Income Tax Severed Letters - 2005-03-18

Miscellaneous

15 March 2005 Miscellaneous 2005-0114061I7 - Cash Retirement Gift from a Union

Unedited CRA Tags
3 6(1)(a)

Principal Issues: A union provides a cash gift upon retirement (anywhere from $300 to $600), to members in good standing. Whether or not the gift is taxable.

Position: No.

Reasons: The Supreme Court of Canada decision in Wally Fries, 90 DTC 6662, held that payments received by a union member in the form of strike pay were not "income from a source". Similarly, it is our view that a retirement gift provided by a union from union funds to a member of the union is not income from a source and is consequently not taxable under the Act.

15 March 2005 Miscellaneous 2004-0108721I7 F - Don d'une licence

Unedited CRA Tags
118.1 248(1):bien

Principales Questions: La remise à un organisme de bienfaisance enregistré d'une licence non exclusive lui accordant la possibilité d'utiliser un logiciel développé par un contribuable représente-t-elle un don pour ce contribuable?

Position Adoptée: Oui.

Raisons: Selon les dispositions pertinentes du Code civil du Québec, la transmission à titre gratuit d'une licence d'un logiciel constitue une donation.

14 March 2005 Miscellaneous 2005-0119451E5 - MV Benefits-Employer's Record Keeping Require.

Unedited CRA Tags
153(1) 230(1)

Principal Issues: Whether an employer is obligated under the Act to ensure that an employee maintains a logbook in respect of the personal use of an employer-provided motor vehicle?

Position: Yes.

Reasons: An employer is obligated under the Act to determine an employee's total employment income, including benefits derived from the personal use and availability of an employer-provided motor vehicle, and to make appropriate withholdings on the amount pursuant to subsection 153(1) of the Act. Subsection 230(1) of the Act requires the employer to maintain adequate records so that the employee's total employment income can, if necessary, be verified - "every person who is required, by or pursuant to [the] Act, to pay or collect taxes or other amounts shall keep records and books of account ... in such form and containing such information as will enable ... the taxes or other amounts that should have been deducted, withheld or collected to be determined." The Courts have consistently held that the best evidence to determine the amount of personal use of an employer-provided motor vehicle is a logbook.

11 March 2005 Miscellaneous 2005-0114811M4 - Clergy Income

Unedited CRA Tags
5(1) 6(1)(c)

Principal Issues: Whether an amount received by a member of the clergy for conducting a wedding or funeral is taxable.

Position: Generally yes.

Reasons: If a clergy member receives an amount for conducting a wedding or a funeral, he or she must include all such amounts in employment income for the year received. A taxpayer is also required to include in employment income all director's or other fees received in the year.

11 March 2005 Miscellaneous 2004-0108461E5 - test wind turbine - CRCE

Unedited CRA Tags
Reg. 1219(1) and (3)

Principal Issues: whether proposed exploratory wind turbines will qualify as test wind turbines under proposed Reg. 1219(3).

Position: yes, provided the amendments to the Regulations are promulgated as described

Reasons: proposed project complies with proposed amendments and favourable written opinion has been provided by Natural Resources Canada

11 March 2005 Miscellaneous 2005-0116071E5 - Paragraph 67.1(2)(f) of the ITA

Unedited CRA Tags
67.1(1) 67.1(2)

Principal Issues: Whether the comments in paragraph 12 of IT-518R concerning the application of the former paragraph 67.1(2)(e) of the Act, apply in respect of the application of paragraph 67.1(2)(f)?

Position: The CRA will, depending on the facts, apply paragraph 67.1(2)(f) of the Act in a similar manner.

Reasons: It should be noted that now the number of such special events held in a calendar year at a particular place of business cannot exceed six. Therefore, where a special event is only held for a specific division of a very large organization that is located at a particular place of business, that special event would count as one event for the whole organization located at that particular place of business for purposes of paragraph 67.1(2)(f) of the Act. However, where a special event such as a Christmas party is held separately for each division of an organization that is located at a particular place of business because all employees of the organization cannot be accommodated at one venue, the Christmas parties for each division would collectively be considered a single special event for that particular place of business for purposes of paragraph 67.1(2)(f) of the Act.

10 March 2005 Miscellaneous 2005-0111101E5 - Sale of a Rental Property

Unedited CRA Tags
38(a)

Principal Issues: A taxpayer owned a home for his son's use while in attendance at university. The son and his four roommates all paid rent, which was reported annually and offset by the related expenses. Whether or not the gain on the proposed sale of the home will be taxable.

Position: Yes.

Reasons: The home was used principally for the purpose of gaining or producing rental income and therefore does not qualify as a principal residence. The disposition of the home will result in a taxable capital gain.

10 March 2005 Miscellaneous 2004-0108561I7 - Product Testing Income

Unedited CRA Tags
5(1) 6(1)(c) 9(1) 3(a)

Principal Issues: A research group pays individuals as little as one $10 payment and as much as $400 per month, to test various products. Whether or not these amounts are taxable.

