External T.I. 2004-0081891E5 - Taxable Benefits

Unedited CRA Tags

6(1)(a) 6(1)(e) 248(1) - automobile

Principal Issues: Whether travel between home and a work site gives rise to a taxable benefit.

Position: Question of fact.

Reasons: Where travel between home and a work site is considered personal use of an automobile, employee in receipt of a taxable benefit.

28 September 2004 External T.I. 2004-0090901E5 - Employees working abroad

Unedited CRA Tags

2(3) 115 250(5) Article XV

Principal Issues: Whether employee working in Malaysia temporarily would only be taxable in Malaysia on Malaysian source income.

Position: Insufficient facts to resolve these issues. General comments provided.

Reasons: General comments.

28 September 2004 External T.I. 2004-0083851E5 - Business Losses - Pursuit of Profit

Unedited CRA Tags

18(1)(a) 18(1)(h)

Principal Issues: To determine if the losses from the taxpayer's business can be claimed.

Position: Question of Fact.

Reasons: Determination to be based on the pursuit of profit test outlined in Stewart 2002 DTC 6969.

28 September 2004 External T.I. 2004-0075161E5 - Medical Expense

Unedited CRA Tags

118.2(2)(h) 118.2(2)(g)

Principal Issues: Whether the travel costs in question qualify for the medical expense tax credit.

Position: No

Reasons: Legislation

27 September 2004 External T.I. 2004-0067721E5 F - Frais de garde d'enfants

Unedited CRA Tags

63(3)

Summary Under

Tax Topics - Income Tax Act - Section 63 - Subsection 63(3) - Child Care Expense - Paragraph (d)

presumption that expenses incurred prior to kindergarten age are not educational

Principales Questions: Est-ce que les différents services fournis par un établissement d'enseignement privé sont des services de garde d'enfants?

Position Adoptée: Cela dépend des services. Les frais qui sont au titre de l'éducation ou de la pension incluant les repas ne sont généralement pas des frais de garde d'enfants. Les frais au titre de l'éducation peuvent comprendre par exemple : les activités parascolaires et les écoles à vocation particulière. Commentaires généraux sur différents services.

Raisons: La définition de frais de garde d'enfants au paragraphe 63(3) de la Loi.

24 September 2004 External T.I. 2004-0055421E5 F - Frais de déplacement

Unedited CRA Tags

18(1)a) 18(1)h)

Summary Under

Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(h)

a hospital could be a place of work if a regular work schedule there, even if no dedicated office there

Principales Questions: Est-ce que des frais de déplacement encourus par un radiologiste pour se rendre aux hôpitaux A et B dans le cadre de son travail régulier et ceux encourus lorsqu'il est de garde sont déductibles dans le calcul de son revenu ?

Position Adoptée: Non.

Raisons: Selon le paragraphe 24 du IT-521R, on ne peut pas déduire les frais de déplacement encourus entre son domicile et un lieu d'affaires à moins que le domicile soit un principal lieu d'affaires.

23 September 2004 External T.I. 2004-0080721E5 - Medical Expense

Unedited CRA Tags

118.2(2)(a)

Principal Issues: Whether the amount paid for metabolic testing, performed through a doctor's office, qualifies for the medical expense credit.

Position: Yes.

Reasons: The amount is paid to a medical practitioner in respect of medical services.

XXXXXXXXXX 2004-008072
Shaun Harkin, CMA
September 23, 2004

17 September 2004 External T.I. 2004-0076741E5 - medical expenses renovations

Unedited CRA Tags

118.2(2)

Principal Issues: Do the cost of alterations/modifications to a dwelling qualify as medical expenses?

Position: Question of fact.

Reasons: All the facts must be considered in order to determine if the modifications allow the person to be mobile or functional within, or gain easier access to the dwelling

16 September 2004 External T.I. 2004-0085301E5 - Write off mortgage held in RRSP

Unedited CRA Tags

146 204.1

Principal Issues: Can we authorize an RRSP trustee to write off a defaulted mortgage held in an RRSP?

Position: The CRA cannot provide such authorization. A mortgage in an RRSP cannot be written off, but the RRSP can dispose of the mortgage.

Reasons: Information provided about the tax consequences of disposing of a mortgage held in an RRSP

2004-008530
XXXXXXXXXX Renée Shields
(613) 948-5273
September 16, 2004

15 September 2004 External T.I. 2004-0071731E5 - PHSP-General Information

Unedited CRA Tags

118.2 20.01

Principal Issues: General Statements re: set up and administration of a PHSP

Position: see letter

Technical Interpretation - Internal

12 October 2004 Internal T.I. 2004-0093431I7 - RPP Pensionable Earnings - EPSPs

Unedited CRA Tags

6(1)(d) 147.1(1)

Principal Issues: Can amounts allocated under an employee profit sharing plan be included as pensionable earnings for a registered pension plan?

Position: Yes.

Reasons: "Compensation" in subsection 147.1(1) includes amounts in respect of office or employment that are required by section 5 or 6 to be included in income. Amounts allocated under an employee profit sharing plan are included in income pursuant to 6(1)(d) of the Act.

29 September 2004 Internal T.I. 2004-0067311I7 F - Bureau à domicile

Unedited CRA Tags

18(12) 8(13)

Summary Under

Tax Topics - Income Tax Act - Section 18 - Subsection 18(12)

s. 18(12) does not alter the result where common expenses are allocated pro rata to the business and personal space in a home

Principales Questions: Est-ce que le paragraphe 18(12) de la Loi est applicable pour restreindre des dépenses liées à un établissement domestique autonome mais qui sont encourues à la fois pour des fins affaires et personnelles ?

Position Adoptée: Non.

Raisons: Le but visé par l'application du paragraphe 18(12) de la Loi est de limiter la déduction des dépenses engagées par un particulier au titre d'un bureau à domicile faisant partie d'un établissement domestique autonome où le particulier réside lorsque certaines conditions ne sont pas réunies. Si ces conditions sont respectées, on ne peut pas refuser la déduction de dépenses qui avait, par ailleurs, été jugées déductibles. Si des dépenses ont servi à plusieurs fins i.e. affaires et personnelles, les alinéas 18(1)a) et h) sont applicables et une répartition " affaire " versus " personnelle " devra être faite en fonction d'une base raisonnable.

28 September 2004 Internal T.I. 2004-0087481I7 - Repayment of Top-up Payments

Unedited CRA Tags

8(1)(n)

Principal Issues: An employee was injured in an automobile accident while working. In addition to WC benefits, the employee received top-up wages from her employer. The Workers' Compensation Board pursued a subrogated claim against the other driver's insurers and received an out-of-court settlement. Part of the proceeds was used to repay the employer for the top-up wages that were included in income in prior years. Is the employee entitled to a deduction for the amount repaid?

Position: Yes.

Reasons: Paragraph 8(1)(n) of the Act.

17 September 2004 Internal T.I. 2004-0087081I7 - Foreign affiliates - retroactive

Unedited CRA Tags

5907(1.1)

Principal Issues: Whether a refund of foreign taxes received by foreign corporation after it ceased to be a foreign affiliate of the particular corporation in Canada is a refund received by a "foreign affiliate" for the purposes of clause 5907(1.1)(a)(v)(B) of the Regulations.

Position: No

Reasons: The reference in clause 5907(1.1)(a)(v)(B) is to the foreign affiliate of the particular corporation resident in Canada in respect of which the surplus calculation is being made. At the time the refund was received, the foreign corporation was not a foreign affiliate of the relevant Canadian corporation.