Income Tax Severed Letters - 2005-05-20

Ruling

2005 Ruling 2005-0118261R3 - Amendment to DSU plan - overall Plan DSU limit

Unedited CRA Tags
6801(d)

Principal Issues: Will an overall limit of XXXXXXXXXX on the number of DSUs that the Plan may issue cause the Plan to cease compliance with paragraph 6801(d) of the Regulations?

Position: No

Reasons: A limit on the number of DSUs that may be issued under the Plan does not violate any of the requirements of paragraph 6801(d) such that the Plan would cease to be a prescribed plan or arrangement within paragraph (l) of the definition of salary deferral arrangement in subsection 248(1) of the Act.

XXXXXXXXXX 2005-011826

Technical Interpretation - External

19 May 2005 External T.I. 2005-0126961E5 - Union levy

Unedited CRA Tags
8(1)(i)(iv)

Principal Issues: Whether the local union levy fees deducted from school board employee pay is deductible and should be included in box 44 of T4 slips.

Position: The local union levy fees are deductible for the employees and can be included in box 44 of T4 slips.

Reasons: In order for membership dues to be deductible under 8(1)(i)(iv), the amounts paid must be, among other things, "annual" dues to "maintain membership" and not a special assessment made during the year. The Agency accepts the decision in Lucas vs. The Queen (87 DTC 5277) that to be considered "annual" there need not be recurrence from year to year. It is sufficient that the amount be capable of recurring and that the dues paid in the year were required to "maintain membership". In the situation at hand, the local levies are related to the cost of a replacement teacher that a bargaining unit has to pay as set out in the collective bargaining agreements. It is our view that these levies are annual dues directly related to the ordinary operating expenses of the trade union to which they are paid. Accordingly, these due can be included in box 44 of T4 slips.

19 May 2005 External T.I. 2005-0117501E5 - Requirement to Issue T2200

Unedited CRA Tags
8 10

Principal Issues: Whether an employee would have reasonable grounds to request that a T2200 be issued by the employer

Position: It is a question of fact to be determined upon a review of the circumstances.

Reasons: In order to determine if an expense incurred by an employee, which was not expressly required in the contract was actually an implied requirement, the courts have reviewed whether the failure to meet the requirement could result in the cessation of employment, poor performance evaluation or other disciplinary action on the part of the employer.

13 May 2005 External T.I. 2005-0126381E5 - Application of section 74.4

Unedited CRA Tags
74.4(4)

Principal Issues: Whether the terms of a trust agreement will met the conditions set out in subsection 74.4(4) of the Act.

Position: No.

Reasons: The law.

13 May 2005 External T.I. 2005-0126531E5 F - Capital Gain Strip/Significant Increase

Unedited CRA Tags
55(3)(a)(i) 55(3)(a)(v)
subscription by employees for shares of employeeco was part of series of transactions resulting in the redemption of shares held in employeeco, so that s. 55(3)(a)(ii) exclusion applied
employees’ subscription for shares of employeeco and redemption years later of employeeco preferred shares held by parentco engaged the s. 55(3)(a)(v) exclusion

Principales Questions: In a given situation, where Holdco's shareholder and Employeeco's common shareholders are not related to each other, Holdco and Employeeco each own 50% of Opco's common shares, Holdco controls Employeeco and owns all Employeeco high-low redeemable preferred shares which Holdco acquired over a 5 year period as consideration for the rollover transfer each year of 10% of its Opco common shares, and Employeeco redeems part of its preferred shares owned by Holdco, whether 55(2) applies?

Position Adoptée: Yes.

Raisons: 55(3)(a)(ii) and (v) could apply.

10 May 2005 External T.I. 2005-0125211E5 - Taxation of automobile benefit of status Indian

Unedited CRA Tags
81(1)(a) 6(1)(e) 6(1)(k)

Principal Issues: With respect to a status Indian employee whose employment income is tax-exempt, how should a benefit be taxed with respect to an employer-owned vehicle used for personal use by the employee, both on and off-reserve.

Position: To the extent that such a benefit would otherwise be included in income under paragraph 6(1)(e) and 6(1)(k), the amount is taxed in the same manner as the individual's employment income.