Position: The one $10 payment is not taxable, but the ongoing $400 per month is taxable.

Reasons: The individuals who received one isolated $10 payment are in receipt of an amount that does not trigger any income tax consequences. However, the individuals who received $400 per month in recognition for testing services provided, or to be provided, must include the amounts in income for tax purposes. Depending on whether the individuals are employees or self-employed, the regular ongoing amounts are taxable as either employment or business income.

10 March 2005 Miscellaneous 2005-0115671E5 - Immigrant trusts

Unedited CRA Tags
94(1)

Principal Issues: General discussion of Immigrant trust rules.

Position: general comments given
CRA PUBLICATIONS: T1141;2002-0133035;2001-007705;2000-0000217

XXXXXXXXXX 2005-011567
Lena Holloway
March 10, 2005

9 March 2005 Miscellaneous 2005-0113051E5 - Debt Parking and Shareholder loans

Unedited CRA Tags
80.01(7)(b) 39(1)(c) 50(1) 80.01(8)

Principal Issues: Is a shareholder loan debt of a CCPC written off by the creditor-shareholder under subsection 50(1) considered a "parked debt"

Position: Yes

Reasons: Wording of 80.01(6)(b) and 80.01(7)(b) and 80.01(8)

9 March 2005 Miscellaneous 2005-0114371E5 - Application of Paragraph 81(1)(h)

Unedited CRA Tags
81(1)(h)

Principal Issues: 1. Does the exemption in 81(1)(h) of the Income Tax Act apply where a taxpayer carries on a business of providing a residence to other individuals?

2. Would the number of other individuals residing with the taxpayer impact the application of exemption in 81(1)(h) of the Income Tax Act?

3. Is a payment made under the Ontario Disabilities Support Program Act similar to the family allowance provided under the Family Allowances Act?

Position: 1. Provided all the conditions provided for in paragraph 81(1)(h) of the Income Tax Act are met, the fact that the taxpayer carries on a business of providing a residence to the other individuals will not, in and of itself, prevent the application of that exemption.

2. Provided all the conditions provided for in paragraph 81(1)(h) of the Income Tax Act are met, the number of other individuals residing with the taxpayer will not, in and of itself, prevent the application of that exemption.

3. A payment made under the Ontario Disabilities Support Program is not similar to the family allowance provided under the former Family Allowances Act.

Reasons: 1. The taxpayer is an individual and is not carrying on the business within a corporation.

7 March 2005 Miscellaneous 2005-0118291E5 - App of Sec 84.1 - Non-arm's length sale of shares

Unedited CRA Tags
84.1

Principal Issues: Is the adjusted cost base of shares reduced by subsection 84.1(2) in this situation?

Position: Yes

Reasons: The law.

25 February 2005 Miscellaneous 2005-0113521I7 - Artificial loss

Unedited CRA Tags
54 "superficial loss"

Principal Issues: Whether the stop loss rules or GAAR apply to deny the tax benefit resulting from a loss which is created through a series of transactions including the issuance of shares having a high redemption value and a low paid up capital.

Position: We recommend applying GAAR.

Reasons: Previous positions from the GAAR committee.

25 February 2005 Miscellaneous 2005-0113531I7 - Artificial loss

Unedited CRA Tags
40(3.3) 40(3.4)

Principal Issues: Whether the stop loss rules or GAAR apply to deny the tax benefit resulting from a loss which is created through a series of transactions including the issuance of shares having a high redemption value and a low paid up capital.

Position: We recommend applying GAAR.

Reasons: Previous positions from the GAAR committee.

25 February 2005 Miscellaneous 2005-0113541I7 - Artificial loss

Unedited CRA Tags
54 "superficial loss"

Principal Issues: Whether the stop loss rules or GAAR apply to deny the tax benefit resulting from a loss which is created through a series of transactions including the issuance of shares having a high redemption value and a low paid up capital.

Position: We recommend applying GAAR.

Reasons: Previous positions from the GAAR committee.

4 February 2005 Miscellaneous 2004-0085361E5 F - Changement de résidence: émigration

Unedited CRA Tags
2(3) 128.1(4) 122.6

Principales Questions: Voir ci-dessous

Position Adoptée: Voir ci-dessous

Raisons: Voir ci-dessous

4 February 2005 Miscellaneous 2004-0093611E5 F - Don par testament d'un bien culturel

Unedited CRA Tags
39(1)a)(i.1)(A) 70(5) 104(4) 118.1(5)

Principales Questions: Voir ci-dessous

Position Adoptée: Voir ci-dessous

Raisons: Voir ci-dessous

1 February 2005 Miscellaneous 2004-0083201E5 - Distribution by a non-resident trust

Unedited CRA Tags
107(2) 107(2.1) 107(5) 116(1)

Principal Issues: See below

Position: See below

Reasons: See below

1 February 2005 Miscellaneous 2004-0083921E5 F - Société mandataire, gain & CIÉ

Unedited CRA Tags
126

Principales Questions: Voir ci-dessous

Position Adoptée: Voir ci-dessous

Raisons: Voir ci-dessous

31 January 2005 Miscellaneous 2004-0091301E5 F - Déductions à la source-avantage autre qu'en argent

Unedited CRA Tags
153(1)a)

Principales Questions: Voir ci-dessous

Position Adoptée: Voir ci-dessous

Raisons: Voir ci-dessous

2005 Miscellaneous 2005-0114001R3 - Supplemental Pension Plan

Unedited CRA Tags
248(1)

Principal Issues:
Whether the supplemental pension plan is an SDA or an RCA?

