Income Tax Severed Letters - 2006-06-23

Ruling

2006 Ruling 2006-0179471R3 - Utilization of Losses within an affiliated group

Unedited CRA Tags
88(1.1) 245

Principal Issues: No new or significant issues.

2006 Ruling 2004-0086091R3 - Assignment- Structured settlement

Unedited CRA Tags
56(1)(d) 20(7)(c) Reg 1400(3)

Principal Issues: 1. Where a general insurance carrier is insolvent- can it assign the structured settlements it owns to other general insurance carriers? 2. Are the claimants still entitled to receive the amounts from the Lifeco tax-free? 3. Are the new assignee corporations that are insurance corporations entitled to a paragraph 20(7)(c) reserve?

Position: 1. YES, provided the Claimants consent
2. YES 3. Probably NO

Reasons: 1. Consent from claimant - policy in IT-365R2 2. Nothing changes for the claimant. The same Annuity is received from the same LIFECO 3. We cannot determine whether the Assignee corporation qualifies for the reserve under paragraph 20(7)(c)

Technical Interpretation - External

21 June 2006 External T.I. 2006-0170311E5 F - Revenu d'une SEC - Indien inscrit

Unedited CRA Tags
81(1)a)

Principales Questions:
Est-ce qu'un Indien inscrit est imposable sur les revenus d'une société en commandite dont il est commanditaire si l'ensemble des opérations commerciales sont réalisées sur des réserves indiennes?

Position Adoptée:
Commentaires généraux.

Raisons:
Question de fait.

XXXXXXXXXX 2006-017031
L. J. Roy, CGA
Le 21 juin 2006

20 June 2006 External T.I. 2005-0165381E5 - calculation of variables in 127(10.2).

Unedited CRA Tags
125 127(10.2) 256(2) 248(1)

Principal Issues: In the example below, are the variables in 127(10.2) calculated correctly?

Position: Yes.

Reasons: Plain reading of subsection 127(10.2).

20 June 2006 External T.I. 2006-0168521E5 - Clothing Allowance Benefit

Unedited CRA Tags
6(1)(a) 6(1)(b) 18(1)(h)

Principal Issues: Whether a clothing allowance would result in a taxable benefit where: 1 An employer provides a clothing allowance for which clothing receipts would be provided, 2. The clothing expenses would be incurred as a result of self-employment, and 3. An individual would work for his or her own corporation, receive a clothing allowance and retain receipts.

Position: Generally yes in all three situations except for specific exceptions such as protective clothing, uniforms, etc.

Reasons: Paragraphs 6(1)(a), (b) and 18(1)(h) of the Act.

16 June 2006 External T.I. 2004-0100621E5 - Application of s. 164(6) in a civil law context

Unedited CRA Tags
164(6) 104(1) 104(2)

Principal Issues: Whether the loss realized upon the redemption of the shares of an estate can be carried back to the terminal return of the deceased pursuant to subsection 164(6) of the Act where such shares are the object of a legacy by particular title under a valid will under Quebec civil law?

Position: Yes.

Reasons: Notwithstanding the fact that the shares are the object of a legacy by particular title, they would remain registered under the name of the deceased in the corporation's share register (or be registered under the name of the liquidator of the succession) until their transfer to the legatee(s) by particular title is registered in the corporation's share register.

16 June 2006 External T.I. 2006-0179401E5 - Legal Fees

Unedited CRA Tags
8(1)(b) 60(o.1) 111(1)(a)

Principal Issues: Whether a deduction for legal fees in excess of income may be carried forward to future years.

Position: Question of fact. General comments given.

Reasons: Depends whether legal fees are incurred to collect or establish right to salary or wages, or a retirement allowance.

16 June 2006 External T.I. 2006-0168331E5 - Application of 66.7(16)

Unedited CRA Tags
66.7(16) 66.7(10)

Principal Issues: Whether subsection 66.7(16) applies with regard to a Canadian resource property, owned by a corporation at the time of an acquisition of control, where that property is subsequently sold and then reacquired.

Position: Yes - General comments provided.

Reasons: Based upon application of the relevant legislation to the hypothetical fact situation.

14 June 2006 External T.I. 2006-0172351E5 - BC Forestry Revitalization Trust

Unedited CRA Tags
12(1)(x) 12(2.2) 13(7.4) 53(2)(s)

Principal Issues: What is the tax treatment of various mitigation payments from a trust set up by the government?

Position: Each payment is considered taxable pursuant to paragraph 12(1)(x).

Reasons: The recipients have no legal right to the payment from the trust, and it is reasonable to conclude that the payer would not have paid the amount but for the receipt by the payer from a government, or payer, as the case may be.

13 June 2006 External T.I. 2006-0186311E5 - Education Assistant Payment

Unedited CRA Tags
146.1(1)

Principal Issues: General questions concerning education assistant payments from an RESP

Position: General comments provided

Reasons: wording of the legislation

9 June 2006 External T.I. 2006-0182821E5 - Health and Welfare Trust

Unedited CRA Tags
118.2(2) 248(1)

Principal Issues: Whether the XXXXXXXXXX as drafted would meet the definition of a Private Health Services Plan ("PHSP") in subsection 248(1) of the Income Tax Act ("Act")

Position: General comments provided.

