Income Tax Severed Letters - 2006-03-24

Ruling

2006 Ruling 2005-0141921R3 - Public Company Spin-off

Unedited CRA Tags
55(3)(b) 7(1.5)

Principal Issues: Whether the proposed butterfly reorganization satisfies the requirements of paragraph 55(3)(b).

Position: Yes

Reasons: Requirements of the legislation are met

2006 Ruling 2005-0143191R3 F - Spin-Off Reorganization

Unedited CRA Tags
55(3)(a) 256(7)

Principal Issues: Whether the dividends are exempt from 55(2) by virtue of 55(3)(a)?

Position: Yes.

Reasons: None of the events described in 55(3)(a) occurs.

2005 Ruling 2005-0149751R3 - Reorganization of a business

Unedited CRA Tags
84(2) 84(4.1)

Principal Issues: Transfer of some operations which are highly integrated to the taxpayer's business and of the assets required for those operations to a third party. Whether the distribution of the sale proceeds gives rise to a deemed dividend under subsection 84(2) to the extent that the amount of that distribution exceeds the amount by which the paid-up capital is reduced on the distribution.

Position: Yes.

Reasons: Consistent with our position in previous rulings and with the Department of Finance policy.

2005 Ruling 2005-0157311R3 - Incorporating a Partnership

Unedited CRA Tags
125(7)("specified partnership interest") 125(7)("personal services business")

Principal Issues: Whether a professional corporation, providing XXXXXXXXXX services to another corporation, will be carrying on a "personal services business" within the meaning thereof in subsection 125(7) of the Act.

Position: No.

Reasons: The former partners that are providing services through a "Contracting Company" do not provide services to Newco in his/her capacity as an employee or officer of Newco. See previous rulings issued.

Technical Interpretation - External

22 March 2006 External T.I. 2005-0133061E5 F - Limitation Period Collection of Debts

Unedited CRA Tags
222(1) 222(4)
Summary Under
Tax Topics - Income Tax Act - Section 222 - Subsection 222(4) - Paragraph 222(4)(a) - Subparagraph 222(4)(a)(ii)
10-year limitation period did not start running for a pre-2004 debt until March 4, 2004

Principal Issues: In a given situation, where a corporation has an amount payable under the ITA outstanding since 1998 and the Crown has not taken collection action, whether the tax debt is statute barred?

Position: No.

Reasons: The law.

22 March 2006 External T.I. 2006-0171351E5 - test wind turbine CRCE

Unedited CRA Tags
Reg. 1219(3) Reg. 1219(2)

Principal Issues: Whether a wind turbine will qualify as a test wind turbine under subsection 1219(3) of the Regulations.

Position: Yes, provided the taxpayer proceeds with the development of the wind farm project as planned.

Reasons: Based upon the wording of the relevant provisions of the Regulations, a written opinion obtained from Natural Resources Canada dated March 6, 2006 and the facts of the situation.

21 March 2006 External T.I. 2005-0158451E5 F - Québec Mining Duties Act - Credit for Losses

Unedited CRA Tags
12(1)(x.2) 12(1)(x) 66.1(6) 66.2(5)
Summary Under
Tax Topics - Income Tax Act - Section 66.1 - Subsection 66.1(6) - Cumulative Canadian exploration expense - Element J
credit under the Quebec Mining Duties Act based on exploration and development losses of operator was not “assistance" under J
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x.2)
credit under the Quebec Mining Duties Act based on exploration and development losses of operator was not includible under s. 12(1)(x.2)
Summary Under
Tax Topics - Income Tax Act - Section 66 - Subsection 66(12.6) - Paragraph 66(12.6)(a)
credit under the Quebec Mining Duties Act based on exploration and development losses of operator was too remote from the exploration to reduce the renounced CEE

Principal Issues: Whether paragraph 12(1)(x.2) of the Act applies to the "Credit on Duties Refundable for Losses" provided under section 32 of the Québec Mining Duties Act.

Position: No.

Reasons: The Credit on Duties Refundable for Losses does not fall within the ambit of paragraph 12(1)(x.2) of the Act because such credit is not received by the taxpayer in respect of an amount that was at any time receivable by Her Majesty in right of the province of Québec.

16 March 2006 External T.I. 2005-0165371E5 - Interest Income and Offset

Unedited CRA Tags
20(1)(c)

Principal Issues: Is a reduction in interest income in exchange for a reduction in club dues taxable?

Position: Yes

Reasons: Barter transaction

16 March 2006 External T.I. 2005-0154871E5 - Spousal RRSP LSF tax credit

Unedited CRA Tags
124.7

Principal Issues: Who can claim the Labour Sponsored Fund Tax Credit in the two scenarios outlined below: (1) where a contributor acquires LSF shares and contributes them to a spousal RRSP? (2) where the contributor makes a contribution (other than approved LSF shares) to a spousal RRSP and then the RRSP trust acquires LSF shares?

Position: (1) Only the person acquiring the shares can claim the LSF tax credit. (2) The RRSP trust acquires the LSF shares. Either the contributor or the annuitant of the spousal RRSP shares can claim LSF tax credit but they cannot split the LSF credit.

Reasons: Position taken in previous Rulings documents.

15 March 2006 External T.I. 2005-0141451E5 - Alberta Unlimited Liability Corporations

Unedited CRA Tags
248(1)

Principal Issues: Whether an Alberta Unlimited Liability Corporation is a "corporation" for purposes of the Income Tax Act.

Position: Yes.

Reasons: An Alberta Unlimited Liability Corporation is incorporated under the Business Corporations Act (Alberta) and therefore meets the definition of "corporation" in subsection 248(1) of the Income Tax Act (Canada).

14 March 2006 External T.I. 2005-0114971E5 - Associated corporations

Unedited CRA Tags
256(1.1)

Principal Issues: The application of paragraph 256(1.1)(a) to a particular situation.

Position: It should ordinarily apply.

Reasons: Meets the requirements of the law.

14 March 2006 External T.I. 2006-0166891E5 - Qualifying Retroactive Lump-Sum Payment

Unedited CRA Tags
110.2

Principal Issues: Will a lump-sum payment of pension benefits relating to prior years be considered a qualifying amount for purposes of the qualifying retroactive lump-sum payment rules in section 110.2 of the Act?

Position: Question of fact, but likely yes

Reasons: wording of the legislation

14 March 2006 External T.I. 2005-0163771E5 - PHSP for sole shareholder sole employee

Unedited CRA Tags
118.2 6(1)(a)(i) 15(1) 18(1)(e)

Principal Issues: 1. Can a corporation with a sole shareholder/employee set up a PHSP for that sole shareholder/employee? 2. What amounts are deductible by the corporation under a health spending account arrangement where the plan is a PHSP but there is no trust, only a notional account?

Position: 1. Yes. 2. Assuming that a PHSP exists, amounts would be deductible as and when paid or payable by the corporation for qualifying medical expenses.

Reasons: See previous rulings documents.