Position:
No.

Reasons:
The plan is an unfunded arrangement to provide pension benefits that are supplementary to the benefits provided under the employer's RPP. While funds may be set aside and invested to pay for benefits under the plan, the funds will remain available to the general creditors of the employer.

2005 Miscellaneous 2004-0060241R3 - XXXXXXXXXX

Unedited CRA Tags
149(1)(c) 75(2) 104(6) 107(2)

Principal Issues: 1. Whether the First Nation will be considered a public body described in 149(1)(c).
2. Whether the new trust to be established will be an inter vivos trust, as defined in 108(1).
3. Whether the new trust to be established will be a personal trust, as defined in 248(1).
4. Whether the new trust to be established will meet the requirements in ¶(g) of the definition of trust in 108(1), with the result that 104(4),(5) and (5.2) will not apply.
5. Whether 75(2) will apply to the trust's income.
6. Whether the trust will be able to make deductions under 104(6).
7. Whether 107(2) will apply to distributions from the trust to the First Nation.
8. Whether Pt. XII.2 tax will be exigible.

Position: 1. Yes, as determined by W/S 045, Aboriginal and Non-Profit Section.
2. Yes.
3. Yes.
4. Yes.
5. Yes.
6. Yes.
7. Subject to certain conditions, yes.
8. No.

Reasons: 1. The First Nation was found to be performing relevant activities.
2. Since it will not be a testamentary trust.
3. In order for an inter vivos trust to be a personal trust, there must be no beneficial interest in the trust acquired for consideration payable to the trust or to any person who has made a contribution to the trust. 108(7) provides that, for purposes of the definition of personal trust in 248(1), if only one person makes a contribution of property to the trust, that person will be deemed to have acquired his or her beneficial interest in the trust for no consideration. In the case at hand, the First Nation will be the sole contributor to the trust.
4. All interests in the trust have vested indefeasibily and the trust is not a spousal trust, alter ego trust, etc.
5. The First Nation will be the sole contributor of funds to the trust, and is the sole beneficiary (?) and the funds may revert to the First Nation, and during the Trust's existence, funds will not be disbursed without the First Nation's approval.
6. Any income (other than income subject to 75(2)) will be irrevocably payable to the First Nation.
7. s.t. normal provisos.
8. The sole beneficiary, the First Nation, although a tax-exempt entity, will not acquire its interest directly or indirectly from another beneficiary. As a result, the First Nation is not a designated beneficiary as defined in 210. In order to be relieved of the obligation to pay the tax, the Trust must certify that there are no designated beneficiaries of the Trust.

2005 Miscellaneous 2004-0105821R3 - Loss utilization

Unedited CRA Tags
20(1)(c) 112(1) 246(1) 84(3)

Principal Issues: Loss utilization within a corporate group

Position: Acceptable

Reasons: Meets the technical requirements of the provisions

2005 Miscellaneous 2005-0115271R3 - Interest deductibility

Unedited CRA Tags
20(1)(c)(i)

Principal Issues: Minor changes and extension of delay

Position: Granted

Reasons: Minor Changes only

2005 Miscellaneous 2005-0113591R3 - Supplemental Ruling to 2004-009908.

Unedited CRA Tags
248(1)(k)(ii) 248(25.2)

Principal Issues: Changes to facts; revised draft agreements submitted.

Position: Will not impact original rulings given but some corrections and clarifications.

Reasons: Changes to Facts and proposed transactions are for clarification only; revised draft agreements not substantively different from draft agreements submitted with original ruling.

2004 Miscellaneous 2002-0149781R3 F - Transfer of copyrights

Unedited CRA Tags
56(2) 56(4) 85(1.1)

Principal Issues: 1. Whether a copyright is eligible property under subsection 85(1.1). 2. Whether subsection 56(4) will apply following the transfer to a corporation of a right subject to an arrangement with a collective society.

Position: 1. Yes. 2. No.

Reasons: 1. Previous positions. 2. Question of fact.

2004 Miscellaneous 2004-0095491R3 - XXXXXXXXXX

Unedited CRA Tags
75(2) 149(1)(c) 107(2) 104(6)(b)

Principal Issues: See Ruling and Statement of Principal Issues.

Position: See Ruling and Statement of Principal Issues.

Reasons: See Ruling and Statement of Principal Issues

2004 Miscellaneous 2004-0096661R3 - 55(3)(a)

Unedited CRA Tags
55(3)(a)

Principal Issues: standard internal reorganization transactions