Income Tax Severed Letters - 2005-06-24

Ruling

2005 Ruling 2004-0095431R3 - Spin-off butterfly

Unedited CRA Tags
55(3)(b) 55(3.1) 112(1)

Principal Issues: Spin-off butterfly.

Position: Acceptable

Reasons: No contentious issues.

Ministerial Correspondence

7 June 2005 Ministerial Correspondence 2005-0128501M4 - Taxation of status Indian PSE assistance

Unedited CRA Tags
56(1)(n) 81(1)(a)

Principal Issues: Are status Indian students required to include post-secondary education assistance in income?

Position: Question of fact, but most likely yes.

Reasons: INAC has advised that PSE assistance is provided as a matter of social policy and not as a treaty right. In the absence of a treaty right, the amount would be exempt if sufficient connecting factors exist to situate the amount on a reserve. The requirement to issue a T4A slip reporting the payment of PSE assistance has been delayed until 2006 to ensure sufficient time is provided to allow First Nations to set up reporting systems.

26 May 2005 Ministerial Correspondence 2005-0123651M4 - Status Indian post secondary education assistance

Unedited CRA Tags
81(1)(a)

Principal Issues: Is a status Indian taxable on post secondary education assistance received under INAC's program?

Position: Generally yes

Reasons: The Indian Act exempts from taxation a status Indian's personal property situated on a reserve. PSE assistance will be situated on a reserve if paid pursuant to treaty (which INAC advises is not the case with respect to its program) or if sufficient connecting factors exist to connect the amount to a reserve. This measure has been delayed so that it will first have effect with respect to amounts paid in 2006. As with all students, the scholarship exemption of up to $3,000 and the education and tuition tax credits are available.

Technical Interpretation - External

22 June 2005 External T.I. 2005-0136421E5 - single-purpose corporation

Unedited CRA Tags
15(1) 70(6)(b)

Principal Issues: whether transitional relief to the termination of the administrative practice referred to in Income Tax Technical News No. 31R would also apply where, upon the shareholder's death, the shares of the single-purpose corporation are transferred to a trust of which the shareholder's spouse or common-law partner is a beneficiary

Position: Yes, provided that the trust is one described in paragraph 70(6)(b) of the Act

Reasons: consistent with the rationale to permit a transfer on death to a spouse or common-law partner

20 June 2005 External T.I. 2004-0095441E5 - subsection 216(1) election on rent receivable

Unedited CRA Tags
216(1)
Summary Under
Tax Topics - Income Tax Act - Section 216 - Subsection 216(1)
election only available for rents received in year

Principal Issues: Whether the election under subsection 216(1) of the Act will be available for rental income receivable by a non-resident person. Will a non-resident person that has rent receivable at the end of a taxation year be allowed to file an election under subsection 216(1) of the Act for that year or be required to wait until the subsequent taxation year in which the rent is actually received to file the election?

Position: No, an election under subsection 216(1) is not available for rental income accrued at the end of the year.

Reasons: Contrary to the intent and wording of subsection 216(1).

16 June 2005 External T.I. 2005-0134361E5 - Rental Property

Unedited CRA Tags
13(6); 45 54 Class 1, 6

Principal Issues: To determine if the capital gain accrued to the time the property's use changes from rental to a principal residence can be deferred for tax purposes.

Position: Yes.

Reasons: Where the taxpayer makes an election under subsection 45(3), the capital gain accrued during the period the property was used for rental purposes can be deferred for tax purposes.

15 June 2005 External T.I. 2005-0119731E5 - Paragraph (f) of CEE Definition

Unedited CRA Tags
66.1(6) 66(15) 66(12.6)

Principal Issues: 1. Whether Agency's position regarding a simple farm-out transaction remains as stated in Interpretation Bulletin IT-125R4. 2. How payments made / received in a situation that does not involve a "farm-out" transaction of the type described in IT-125R4 are to be treated for income tax purposes.

Position: 1. Yes; where in a simple farm-out transaction a farmee obtains an interest in an unproven resource property solely as a result of incurring exploration expenditures (which otherwise meet the requirements of paragraph (f) to the definition of CEE) on that property, those expenditures will generally be accepted as constituting CEE to the farmee with the farmee having a nil acquisition cost for the interest earned in the unproven resource property. 2. Question to be determined from all of the facts and circumstances relevant to a particular situation.

Reasons: 1. No change has been made to the Agency's position regarding a simple farm-out transaction as described in IT-125R4. 2. Nature of the determination.

13 June 2005 External T.I. 2005-0113981E5 - Subsection 116(3) Notification

Unedited CRA Tags
116 ); 45(1) 45(2) 45(3)

Principal Issues: A) whether a notification under subsection 116(3) is required when a non-resident person converts a seasonal vacation property from personal use to a rental property. B) whether a notification under subsection 116(3) will also be required when the property is converted back to personal use

Position: A) not if a valid election under subsection 45(2) is made; otherwise a notification would be required B) not if the subsection 45(2) election continues in force

Reasons: Where a valid subsection 45(2) election is made, there is deemed not to have been a change in use; consequently, there would not be a deemed disposition of the property

13 June 2005 External T.I. 2005-0119011E5 - Education TC - Part-time at two institutions

Unedited CRA Tags
118.6

Principal Issues: Whether a student who is enrolled as a part-time student at 2 different institutions in the same program qualifies for the full-time education tax credit.

Position: Provided that the student otherwise qualifies for the education tax credit, the CRA will accept that the full-time requirement is met by a student enrolled part-time in two or more institutions for the same session period if the courses form part of a single program of study and the cumulative total of the time spent on courses or work in the program equals at least 10 hours per week.

Reasons: Based on established assessing position.

XXXXXXXXXX 2005-011901
J. Gibbons, CGA
June 13, 2005

6 June 2005 External T.I. 2005-0127341E5 - Education Tax Credit

Unedited CRA Tags
118.6

Principal Issues: Whether a school should be issuing T2202As to its "Mature Students". The students' tuition is funded by the provincial government.

Position: T2202As should not be issued.

Reasons: In relation to the Mature students, the program appears to not be a qualifying educational program due to the benefit of free tuition not available to all students in the program. Pursuant to paragraph (a) of the definition "qualifying educational program" in subsection 118.6(1), where a particular student receives a benefit from an arm's length person (other than a benefit described in subparagraphs (a)(i), (ii) or (iii) of the definition), the program will not be a qualifying educational program to that student. As noted in paragraph 16 of IT-515R2, "free tuition" is not considered to be a benefit where the program is available to the public at large at no cost. However, where a particular program is offered to some students for tuition, and to others free of charge, the students receiving free tuition are considered to be receiving a benefit.

Technical Interpretation - Internal

8 June 2005 Internal T.I. 2005-0129791I7 - Indian remission order and fairness package

Unedited CRA Tags
152(4.2) 220(3.1) 220(3.2)

Principal Issues: Is a request for an income tax refund pursuant to a Remission Order subject to the 10-year limitation period contained in the Fairness Provisions?

Position: No.

Reasons: A Remission Order is issued under the authority of the Financial Administration Act. In the absence of any specific wording to the contrary in the terms of the Order, it is not subject to the statute barring provisions of the Income Tax Act. A request for a refund pursuant to a Remission Order is not subject to the 10-year limitation affecting applications for fairness.