Reasons: IT-85R2

2 June 2006 External T.I. 2006-0173251E5 - Reward Points / Airplane ticket

Unedited CRA Tags
118.1

Principal Issues:
Whether the donation of an airplane ticket that has been acquired by redeeming reward points qualifies as a gift for the purposes of section 118.1 of the Income Tax Act.

Position: Yes

Reasons:
Where the reward points are redeemed to acquire an airplane ticket, the property transferred to the registered charity is the airplane ticket. It is the fair market value of the airplane ticket at the time it is transferred to the charity that is relevant to the determination of the donation tax credit.

23 May 2006 External T.I. 2006-0181711E5 - Paragraph 60 of IC 72-17R5

Unedited CRA Tags
116

Principal Issues: In technical interpretation #2005-014996, why is there no mention of paragraph 60 of IC 72-17R5?

Position: In technical interpretation #2005-014996, we stated that section 116 applies to the disposition of a capital interest in an estate by the beneficiary of that capital interest, situation which is different from the one provided for in paragraph 60 of IC 72-17R5.

Reasons: Paragraph 60 of IC 72-17R5 applies to a deemed disposition of property upon death by a person in favour of his estate.

25 April 2006 External T.I. 2005-0154931E5 F - Action - société agricole familiale

Unedited CRA Tags
70(10)

Principales Questions: Est-ce que des actions détenues par un particulier sont des actions du capital-actions d'une société agricole familiale définie au paragraphe 70(10) de la Loi lorsque le seul bien de la société est une participation dans une société de personnes (dont les actifs sont des biens utilisés dans son entreprise agricole et des actions du capital-actions d'une société agricole familiale du particulier)?
Est-ce que la réponse serait la même si les actifs de la société de personnes étaient composés d'une participation dans une deuxième société de personnes et des actions du capital-actions d'une société agricole familiale du particulier?

Position Adoptée: La valeur des actions est imputable aux biens utilisés dans l'entreprise agricole de la société de personnes et aux actions du capital-actions d'une société agricole familiale du particulier. La société exploite l'entreprise agricole de la société de personnes. Dans la situation, les biens auxquels la valeur des actions est imputable sont des biens visés au sous-alinéa a)(i) et l'alinéa b) de la définition de l'expression action du capital-actions d'une société agricole familiale. Par conséquent, les actions du particulier répondent à la définition du paragraphe 70(10).
Notre réponse serait la même si les biens étaient détenus et utilisés dans l'entreprise agricole d'une société de personnes qui est détenue par la première société de personnes détenue par la société. La société serait considérée exploiter l'entreprise agricole de la deuxième société de personnes et les biens utilisés dans l'entreprise agricole seraient visés au sous-alinéa a)(i) de la définition de l'expression action du capital-actions d'une société agricole familiale.

Raisons: La valeur de la participation dans la société de personnes est imputable aux biens de la société de personnes. Selon la législation pertinente portant sur les sociétés de personnes et la jurisprudence, l'entreprise d'une société de personnes est exploitée par les associés de la société de personnes. Position antérieure prise lorsqu'il y a deux niveaux de sociétés de personnes.

Technical Interpretation - Internal

12 June 2006 Internal T.I. 2006-0186041I7 F - Résidence des membres du clergé

Unedited CRA Tags
8(1)c)

Principales Questions: Le contribuable qui est un agent de pastorale est-il admissible à la déduction pour résidence des membres du clergé en vertu de l'alinéa 8(1)c)?

Position Adoptée: Généralement non

Raisons: Un agent de pastorale ne satisfait généralement pas le test de statut au sous-alinéa 8(1)c)(i) car il n'est pas un ministre régulier d'une confession religieuse. Il n'est donc pas admissible à la déduction relative à la résidence des membres du clergé.

16 January 2006 Internal T.I. 2005-0156501I7 - Automobile Benefit and Beneficial Ownership

Unedited CRA Tags
6(1)(a) 6(1)(e) 6(1)(k) 6(2)

Principal Issues: An automobile is leased in the name of a shareholder/employee and the lease describes the primary use of the automobile as "personal, family or household". Another automobile is purchased in the name of another shareholder/employee. The corporation pays all of the automobile expenses including the lease (or financing) charges and operating costs. The corporation claims beneficial ownership of the automobiles and deducts CCA on the automobiles based on our technical interpretation E2005-0122211E5. What is the impact on a taxable employment benefit under paragraph 6(1)(a) or a standby charge and operating cost benefit under paragraphs 6(1)(e) and (k), respectively?

Position: A standby charge and operating cost benefit do not apply. However, a taxable employment benefit will apply pursuant to paragraph 6(1)(a) for the expenses paid by the corporation that can reasonably relate to the personal use of the automobiles.

Reasons: The corporation does not own the automobiles.