Income Tax Severed Letters - 2006-09-29

Ruling

2006 Ruling 2006-0172401R3 - Canadian Investment Service Providers

Unedited CRA Tags
115.2

Principal Issues: Whether the investments by XXXXXXXXXX Canadian Advisor would result in the Fund being considered to be carrying on business in Canada.

Position: No.

Reasons: The activities of XXXXXXXXXX Canadian Advisor would satisfy the requirements of subsection 115.2(2) of the Act such that the Fund would not be considered to be carrying on business in Canada.

2006 Ruling 2006-0182211R3 - Public company spin-off

Unedited CRA Tags
55(3)(b)

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

Position: Yes

Reasons: Complies with provisions of the legislation

2006 Ruling 2006-0187361R3 - Segregated Fund and Financial Institution

Unedited CRA Tags
142.2(1) 138.1(1)(e)

Principal Issues: A segregated fund proposes to acquire units of an investment trust. Will this cause the investment trust to be considered a financial institution under paragraph (b) of the definition of "financial institution" in subsection 142.2(1) of the Act?

Position: Based on the facts provided, the acquisition by the segregated fund will not, in itself, cause the investment trust to be considered a financial institution.

Reasons: In order to determine whether the investment trust falls within the scope of paragraph (b) of the financial institution definition, we need to consider whether the segregated fund is itself a financial institution. The facts provided indicate that the segregated fund is not a financial institution.

2006 Ruling 2006-0190371R3 - Reorganization of a mutual fund trust - s. 132.2

Unedited CRA Tags
132.2 131(8) 89(1) 245(2)

Principal Issues: A. Whether a corporation qualifies as a "mutual fund corporation" within the meaning of subsection 89(1) of the Act; B. Whether the transfer of the assets of a mutual fund corporation to a mutual fund trust would qualify as a "qualifying exchange" within the meaning of subsection 132.2(2) of the Act so that the rules in subsection 132.2(1) of the Act would apply to such transfer; and C. Whether subsection 245(2) of the Act would apply to redetermine the tax consequences confirmed in rulings A and B.

Position: A. Yes; B. Yes; and C. No.

Reasons: See statement of principal issues and file 2006-018227.

Technical Interpretation - External

28 September 2006 External T.I. 2006-0189101E5 - Interest Free Loan - Life Lease

Unedited CRA Tags
3

Principal Issues: Whether there is a deemed benefit for the difference between the fair market value rent of a unit and the amount that is currently paid under the "life lease arrangement"

Position: Yes.
JURISPRUDENCE: Villa Beliveau Inc. v. Canada, [2004] TCJ No.558 (affirm'd) 2006 FCA 153; Construction Berou Inc. v. The Queen, 99 DTC 5868.

20 September 2006 External T.I. 2006-0166541E5 F - Revenu d'emploi hors réserve gagné par un Indien

Unedited CRA Tags
81(1)a)
employer is a connecting factor if all its members are on the reserve

Principales Questions: Est-ce que le revenu que tire un Indien d'un emploi qui est exercé hors réserve est exclu du calcul du revenu selon l'alinéa 81(1)a) de la Loi?

Position Adoptée: Commentaires généraux.

Raisons: Questions de fait et ligne directrice 2.

20 September 2006 External T.I. 2006-0198861E5 - Interest Deduction - Linking/Tracing

Unedited CRA Tags
20(1)(c)

Principal Issues: Personal line of credit used for both investment and personal - is % of loan balance acceptable

Position: Yes - Flexible approach per paragraph 20 of IT-533

Reasons: Tracing/Linking Concept

19 September 2006 External T.I. 2006-0170861E5 F - Contrat de rente différé et perte courue

Unedited CRA Tags
12.2(1) 148(9)
ACB does not reflect the income for the anniversary year if disposition of interest occurs immediately after the anniversary day

Principales Questions:
1. Au jour anniversaire d'un contrat de rente, la perte de valeur sur un placement à rendement boursier doit-elle être considérée dans l'établissement du fonds accumulé?
2. À quel moment le revenu établi selon le paragraphe 12.2(1) doit-il être inclus dans le coût de base rajusté?

Position Adoptée:
1. Aucune.
2. Dans l'année d'imposition suivant celle de l'inclusion d'une somme dans le revenu en vertu du paragraphe 12.2(1).

Raisons:
1. Impossible de statuer sans le contrat.
2. Analyse législative.

15 September 2006 External T.I. 2006-0199361E5 - Attribution rules - spouses

Unedited CRA Tags
74.1(1) 74.2(1)

Principal Issues: General questions regarding attribution rules relating to spouses

Position: General comments provided

Reasons: The law

13 September 2006 External T.I. 2006-0175601E5 - Discretionary dividends

Unedited CRA Tags
56(2) 245

Principal Issues: 1) Whether the payment of discretionary dividends by Opco to each of its corporate shareholders, Holdco1, Holdco2 and Holdco3 will result in the application of subsection 56(2)? 2) Whether the series of transactions would be subject to subsection 245(2)?

Position: 1) No 2) We would need to review the pertinent facts to make a determination with respect to GAAR>

Reasons: Consistent with previous court decisions, subsection 56(2) will not apply to the payment of dividends provided that the applicable taxpayer does not have a pre-existing entitlement to dividends.

8 September 2006 External T.I. 2006-0175841E5 - UCC of vehicle, GM points redeemed

Unedited CRA Tags
20(1)(a)

Principal Issues: Taxpayer redeems GM points towards the purchase of a new vehicle for her business. Is the UCC of the vehicle the cost before or after the GM points are redeemed?

Position: The UCC of the vehicle is the cost before the GM points are redeemed

Reasons: The GM points are considered to be a cash equivalent.

1 August 2006 External T.I. 2005-0125431E5 F - Donation rémunératoire et vente à rabais

Unedited CRA Tags
248(32) 118.1
must be a donative intent for there to be a remunerative gift

Principales Questions: (1)Une donation rémunératoire peut-elle donner lieu à un crédit d'impôt pour don? (2) En est-il de même pour une vente à rabais?

Position Adoptée: (1) Oui (2) Non

Raisons: L'opération est soumise aux règles particulières de la donation, qui est un contrat nommé au Code civil du Québec.

Technical Interpretation - Internal

21 September 2006 Internal T.I. 2006-0201651I7 - Disposition of Taxable Canadian Property ("TCP")

Unedited CRA Tags
116(3) 116(5) 44(2)(b)

Principal Issues: In the situation where paragraph 44(2)(b) of the Act applies to a non-resident taxpayer disposing of TCP by way of expropriation by a government body, does:
(1) subsection 116(3) of the Act apply to the non-resident at the time the government body makes an initial payment of compensation; and
(2) subsection 116(5) of the Act apply to the government body at the time it makes an initial payment of compensation to the non-resident.

Position: (1) No. (2) Yes.

Reasons: (1) Paragraph 44(2)(b) of the Act overrides the application of subsection 116(3) of the Act. (2) Paragraph 44(2)(b) does not override the application of subsection 116(5) of the Act.