Income Tax Severed Letters - 2005-07-22


2005 Ruling 2004-0103071R3 - exploration/new mine- CEE

Unedited CRA Tags

Principal Issues: Whether expenses relating to an exploration program will qualify for inclusion under paragraph (f) to the definition of CEE.

Position: Expenses to be incurred in respect of the proposed exploration program may potentially qualify under paragraph (f) to the definition of CEE. Expenses already incurred for 1 zone do not qualify.

Reasons: Based upon the facts of the situation and a written opinion received from Natural Resources Canada dated March 8, 2005. A representative of that Department visited the site and reached conclusions that support the above positions. The operating open mine pit could potentially be extended to mine any resource found in the zone where drilling has been completed.

2005 Ruling 2005-0119481R3 - Assumption of Debt

Unedited CRA Tags
85(1)(b) 97(2)

Principal Issues: Whether paragraph 85(1)(b), as modified by paragraph 97(2)(a) applies to adjust agreed amount.

Position: No.

Reasons: Amount of consideration, other than an interest in the partnership, does not exceed amount agreed upon by the parties

2005 Ruling 2005-0126121R3 - Supplemental ruling

Unedited CRA Tags

Principal Issues: Changes to ruling

Position: Ruling modified

Reasons: Changes do not affect validity of rulings given.

2005 Ruling 2005-0130141R3 - safe income extraction

Unedited CRA Tags
55(2) 88(1)

Principal Issues: Whether the taxpayer is entitled to a bump under paragraph 88(1)(c)

Position: Yes

Reasons: Meets the requirements of the law

Technical Interpretation - External

20 July 2005 External T.I. 2005-0120161E5 - RRSP - Beneficiary Designation/Settlement Annuity

Unedited CRA Tags

Principal Issues: Will a "settlement annuity" that must be provided to a beneficiary on death of the RRSP annuitant satisfy the registration provisions under subsection 146(2) of the Act?

Position: Question of fact. Based on the description of a "settlement annuity" provided, in our view, there may be a problem with satisfying the requirements of paragraph 146(2)(c.2) of the Act.

Reasons: Wording of paragraph 146(2)(c.2).

18 July 2005 External T.I. 2005-0112551E5 - e-commerce income of status Indian

Unedited CRA Tags

Principal Issues: Where an e-commerce business makes a wide variety of products made or manufactured by other entities available through its website, will it be taxable on income earned through sales of these products to off-reserve customers?

Position: Likely yes

Reasons: Because the income is generated by being an intermediary between supplier and consumer, it is reasonable to consider the location of suppliers as a connecting factor. (Cleary v. the Queen) This, in conjunction with the location of customers, the other factor deemed key by the Southwind case, tend to suggest the income is situated off-reserve and therefore would be taxable.

18 July 2005 External T.I. 2005-0122271E5 - Reduction in Tuition Fees

Unedited CRA Tags
118.5 56(1)(n)

Principal Issues: Is a reduction in tuition fees offered to all students by a college taxable to the students under 56(1)(n) or should the reduction be considered a reimbursement of fees in the circumstances?

Position: Taxable as a bursary under 56(1)(n) in the particular circumstances

Reasons: The definition of bursary is broad enough to encompass any form of financial assistance to enable a student to pursue his or her education.

15 July 2005 External T.I. 2005-0130471E5 - DPSP Forfeitures and Withholding

Unedited CRA Tags
153(1) 147(2)(i.1) Reg 102 Reg 103(4)

Principal Issues: Where a forfeited amount is paid out of a deferred profit sharing plan to the employer and where the employer subsequently contributes part of the forfeited amount back into the plan as a contribution or repayment of expenses such that the actual payment from the plan to the employer is a net amount (the total forfeited amount less the amount of the subsequent contribution or expense reimbursement), will the reporting and/or withholding tax requirement be based on the gross or net amount of the payment to the employer?

Position: Reporting and tax withholding on the gross forfeited amount

Reasons: Consistent with previous positions and based on the "constructive receipt doctrine"

14 July 2005 External T.I. 2005-0140571E5 - Shareholder/Employee Loan

Unedited CRA Tags

Principal Issues: Whether a loan received by the sole shareholder and only employee of a corporation will be received in the capacity as a shareholder or employee?

Position: Question of fact.

Reasons: The fact that the individual is the sole shareholder and only employee of the corporation does not mean that the loan is received in the capacity as a shareholder.

14 July 2005 External T.I. 2005-0140591E5 - Wage Loss Replacement Plans

Unedited CRA Tags

Principal Issues: What is the taxable status of a wage loss replacement plan where the employer pays the premium on behalf of employees?

Position: Determination can only be made with reference to the plan documents.

Reasons: The status of a plan as an employee pay-all plan is not affected because the employer actually pays the premium, provided the plan is set-up as an employee pay-all plan and the premium is recovered from the employees through payroll deductions or the employer includes the amount in the employees' income.

13 July 2005 External T.I. 2005-0132631E5 F - Prestation fiscale canadienne pour enfants

Unedited CRA Tags
122.6 122.61 122.62 122.63

Principales Questions: Est-il contraire à la législation fiscale qu'une personne qui reçoit une prestation fiscale canadienne pour enfants ou un autre crédit d'impôt, ayant pour objet de compenser les besoins essentiels de l'enfant, convienne avec son ex-conjoint que ces montants soient partagés entre les parents en proportion de leur obligation financière à l'égard des besoins de l'enfant. Est-il contraire à la législation fiscale qu'un juge entérine une telle convention?

Position Adoptée: Ces questions relèvent davantage du droit de la famille que du droit fiscal. En effet, la Loi de l'impôt sur le revenu ne contient aucune restriction à l'égard du "partage" de la prestation fiscale canadienne pour enfants entre parents qui sont soit séparés soit divorcés ni ne contient aucune disposition qui empêcherait un juge d'entériner une telle convention.

Raisons: Interprétation de la Loi de l'impôt sur le revenu.


14 July 2005 Roundtable, 2005-0125791C6 - CLHIA Conference Question

Unedited CRA Tags

Principal Issues: Whether ruling 2004-009868 contradicts the CRA's position in paragraph 21 of IT-428 concerning the purification of a wage loss replacement plan?

Position: No.

Reasons: Where the terms of a taxable wage loss replacement plan are changed to provide that all future contributions to the plan will be 100% funded by employees, and it can be shown that all previous employer contributions to the plan are exhausted (e.g. where the plan is in a deficit position), we will not only consider all payments from liabilities that occur after the purification to be paid under an employee-pay-all plan, but also all payments for liabilities that arose before the purification. In such a case, we do not consider liabilities that arose before the purification to be "provided for in the old plan".

Technical Interpretation - Internal

13 July 2005 Internal T.I. 2005-0134551I7 - Indian fishing income from lakes

Unedited CRA Tags

Principal Issues: Will a status Indian fisher be taxable on fishing income earned by fishing on lakes "closely connected" with his reserve or lakes that are within a resource management area?

Position: Question of fact

Reasons: The principles of the Southwind case apply, meaning that the most significant connecting factors are the location of the income generating activities and the location of the customers. Whether the lake is part of a reserve is a question of fact that would require confirmation from INAC. The fact that fish may be caught within XXXXXXXXXX in and of itself doesn't create a connection to a reserve. XXXXXXXXXX . This is also a question of fact requiring INAC's confirmation.