Income Tax Severed Letters - 2006-06-16


2006 Ruling 2005-0147681R3 - Transfer of CRP

Unedited CRA Tags
245(4) 66.4(5) 53(1)(e)(vii) 53(2)(ii)(E)

Principal Issues: 1. Whether the transfer of Canadian resource properties (CRP) to a recently acquired partnership prior to sale of the interests in that partnership may be considered abusive? 2. Will a partnership continue to exist after it sells its CRP and holds an interest-bearing promissory note for up to XXXXXXXXXX years then acquires new CRP?

Position: 1. GAAR will not apply to re-determine the tax consequences that would otherwise arise from the proposed transactions. 2. Yes

Reasons: 1. There is no identifiable scheme of the Act or jurisprudence that would clearly indicate that the proposed avoidance transactions are abusive. 2. Based on jurisprudence on partnerships indicated below, the low threshold of activity that is necessary in order for a partnership to be considered to be carrying on a business and the active business (i.e., income from oil and gas producing properties) that will be owned by the partnership before and after the holding the promissory note.

2006 Ruling 2005-0156381R3 - withholding post-amble

Unedited CRA Tags

Principal Issues: Are notes linked to a basket of commodities subject to the post-amble in paragraph 212(1)(b)?

Position: No

Reasons: Commodities in question are not linked to any profits, revenues or earnings of the issuer

2006 Ruling 2005-0158841R3 - XXXXXXXXXX - Butterfly Distribution

Unedited CRA Tags

Principal Issues: Multiple wing butterfly followed by winding-up of the DC. Several mostly routine issues.

Position: Favourable ruling issued.

Reasons: Complies with the law.

Technical Interpretation - External

14 June 2006 External T.I. 2006-0165821E5 - Special Work Site and Taxable Benefits

Unedited CRA Tags
6(1) 6(6)

Principal Issues: Part I: Is a work site for logging work a special work site? Is there a taxable benefit to the employee for employer-paid board and lodging and travel costs?
Part II: Is the travel from the employer's home office to the logging site personal travel of the employee?

Position: Part I: Question of Fact. In this case likely yes. No taxable benefits if the exceptions relating to a special work site apply.
Part II: Question of Fact.

Reasons: Part I: The requirements to determine whether a work site is a special or remote work location are provided in subsection 6(6) of the Income Tax Act. A special work site is a location at which the duties performed are of a temporary nature, usually less than 2 years. The exceptions in subsection 6(6) apply in this case.
Part II: Travel between two places of business of the employer is not considered personal. Where an employee is required to travel from home to the employer's home office before travelling to a logging site, the travel from the employer's home office to the logging site will not be considered personal.

12 June 2006 External T.I. 2005-0161671E5 - EPSP forfeitures

Unedited CRA Tags
144(1) 144(4) 144(9)

Principal Issues: 1) Where an EPSP member forfeits a previously allocated capital gain, will the CRA administratively allow an adjustment to account for the amount taxed which will never actually be received?
2) If the EPSP re-allocates the forfeited capital gain, is the amount taxable to the member(s) to whom the amount is allocated?

Position: 1) No.
2) Yes

Reasons: 1) The formula in subsection 144(9) of the Act clearly excludes a deduction for a previously allocated capital gain.
2) Upon re-allocation, the forfeited capital gain is taxable under subsection 144(4) of the Act.

XXXXXXXXXX Renée Shields
(613) 948-5273
June 12, 2006

9 June 2006 External T.I. 2006-0168111E5 - Approved Organization

Unedited CRA Tags
39(1)(a)(ii)(E) 37(1)(a)(ii)(C) 149(1)(j)

Principal Issues: Whether the XXXXXXXXXX can be designated as an "approved organization" pursuant to clause 37(1)(a)(ii)(E) of the Income Tax Act.

Position: No.

Reasons: Approval under this clause is intended to be restricted to the three granting councils which were specifically mentioned in the February 26, 1986 Budget Papers, i.e. the Natural Sciences and Engineering Research Council, the Medical Research Council, and the Social Sciences and Humanities Research Council.

6 June 2006 External T.I. 2006-0175611E5 - Television Monitor on property leased by taxpayer

Unedited CRA Tags
Class 13 1100(1)(b) 1102(4) 102(5)

Principal Issues: (1) Whether television monitors installed on properties leased by the taxpayer fall within Class 13.

Position: (1) Generally, no.

Reasons: (1) It appears that the television monitors are chattels as they are removed and replaced within the term of lease and are installed for the better use of monitor as a monitor and not for the improvement of the freehold.

(613) 941-7239
June 6, 2006

Technical Interpretation - Internal

5 June 2006 Internal T.I. 2006-0167321I7 - Demolition Costs

Unedited CRA Tags
18(3.1) 20(29)

Principal Issues: Whether costs to demolish an old building that had been used by the taxpayer for many years to earn income are deductible in the year or whether these costs must be added by virtue of subsection 18(3.1), to the cost of the new building that the taxpayer plans to use to earn rental income.

Position: Question of fact. In this particular case the costs of demolition of the old building would be deductible.

Reasons: Par. 11 of IT-285R2