Income Tax Severed Letters - 2006-04-14


2006 Ruling 2005-0145921R3 - Innovative Instrument

Unedited CRA Tags
20(1)(c) 104(7.1) 104(6)

Principal Issues:
Whether the XXXXXXXXXX note constitutes borrowed money to ACO for the purpose of paragraph 20(1)(c).
Whether subsection 104(7.1) will apply to deny a deduction to the Trust under paragraph 104(6)(b) of amounts payable to its unit holders.


Reasons: In previous rulings, we concluded that deductibility under paragraph 20(1)(c) is dependent upon there being a borrower and lender relationship between the parties to the XXXXXXXXXX note. There is a good argument that a loan exists until such time as a mandatory conversion event occurs. The existence of the voting rights attached to the Special Trust Securities is not intended to give ACO a percentage interest in the Trust's property in excess of ACO's income interest in the Trust.

Technical Interpretation - External

13 April 2006 External T.I. 2006-0174101E5 - Asset sale, withholding taxes

Unedited CRA Tags

Principal Issues: Whether various circumstances are acceptable events of default

Position: Perhaps, depends on all relevant facts

Reasons: Not possible to provide a definitive answer given limited information provided

7 April 2006 External T.I. 2005-0160551E5 - LTD Lump Sum Payment

Unedited CRA Tags
6(1)(f) 39(1)(a)(iii)

Principal Issues: Taxability of lump sum settlement payment of future disability benefits.

Position: Where an individual receives a lump sum payment in lieu of future benefits that would have been otherwise paid under an employer LTD plan, in circumstances such that the payment can reasonably be considered to be proceeds of disposition of an interest in an insurance policy in accordance with subparagraph 39(1)(a)(iii) of the Act, the proceeds are not taxable under paragraph 6(1)(f) of the Act.

Reasons: Jurisprudence; Subparagraph 39(1)(a)(iii).

6 April 2006 External T.I. 2005-0157981E5 - UK Pension Transfer to Canada

Principal Issues: Request for comments concerning the taxation of UK pension amounts received by a Canadian resident and the ability to transfer a UK pension to Canada on a tax-deferred basis.

Position: General comments provided

Reasons: Question of fact

6 April 2006 External T.I. 2006-0165431E5 - Pension Adjustment Reversal - Status Indian

Unedited CRA Tags
81(1)(a) 147.1

Principal Issues: Is the pension adjustment reversal (PAR) amount of a status Indian reduced by exempt income pursuant to 81(1)(a) of the Act?

Position: no

Reasons: wording of the legislation, specifically the term "compensation"