Reasons: Consistent with the Indian Act Exemption for Employment Income Guidelines

2005-012521
XXXXXXXXXX Kimberly Duval
(613) 957-2747
May 10, 2005

10 May 2005 External T.I. 2005-0125531E5 - Condo NPO disposes of caretaker suite

Unedited CRA Tags
149(1)(l) 149(5)

Principal Issues: If a condominium, which is an NPO, sells its caretaker's suite, will it be taxable on the resulting capital gain?

Position: Likely not.

Reasons: An NPO is exempt from tax on income. However, an NPO whose main purpose is the provision of dining, recreational or sporting facilities for its members will be taxable on its income from property to the extent that:
* the income exceeds $2,000 and
* the income is not a capital gain resulting from the disposition of property used exclusively in the course of providing the dining, recreational or sporting facilities to the NPO's members.

6 May 2005 External T.I. 2005-0116981E5 F - Rollover under section 85 of an ECP

Unedited CRA Tags
85 14(1) 110.6
“exempt gains balance" is of no utility in calculating the amount to be included in income under … 14(1)(a)"

Principal Issues: In a given fact situation, an individual made an election under subsection 110.6(19) in respect of his business carried on, on February 22, 1994, and, as a consequence of that election, has an "exempt gains balance" as defined under subsection 14(5). In 2005, the individual transfers his business to a wholly-owned corporation under section 85. Whether the individual could materialise his "exempt gains balance" by choosing an appropriate agreed amount.

Position: Yes. By choosing an appropriate agreed amount the individual could materialise his "exempt gains balance" but it would trigger an inclusion in his income under paragraph 14(1)a) in the particular fact situation.

Reasons: The law.

2 May 2005 External T.I. 2005-0115461E5 F - Résidence des membres du clergé

Unedited CRA Tags
8(1)c)

Principales Questions:
Est-ce que des agents laïques de pastorale sont admissibles à la déduction pour résidence des membres du clergé en vertu de l'alinéa 8(1)c)?

Position Adoptée:
Généralement non.

Raisons:
Les agents de pastorale ne rencontrent généralement pas le test de statut au sous-alinéa 8(1)c)(i) car ils ne sont pas des ministres réguliers d'une confession religieuse. Donc, ils ne sont pas admissibles à la déduction relative à la résidence des membres du clergé.

29 April 2005 External T.I. 2005-0117371E5 F - Ristourne payée à une société de personnes

Unedited CRA Tags
135(3)
partnership is a look-though entity for patronage dividend withholding tax purposes

Principales Questions: Un paiement effectué conformément à une répartition proportionnelle à l'apport commercial (une "ristourne") fait à une société de personnes est-il assujetti à la retenue prévue au paragraphe135(3) de la Loi?

Position Adoptée: La retenue d'impôt doit être effectuée en tenant compte du statut de chaque membre de la société.

Raisons: Libellé de la Loi

26 April 2005 External T.I. 2004-0107761E5 F - Aide à domicile/SAAQ

Unedited CRA Tags
9
Maurice inapplicable where the adult, mentally capable, victim receives the insurance himself and pays it as compensation for his wife’s care services
amount not business income until the entitlement thereto was determined

Principales Questions: 1. Est-ce que la somme reçue en 2004 de la SAAQ doit être incluse dans le calcul du revenu de l'épouse du contribuable à titre de revenu d'entreprise dans la situation où celle-ci rend les services d'aide personnelle au contribuable ?
2. Si la réponse à la première question est positive, est-ce que l'inclusion de cette somme peut être répartie sur une période de 10 ans ?

Position Adoptée: 1. Oui.
2. Non, la somme doit être incluse en entier en 2004.

Raisons: 1. Le montant de remboursement doit être inclus dans le calcul du revenu aux fins de l'impôt de la personne qui rend les services peu importe si cette personne a un lien de dépendance ou non avec la victime. La situation n'est pas similaire à celle de la cause Maurice.
2. La somme n'a pas la qualité de revenu avant 2004.

18 April 2005 External T.I. 2005-0114051E5 - NPO selling property

Unedited CRA Tags
149(1)(l) 149)5)

Principal Issues: General questions on the tax consequences concerning several options being considered by an NPO for use of proceeds of disposition of property.

Position: General comments only.

Reasons: Whether an NPO will continue to qualify for an exemption under paragraph 149(1)(l) of the Act is a question of fact.

