Income Tax Severed Letters - 2005-01-14

Ruling

2004 Ruling 2004-0088701R3 - New Mine

Unedited CRA Tags
66.1(6)

Principal Issues: Whether expenses relating to an exploration program will qualify for inclusion under paragraph (f) to the definition of CEE? Whether a mine which may be established will be a "new mine" for the purposes of paragraph (g) to the definition of CEE?

Position: Expenses incurred in respect of the proposed exploration program may potentially qualify under paragraph (f) to the definition of CEE. A mine established in accordance with the mine plan described herein would be a "new mine" for the purposes of paragraph (g) of the definition of CEE.

Reasons: Based on the facts presented to us and a written opinion received from Natural Resources Canada dated XXXXXXXXXX . A representative of that Department visited the site and reached conclusions that supported the positions described above.

2004 Ruling 2004-0094741R3 - Withholding Exemption -Minimum EBITDA

Unedited CRA Tags
212(1)(b)(vii)
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Subparagraph 212(1)(b)(vii)

Principal Issues: Is a minimum earning before interest, taxes, depreciation and amortization of a selected group acceptable as triggering event.

Position: Yes

Reasons: There is a cure by injecting cash to purchase shares and providing an acceptable XXXXXXXXXX debt to equity level and the EBITDA projections of the group make it acceptable.

2004 Ruling 2004-0097561R3 - Linked notes - foreign property rules

Unedited CRA Tags
206(1)

Principal Issues: Supplemental to Ruling 2004-006089 - change in facts and request for extension in deadline to complete proposed transactions.

Position: Extension granted. Change in facts not material to rulings given.

2004 Ruling 2004-0100991R3 - Loss utilization

Unedited CRA Tags
55(3)(a) 20(1)(c)

Principal Issues: Whether "zero" spread loss utilization within affiliated group pf companies is acceptable.

Position: Yes.

Reasons: See Statement of Principal Issues.

2004 Ruling 2004-0081021R3 - Gift by will

Unedited CRA Tags
118.1(5)

Principal Issues: The executors made an application to the provincial court for an interpretation and a declaration regarding a clause of a taxpayer's will. Will donations made in accordance with this clause as interpreted and declared in the provincial court order qualify as gifts by will for purposes of subsection 118.1(5)?

Position: Yes.

Reasons: Pursuant to the court order, the executors are directed to make donations to specific charities. The executors are required to make donations of XXXXXXXXXX of the residue to the extent that such donations will minimize income tax payable. The executors have determined that the full XXXXXXXXXX share of the residue will need to be paid to registered charities.

XXXXXXXXXX 2004-008102

2004 Ruling 2004-0085771R3 - Public Company spin-off - FAPI consequences

Unedited CRA Tags
91 95

Principal Issues: Public Company spin-off - FAPI consequences - Opinions on draft legislation

Technical Interpretation - External

13 January 2005 External T.I. 2004-0097911E5 F - Crédit d'impôt pour études

Unedited CRA Tags
118.6(2)
Summary Under
Tax Topics - Income Tax Act - Section 118.6 - Subsection 118.6(1) - Qualifying Educational Program
education credit unavailable where the course consisted of discrete 4-day sessions separated by a month or more – but tuition credit may be available

Principales Questions:
Un cours offert en 6 sessions de 4 jours (32 heures) en raison d'une session par mois constitue-t-il un programme de formation visé à l'article 118.6?

Position Adoptée:
Non.

Raisons:
Les semaines de cours ne sont pas consécutives.

13 January 2005 External T.I. 2004-0101321E5 - 149(12): Information Returns

Unedited CRA Tags
149(12)

Principal Issues: Whether the fees charged are considered to be rents for the purpose of paragraph 149(12)(a)?

Position: Question of law.

Reasons: The organization must file a Non-Profit Information Organization Return only if the fees charged are rentals in law. This determination has to be done in light of the contract concluded between the parties.

