Income Tax Severed Letters - 2006-08-25


2006 Ruling 2006-0184981R3 - Merger LSVCC

Unedited CRA Tags

Principal Issues: Whether transaction qualifies as a "merger" pursuant to ss204.85(3)?

Position: Yes

Reasons: In accordance with the Act and conforms to tax policy described by Department of Finance.

2006 Ruling 2006-0186631R3 - Eligibility for OETC

Unedited CRA Tags
122.3 122.3(1.1)

Principal Issues: Whether Canco is a specified employer within the meaning of 122.3?
Whether Employees are entitled to claim OETC?
Whether 122.3(1.1) will apply to prevent Employees from claiming OETC?

Position: Yes
Yes, if they otherwise meet the conditions as set out in the ruling.

Reasons: Canco meets conditions in 122.3.
Employees that meet the conditions in the ruling are eligible.
In order for the restriction in 122.3(1.1) to apply, the conditions in all three paragraphs must be met.

Ministerial Correspondence

11 July 2006 Ministerial Correspondence 2006-0186661M4 - Taxation of Roth IRA

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56(1)(a)(i)(C.1) 94(1)(d) 12.2(1) 12(1)(c)

Principal Issues: Taxation of Roth IRA

Position: Depends on whether the Roth IRA is a trust, an annuity or a custodial account.

Reasons: See body of letter
FINANCE: Informal discussions with Finance

Technical Interpretation - External

23 August 2006 External T.I. 2006-0168551E5 - Luxury Vehicle Costs and Safe Income On Hand

Unedited CRA Tags
13(7)(g) 55(5)

Principal Issues: Is the amount in excess of the prescribed cost limit of a Class 10.1 vehicle to be deducted in the calculation of safe income?

Position: No.

Reasons: (1) Under the approach of the FCA in the Kruco case, there is no special treatment required. (2) Under the CRA's historical approach, no deduction is required for the cost of an asset acquired by the corporation.

9 August 2006 External T.I. 2005-0163621E5 - Subparagraph 84.1(2)(a.1)(ii) and Section 110.6

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84.1(2)(a.1)(ii) 110.6

Principal Issues: Determination of adjusted cost base of shares for the purposes of s. 84.1(1) of the Act when portion of shares have been disposed of previously by parties not dealing at arm's length with taxpayer and resulting capital gains have been sheltered under s. 110.6 by those non-arm's length parties.

Position: General comments given. Wording of subparagraph 84.1(2)(a.1)(ii) reduces adjusted cost base of shares on a share-by-share basis, so if a share held by a taxpayer has not been previously disposed of by the taxpayer or non-arm's length individual or the taxpayer can demonstrate that no s. 110.6 claims have been made in respect of a previous disposition of the share, s. 84.1(2)(a.1)(ii) will not reduce the adjusted cost base of that share for s. 84.1 purposes even though the taxpayer may also hold identical shares for which such reductions are required. With respect to designating shares that have been the subject of previous s. 110.6 claims, Agency will not necessarily accept a designation where the taxpayer has disposed of shares of that class in a previous taxation year, unless a designation was filed with the return of income for that previous taxation year.

Reasons: Wording of the legislation.

3 August 2006 External T.I. 2006-0175461E5 - Examination fees - Cdn. Vet. Med. Ass.

Unedited CRA Tags
118.5 14(5)

Principal Issues: Whether examination fees paid to the Canadian Veterinary Medical Association qualify for the tuition tax credit.

Position: No.

Reasons: They are not paid to a designated educational institution and they do not form an integral part of a course of study.

17 July 2006 External T.I. 2006-0175331E5 - Special Work Site

Unedited CRA Tags
6(6) 80.4(1)

Principal Issues: Whether the assignment of an employee normally based in one location to a second location for up to XXXXXXXXXX years, is considered to be of a temporary nature for purposes of subsection 6(6). If the assignment is considered to be of a temporary nature, and the second location meets the definition of a special work site, would prepaying the periodic allowances that would normally be paid to the employee for the entire XXXXXXXXXX years be acceptable for purposes of subsection 6(6)? If the lump sum prepayment is not acceptable for purposes of subsection 6(6), how should it be recorded by the company and reported by the employee?

Position: The employee's employment in the second location would be of a temporary nature for purposes of subsection 6(6). The payment of the lump sum advance is not, in and of itself, unacceptable for purposes of subsection 6(6).

Reasons: Although the assignment to the second location is for a period exceeding two years, the employee would be returned to his or her substantive position in his or her home location at the end of XXXXXXXXXX years. Further, the employee's spouse would remain in the couple's principal residence in his or her home location during the duration of the employee's assignment. The company should periodically recognize a portion of the advance as an expense that covers the employee's periodic cost for board and lodging and for transportation while actually working at the special work site. In terms of taxation for the employee, while the payment of the lump sum advance is not, in and of itself, unacceptable for purposes of subsection 6(6), as the recipient of an interest-free employee advance, the employee would be in receipt of taxable employee benefits under subsection 80.4(1).

11 December 2002 External T.I. 2002-01525150 - Roth Ira - Article XVIII (US Treaty)

Unedited CRA Tags
Article XVIII(7) U.S.

Principal Issues: Can an election be made under paragraph 7 of Article XVIIII of the Canada-United States Income Tax Convention (the "Convention") with respect to income of a Roth IRA otherwise taxable in the hands of a Canadian resident beneficiary?

Position: Yes.

Reasons: Interpretation of the law (XXXXXXXXXX ).

Technical Interpretation - Internal

3 January 1996 Internal T.I. 95286470 - Indian Act Exemption vs. U.S. Indian Reserve - XXXXXXXXXX

Unedited CRA Tags

Principal Issues:
An individual, who is a status Indian and a resident of Canada, was employed on the U.S. side of the XXXXXXXXXX reserve by an employer situated on the U.S. side of the reserve. Does the U.S. side of XXXXXXXXXX qualify as a "reserve" for purposes of the tax exemption provided under section 87 of the Indian Act?