Income Tax Severed Letters - 2005-04-22

Principal Issues: What is the proper classification for capital cost allowance purposes of silos built to store grain at a feed processing plant?

Position: Class 43

Reasons: Storage silo is otherwise included in Class 8.

Principal Issues: Whether interest on mortgage deductible after mortgage is transferred to RRSP

Position: Depends on facts

Reasons: Must satisfy 20(1)(c) criteria

Principal Issues: An individual (X") owns all of the issued and outstanding shares of the capital stock of a corporation ("GESCO"). Another individual (Y") owns all of the issued and outstanding shares of the capital stock of another corporation ("HOLDCO"). Each of GESCO and HOLDCO owns 50 common shares of the capital stock of an operating corporation ("OPCO"). GESCO and HOLDCO are the only shareholders of OPCO and they deal with each other at arm's length. Pursuant to a shareholders' agreement, GESCO or HOLDCO, as the case may be, would have the right to acquire the shares of the capital stock of OPCO held by the other shareholder, if X or Y, as the case may be, would leave his or her employment with OPCO. Whether each of GESCO and HOLDCO would be deemed to own all of the issued and outstanding shares of the capital stock of OPCO pursuant to paragraph 256(1.4)(a) of the Act.

Position: Yes. Each of GESCO and HOLDCO would be deemed to own all of the issued and outstanding shares of the capital stock of OPCO pursuant to paragraph 256(1.4)(a). Consequently, GESCO would be associated with OPCO pursuant to paragraph 256(1)(a) or 256(1)(b) of the Act. Furthermore, HOLDCO would be associated with OPCO pursuant to paragraph 256(1)(a) or 256(1)(b) of the Act. It should be noted that pursuant to subparagraph 256(1.2)(b)(ii) of the Act, a corporation may be controlled by a person notwithstanding that the corporation is also controlled or deemed to be controlled by another person.

Reasons: Wording of the Act and previous positions.

Principal Issues: An optometrist who studies outside of Canada is required to pay exam fees to obtain a licence to practice in Canada. Are the exam fees fully deductible as a business expense?

Position: No.

Reasons: Where a doctor who studies outside of Canada is required to pay exam fees necessary to obtain a licence to practice in Canada, the exam fees and related travel costs qualify as an "eligible capital expenditure". These expenditures are not fully deductible in the taxation year in which they were incurred but rather go into an eligible capital property pool of which a percentage may be claimed each year as a deduction in computing business income from the practice.

Principales Questions: Est-ce que les particuliers qui participent à des études cliniques ayant pour but de tester de nouveaux médicaments pour des sociétés pharmaceutiques doivent inclure les montants qu'ils reçoivent de ces sociétés dans le calcul de leur revenu aux fins de l'impôt ?

Position Adoptée: Oui.

Raisons: Les montants sont reçus en contrepartie de services rendus aux sociétés pharmaceutiques.

XXXXXXXXXX 2004-010799
Lucie Vermette, CGA
Le 14 avril 2005

Principales Questions: Est-ce que l'indemnité reçue en vertu d'une entente hors-cour (en raison de la perte d'emploi) est imposable?

Position Adoptée: La partie qui correspond à la facture des frais légaux semble constituer un remboursement des frais judiciaires. Si ces frais légaux étaient des frais engagés pour établir le droit à l'allocation de retraite, le remboursement de ces frais serait imposable en vertu de l'alinéa 56(1)l.1) de la Loi. Cependant, le contribuable aurait droit à une déduction correspondante en vertu de l'alinéa 60o.1) de la Loi. L'autre partie de l'indemnité constituerait une allocation de retraite. Toute partie de l'allocation de retraite reçue au cours d'une année d'imposition serait incluse dans le calcul du revenu de cette année d'imposition en vertu du sous-alinéa 56(1)a)(ii) de la Loi.

Raisons: Selon sa définition indiquée au paragraphe 248(1) de la Loi, l'expression " allocation de retraite " englobe une somme reçue à l'égard de la perte d'une charge ou d'un emploi, qu'elle soit reçue ou non à titre de dommages ou conformément à une ordonnance ou sur jugement d'un tribunal compétent. Une allocation de retraite ne comprend cependant pas un remboursement des frais judiciaires et extrajudiciaires. Un tel remboursement pourrait être visé par l'alinéa 56(1)l.1) de la Loi.