13 January 2005 External T.I. 2004-0101701E5 F - Bien substitué

Unedited CRA Tags
7(1.1) 248(5)b)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(5) - Paragraph 248(5)(b)
substituted property definition in s. 248(5)(b) does not apply for the purposes of s. 7(1.1)
Summary Under
Tax Topics - Statutory Interpretation - Interpretation/Definition Provisions
deeming provision only engaged when the referenced term is used
Summary Under
Tax Topics - Income Tax Act - Section 7 - Subsection 7(1.1)
s. 248(5)(b) inapplicable to s. 7(1.1)

Principales Questions: La définition de bien substitué à l'alinéa 248(5)b) de la Loi s'applique-t-elle pour les fins du paragraphe 7(1.1) de la Loi?

Position Adoptée: Non.

Raisons: La définition de bien substitué au paragraphe 248(5) de la Loi s'applique aux dispositions de la Loi qui contiennent les mots "bien substitué".

2004-010170
XXXXXXXXXX Michelle Desrosiers
Notaire, M.Fisc.
Le 13 janvier 2005

13 January 2005 External T.I. 2004-0103281E5 F - dons et avantages

Unedited CRA Tags
248(30) 248(31) 248(32)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(32)
value of advantage should be based on FMV and ignore sales tax and tips

Principales Questions: 1) Comment calcule-t-on la valeur de l'avantage pour les fins de la détermination du montant admissible d'un don? 2) Doit-on tenir compte de la valeur de la TPS et e la TVP dans la valeur attribuable à l'avantage ainsi calculé?

Position Adoptée: 1) Le montant de l'avantage correspond à la valeur, au moment du don, de tout bien ou service, compensation ou bénéfice que le donateur a reçu. Dans le cas sous étude, cela correspond à la valeur du paiement que le donateur aurait fait pour obtenir ce qu'il a reçu auprès d 'une personne autre que l'organisme de bienfaisance. 2) Les montants représentant la valeur de l'avantage excluent la TPS et les taxes de vente provinciales.

Raisons: 1) La Loi. 2)L'esprit de la mesure. La valeur d'un bien exclut les montants de taxe prélevés par les autorités fiscales.

2004-010328
XXXXXXXXXX Michelle Desrosiers
Notaire, M.Fisc.
Le 13 janvier 2005

12 January 2005 External T.I. 2004-0106161E5 - Application of par. 84.1(1)(b) on a sale of shares

Unedited CRA Tags
84.1 55(2) 245(2)
Summary Under
Tax Topics - Income Tax Act - Section 84.1 - Subsection 84.1(1)

Principal Issues: Will a deemed dividend result under 84.1(1)(b) in the taxpayer's crystallization transactions

Position: Yes.

Reasons: Parties appear not to be dealing at arm's length.

12 January 2005 External T.I. 2004-0101161E5 - Trading in stock index futures

Unedited CRA Tags
9 39
Summary Under
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Futures/Forwards/Hedges
daily stock futures trading on income account

Principal Issues: Whether an individual who trades in stock index futures every day and the trades constitute a major source of income for the person is taxed on account of income or capital.

Position: Income.

Reasons: Common law; IT-346R and IT-479 were drafted before trading in stock index futures became more common.

XXXXXXXXXX 2004-010116
Denise Dalphy, LL.B.
January 12, 2005 (613) 941-1722

11 January 2005 External T.I. 2004-0085091E5 - US Lottery Winnings - Taxation

Unedited CRA Tags
248(1) 12.2 148(2)(b) and c)

Principal Issues: whether US lottery prize, which is paid as XXXXXXXXXX annual payments, is taxable when received by a Canadian resident

Position: A portion of the payments will be taxable

Reasons: the payments represent an annuity that is not a prescribed annuity and would be taxable under the accrual rules in section 12.2

11 January 2005 External T.I. 2004-0103601E5 - Test Wind Turbine - Proposed Amendments

Unedited CRA Tags
1219(3) 1219(1)

Principal Issues: Whether, given the reference in proposed paragraph 1219(3)(f) of the Regulations to a wind energy conversion system being "installed", work with regard to non-test wind turbines which may ultimately form part of a wind farm project may proceed without limitation during the 120 calendar day testing period provided the wind turbines are not fixed to their respective foundations.

