Income Tax Severed Letters - 2006-01-20


2005 Ruling 2005-0130131R3 - Partner Creating Professional Corporation

Unedited CRA Tags
96(1) 125(7) 125(1) 256(2.1)

Principal Issues: When a partner of a partnership (while remaining a partner) creates a professional corporation through which professional services will be provided to the partnership, will the professional corporation be eligible for the small business deduction?

Position: Yes.

Reasons: Legislation.

2005 Ruling 2005-0149021R3 - XXXXXXXXXX - Internal Reorganization

Unedited CRA Tags

Principal Issues: Internal reorganization - does subsection 55(4) apply?

Position: No based on facts.

Reasons: Based on the facts it is reasonable to conclude that the main purpose test in subsection 55(4) is not met.

Technical Interpretation - External

19 January 2006 External T.I. 2005-0161811E5 - Employee Recognition Policies

Unedited CRA Tags
6(1)(a) 67.1(2)(f)

Principal Issues: 1) Whether an employer provided social event that is generally available to all employees in a XXXXXXXXXX branch would result in a taxable benefit to the employees.
Distinguish between an award and a reward and provide the circumstances in which a reward may be non-taxable.
Whether a hospitality reward such as employer-provided team building lunch is taxable to the employee and if so, how the cost of such a lunch should be reported for tax purposes.

Position: 1) All employees at an employer's particular place of business could be a branch or division.
Awards and rewards are taxable if they do not fall within our policy.
Team building lunch is taxable

Reasons: Previous Position taken

17 January 2006 External T.I. 2005-0159721E5 - LCT and Government Assistance

Unedited CRA Tags

Principal Issues: 1. Would government assistance that is deferred and amortized into income in accordance with GAAP be considered a "reserve", "provision", "allowance" or "advance" for purposes of computing capital under subsection 181.2(3) of the Act?
2. Does the fact that the government assistance may become repayable at a future date if the recipient does not use the asset acquired with the funds in a manner required by the assistance agreement, result in the assistance being considered an "advance".

Position: 1. Generally no.
2. Generally no.

Reasons: 1. While each case would need be considered based on the terms and conditions of the specific assistance agreement, it is our general view that the deferred assistance balance would not be a "reserve", "provision" or "allowance" as those terms are defined for accounting purposes, nor would it constitute a legal advance provided the assistance funds were received when due under the terms and conditions of the assistance agreement.
2. The fact that the funds may become repayable at a future time because the recipient failed to continue to satisfy a requirement under the agreement would not in our view cause the funds, when received, to be considered an advance. In the event the funds do become repayable at a future time, the recipient will have a debt obligation that may or may not be included in capital.

16 January 2006 External T.I. 2005-0141731E5 - Northern Residents Deduction

Unedited CRA Tags

Principal Issues: Whether employees who work in a prescribed northern zone in employer provided accommodation, for a schedule of four days or fourteen days and then return to their principle residence outside the prescribed northern zone, would be considered to have resided in a prescribed northern zone for a period of more than six consecutive months for purposes of the northern residents deduction.

Position: No

Reasons: Employees do not meet requirements of subsection 110.7(1) that requires that they reside for a period that is "not less than 6 consecutive months".

21 December 2005 External T.I. 2005-0150711E5 F - Wind turbines - Class 43.1

Unedited CRA Tags
Class 43.1

Principal Issues: Whether in the situation described wind turbines would be properties included in Class 43.1?

Position: Yes

Reasons: Requirements of the Regulations are satisfied.


7 October 2005 Roundtable, 2005-0141121C6 F - Credit Checks

Unedited CRA Tags
231.1 225.2

Principal Issues: Various questions on CRA's practice of performing credit checks before an individual's tax payable for the year becomes due (April 30th).

Position: General information provided.

Reasons: Answered the questions.


7 October 2005 Roundtable, 2005-0141191C6 F - Loss Suspension Rules in Event Merger Winding-up

Unedited CRA Tags
40(3.3) 40(3.4) 40(3.5)(c)

Principal Issues: Does Technical Interpretation 2003-0182977 still represents the CRA's position?

Position: Yes.

Reasons: The law.

7 October 2005 Roundtable, 2005-0141241C6 F - Security of Information Provided to CRA

Unedited CRA Tags

Principal Issues: What is CRA's administrative process for ensuring the confidentiality and retention of taxpayer information obtained during an audit?

Position: General information provided.

Reasons: Too many measures to mention all of them.

7 October 2005 Roundtable, 2005-0141251C6 F - Interest and Loss Carryback

Unedited CRA Tags
161(1) 161(7)

Principal Issues: In a situation where a loss carry back is made to a taxation year with no tax payable in substitution of a foreign tax credit, whether CRA would charge interest pursuant to 161(1) because of 161(7)?

Position: No, even though technically interest charges apply.

Reasons: Long standing administrative position.


Technical Interpretation - Internal

18 January 2006 Internal T.I. 2005-0163731I7 - Designated Education Institution CGA

Unedited CRA Tags

Principal Issues: Can an individual taking courses offered through a provincial CGA program, claim the education tax credit?

Position: Question of fact

Reasons: The individual is required to be enrolled at a "designated education institution" either on a full time or part-time basis in a program meeting the provisions of the Act with respect to either a "qualifying educational program" or a "specified educational program" respectively.