XXXXXXXXXX 2005-011405
J. Gibbons, CGA
April 18, 2005

16 March 2005 External T.I. 2004-0107341E5 - Social assistance paid to Indian by First Nation

Unedited CRA Tags
56(1)(u) 81(1)(a) 110(1)(f)

Principal Issues: Is social assistance paid by a First Nation to a status Indian taxable?

Position: If certain conditions are met, the amount would be tax exempt.

Reasons: If the First Nation is running a social assistance program which makes benefits available only to Indians, and if the recipient is a status Indian who is a reserve resident, then the amount will be sufficiently connected to a reserve to be exempt under section 87 of the Indian Act and paragraph 81(1)(a) of the Income Tax Act.

2004-010734
XXXXXXXXXX Renée Shields
(613) 948-5273
March 16, 2005

Conference

8 October 2004 Roundtable, 2004-0087001C6 F - Déductibilité des intérêts - fusion ou liquidation

Unedited CRA Tags
20(1)c)

Principales Questions: Est-ce que la position énoncée au paragraphe 21 du bulletin d'interprétation IT-533 s'applique également à la situation où l'argent emprunté par l'acquéreur est utilisé pour acquérir une créance dont la société cible est débitrice en plus des actions de cette société?

Position Adoptée: Oui, en autant qu'il est possible d'établir un lien entre les actions et la créance qui ont été acquises initialement et les actifs de la société cible qui sont maintenant la propriété de la société qui continue les opérations.

Raisons: Conforme à l'approche du principe du retraçage.

Technical Interpretation - Internal

13 May 2005 Internal T.I. 2005-0127041I7 F - Revisions of CCA and non-capital loss claims

Unedited CRA Tags
111 161(1)
permissible to revise return to increase CCA and decrease NCL carryforward to that year

Principal Issues: 1. Whether paragraph 10 of IC 84-1 applies in the situation described? 2. Whether the taxpayer must pay interest pursuant to subsection 161(1)?

Position: 1. Yes. 2. No.

Reasons: 1. Situation described in paragraph 10 of IC 84-1. 2. No tax payable before and after the revision.

4 May 2005 Internal T.I. 2005-0121761I7 F - Déduction des intérêts - améliorations locatives

Unedited CRA Tags
18(3.1) 20(1)c)
s. 18(3.1) generally inapplicable to borrowing by tenant to make leasehold improvements

Principales Questions:
Les intérêts sur de l'argent emprunté utilisé pour effectuer des améliorations locatives sont-ils assujettis au paragraphe 18(3.1)?

Position Adoptée:
Généralement déductibles.

Raisons:
Le paragraphe 18(3.1) ne s'applique généralement pas aux intérêts sur de l'argent emprunté par un locataire et utilisé pour effectuer des améliorations locatives normalement à sa charge afin d'aménager un local loué.

25 April 2005 Internal T.I. 2004-0108301I7 F - Coût d'une automobile

Unedited CRA Tags
6(1) 6(2) 49(3)
cost of automobile acquired pursuant to exercise of bargain purchase option increased under s. 49(3) by portion of each preceding lease payment treated as an option premium
each car lease payment contained an embedded premium referable to the bargain purchase option, which was added under s. 49(3)

Principales Questions: Une société a acquis une automobile à la fin d'un bail en raison de l'exercice d'une option d'achat à prix de faveur qui était accordée en vertu du bail. Ce prix est beaucoup moins élevé que la juste valeur marchande de l'automobile à cette date. Est-ce que le coût de l'automobile aux fins du calcul des frais raisonnables pour droit d'usage d'une automobile par un employé est égal au prix de faveur?

Position Adoptée: Une partie de chaque paiement de loyer pourrait être considérée comme un paiement à l'égard du droit d'acheter le bien dans le futur. Cette partie de chaque paiement de loyer fait partie du prix de base rajusté de l'option d'achat de l'automobile à prix de faveur. Conformément au paragraphe 49(3) de la Loi, le coût de l'automobile acquise suite à l'exercice de l'option d'achat sera majoré du prix de base rajusté de l'option. C'est ce coût majoré qui sera utilisé aux fins de l'élément C au paragraphe 6(2) de la Loi. Ainsi, le coût sera supérieur au prix de faveur.

Raisons: Application du paragraphe 49(3) de la Loi en tenant compte de la position prise antérieurement à l'effet qu'une partie de chaque paiement de loyer pourrait être considérée comme étant à l'égard de l'option d'achat du bien.