Position: No.

Reasons: The provisions of proposed paragraph 1219(3)(f) of the Regulations represent only one of the conditions that must be satisfied in order to obtain test wind turbine status. While a wind turbine may not be installed from an engineering perspective prior to being fastened to its foundation at the fixed location at which it is to be used, it must also be considered that the above proposed paragraph requires a 120 calendar day testing period and that proposed paragraph 1219(3)(d) of the Regulations requires that the "primary purpose" for installing a wind turbine intended to be a test wind turbine must be to perform the "test" described therein. As such, while preparatory work with regard to non-test wind turbines intended to form part of a wind farm project is not precluded during the relevant 120 calendar day testing period, it will be a question to be determined from the facts and circumstances of a particular wind farm situation whether the extent of such preparatory work would preclude satisfaction of the above-mentioned "primary purpose" test.

10 January 2005 External T.I. 2004-0075931E5 - adjusted cost base - partnership interest

Unedited CRA Tags
53(2)(c) 20(12) 126(1)
Summary Under
Tax Topics - Income Tax Act - Section 53 - Subsection 53(2) - Paragraph 53(2)(c)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(12)
no partnership ACB reduction for partner s. 20(12) deduction

Principal Issues: whether amount of foreign non-business income taxes allocated by partnership to a partner and in respect of which the partner claims a deduction under subsection 20(12) will result in a reduction to the partner's adjusted cost base of the partnership interest

Position: No

Reasons: in such circumstances, the deduction under subsection 20(12) is deducted at the partner level and thus does not reduce partners allocation of partnership income - also, no deduction under paragraph 53(2)(c) specified

10 January 2005 External T.I. 2004-0095361E5 F - Dommages

Unedited CRA Tags
3 56(1)a)(i)
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(a) - Subparagraph 56(1)(a)(i)
damages for negligence resulting in not becoming entitled to QPP would not be income under s. 56(1)(a)(i)
Summary Under
Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a)
courts have preferred to tax on the basis of an identified source

Principales Questions: Quel sera le traitement fiscal de sommes qui pourraient être reçues à titre de dédommagement pour une perte de revenu?

Position Adoptée: Commentaires généraux.

Raisons: Question de fait.

7 January 2005 External T.I. 2004-0096551E5 - Personal Use Of An Employer-Provided Motor

Unedited CRA Tags
6

Principal Issues: What constitutes personal use of an employer-provided motor vehicle by construction site foremen? Mainly where the motor vehicle is used to travel between a foreman's home and a construction site or an employer's premises and the foreman is required to take the motor vehicle home, either because the construction site is not secure, the motor vehicle is equipped with special tools, material or equipment, or the foreman is on call for emergencies or must pick up tools, equipment, fuel or other employees while on route to the construction site or the employer's premises.

Position: Generally, travel between an employee's home and regular place of employment is considered personal, unless the exception paragraph 5 of IT-63R5 is met.

Reasons: Longstanding position supported by jurisprudence.

5 January 2005 External T.I. 2004-0082991E5 - RCA for Recently Incorporated Professional

Unedited CRA Tags
20(1)(r) 67

Principal Issues: Can periods of time before a professional incorporates his or her practice be considered in determining the benefits to be provided under an RCA?

Position: No, these periods are not relevant.

Reasons: Paragraph 20(1)(r) requires that employer contributions must be in respect of services rendered by an employee or former employee.

5 January 2005 External T.I. 2004-0094761E5 - Application of 67.1(2)(a) and 67.1(2)(c)

Unedited CRA Tags
67.1(1) 67.1(2)

Principal Issues: Whether or not the exceptions in paragraphs 67.1(2)(a) or 67.1(2)(c) of the Income Tax Act apply so that the 50% limitation in 67.1(1) of the Act does not apply to a department store and a book publisher selling promotional packages.

Position: Paragraph 67.1(2)(c) is not applicable in this situation. It is our general view that since the taxpayer will receive compensation for all items in the promotional packages, the exception in paragraph 67.1(2)(a) of the Act will apply so that the 50% limitation in subsection 67.1(1) of the Act will not apply.

Reasons: Paragraph 67.1(2)(a) applies where the ordinary course of a business of the taxpayer is that of providing food, beverages or entertainment for compensation.

5 January 2005 External T.I. 2004-0103451E5 - Current Expense or Capital Improvements

Unedited CRA Tags
18(1)(b)

Principal Issues: Whether renovations to a rental property are deductible in the current year or added to the capital cost of the property.

Position: Question of fact.

Reasons: Applying the criteria set out in IT-128R to the renovation expenditures will determine whether they are currently deductible or added to the capital cost of the property.

13 December 2004 External T.I. 2004-0069601E5 - Tuition fees/Forgivable Loans/Charitable Credit

Unedited CRA Tags
56(1)(n) 118.5 63 118.1

Principal Issues: 1.Nature of assistance given to student -forgivable loans vs. scholarship/bursaries and affect on other tax credits/deductions such as childcare deductions and charitable credit....

Position: 1. General discussion only-- whether bona fide loan exists is a question of fact- whether forgivable or not

Reasons: 1. Loan described was more in the nature of assistance/scholarship-bursary; forgivable loan must be forgiven upon meeting certain conditions- financial hardship is more in nature of awarding a scholarship or bursary.

8 December 2004 External T.I. 2004-0091401E5 - Medical Expense - Shiatsu

Unedited CRA Tags
118.2 118.4(2)

Principal Issues: Is a Shiatsu Therapist considered a medical practitioner for purposes of the Medical Expense Tax Credit?

Position: No.

Reasons: Shiatsu therapist not authorized under the laws of Ontario.

Conference

8 October 2004 APFF Roundtable Q. 34, 2004-0087021C6 F - Remboursement de frais de financement

Unedited CRA Tags
20(1)e)(ii) 12(1)x)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e)
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x) - Subparagraph 12(1)(x)(iv)
reimbursement of financing expenses

Principales Questions: Est-ce que le remboursement des frais de financement engagés par une société d'un groupe dans le cadre d'emprunts d'argent pour les autres sociétés du groupe est déductible selon 20(1)e) et imposable selon 12(1)x) et selon le cas.

Position Adoptée: Oui, si les conditions de 12(1)x) et 20(1)e) sont respectées.

Raisons: Texte de la Loi

Technical Interpretation - Internal

13 January 2005 Internal T.I. 2004-0103501I7 - Death of RRSP or RRIF annuitant: Election Form

Unedited CRA Tags
146(1) 146(8.8) 146(8.9)

Principal Issues: What is the impact of the Supreme Court of Canada decision in the Thibault case on reporting amounts held in an RRSP or RRIF on the annuitant's death?

Position: There is no impact. If the designation of the spouse or common-law partner is provided in the will or in the marriage contract, the entire refund of premiums or eligible amount is transferred to the spouse's RRSP or RRIF and all the RRSP or RRIF property is distributed before the end of the exempt period, the trustee of the plan can issue the slip as if the designation was made in the RRSP or RRIF contract.

Reasons: Agrees with our administrative position.

6 January 2005 Internal T.I. 2004-0100241I7 F - Imposition des rentes au décès

Unedited CRA Tags
148(2)b) 148(2)c) 148(9) 148(1)
Summary Under
Tax Topics - Income Tax Act - Section 148 - Subsection 148(2) - Paragraph 148(2)(b)
no disposition of PAC under s. 148(2)(b) – but disposition if estate elects to commute
Summary Under
Tax Topics - Income Tax Act - Section 148 - Subsection 148(9) - Proceeds of the Disposition - Paragraph (d)
disposition gain based on accumulating fund

Principales Questions: Quelles sont les règles d'imposition des contrats de rente prescrits et non prescrits au décès du titulaire?

Position Adoptée: Pour les contrats de rentes prescrits, il n'y aura pas de disposition présumée. Les dispositions des alinéas 148(2)b) et c) de la Loi s'appliquent aux contrats de rente non prescrits.

Raisons: Interprétation de la Loi.