Income Tax Severed Letters - 2006-10-13

Ruling

2006 Ruling 2006-0191881R3 - Witholding Tax Exemption

Unedited CRA Tags
212(1)(b)(vii) 15(2.3) 245(2)
Summary Under
Tax Topics - Income Tax Act - Section 132 - Subsection 132(6)
loan guarantees
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Subparagraph 212(1)(b)(vii)
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.3)

Principal Issues:
1. Does the failure to make an offer when there is an Assets Sale over $ XXXXXXXXXX constitutes an acceptable event of default?
2. Whether subsection 15(2.3) will apply to the loans from Finco to the partnership?
3. Whether the guarantee provided by ABC Fund will result in ABC Fund failing to meet the condition in subparagraph 132(6)(b)(i)?

Position:
1. The failure to make an offer is an acceptable event of default.
2. Subsection 15(2.3) will apply to the loans from Finco to the partnership.
3. The guarantee in the present situation will not, in and by itself disqualify the Fund as a mutual fund trust as defined in 132(6)(b).

Reasons:
1. The default has commercial reality, is beyond the control of the lenders and is not contrived.
2. The loans will be made in the ordinary course of Finco ordinary business which is the lending of money.
3. In this case, the level of integration of the trust investing activities is sufficiently high for considering that the consenting of guarantees is not an undertaking by itself. Also, ABC Fund is not in the business of providing guarantees.

2006 Ruling 2004-0106101R3 - Class of German Arrangement & Treaty Benefits

Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1)
German real estate investment fund treated as trust
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 4

Principal Issues: 1) Whether the German arrangement in issue can be classified as a trust for the purposes of the Income Tax Act. 2) Whether the arrangement is entitled to the benefits of the Canada-Federal Republic of Germany Tax Agreement

Position: 1) yes 2) yes

Reasons: 1) The arrangement meets the essential elements of a trust. 2) The arrangement falls within the ambit of Article 4.

2006 Ruling 2006-0184821R3 - Proposed PUC reduction by a public corporation

Unedited CRA Tags
84(4.1) 84(2)

Principal Issues: Whether a proposed reduction of PUC by a public corporation occurs on the reorganization of business for the purposes of subsection 84(2)?

Position: Yes.

Reasons: The Law.

2006 Ruling 2006-0205411R3 - Innovative Instrument - changes to prior ruling

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

Principal Issues: 1. Whether changes to the prior ruling will have any impact on rulings given?
2. Request for extension of time to complete the proposed transactions

Position: 1. No. Minor changes.
2. Extension of time granted.

Reasons: 1. Similar to facts on prior rulings see E2006-019547 and E2006-017143.
2. Valid business reason.

Ministerial Correspondence

3 October 2006 Ministerial Correspondence 2006-0204311M4 - Public Transit Pass Tax Credit

Unedited CRA Tags
118.02

Principal Issues: Whether a daily or weekly pass would be eligible for the tax credit.

Position: No.

Reasons: Draft legislation indicates that an eligible transit pass must provide the individual with the right to use public commuter transit services of a qualified Canadian transit organization on an unlimited number of occasions and on any day on which the public commuter transit services are offered during an uninterrupted period of at least 28 days.

3 October 2006 Ministerial Correspondence 2006-0204321M4 - Public Transit Pass Credit

Unedited CRA Tags
118.02

Principal Issues: Whether the tax credit will be available to individuals that pay a cash fare daily or purchase daily and weekly passes.

Position: No.

Reasons: The draft legislation indicates that an eligible public transit pass must provide the individual with the right to use public commuter transit services of a qualified Canadian transit organization on an unlimited number of occasions and on any day on which the public commuter transit services are offered during an uninterrupted period of at least 28 days.

11 September 2006 Ministerial Correspondence 2006-0199031M4 - Qualifying Medical Expenses

Unedited CRA Tags
118.2(2) 118.2(4)

Principal Issues: Which medical expenses that are specific to a province are eligible for the medical expense tax credit.

Position: See below for details.

Reasons: See below for details.

Technical Interpretation - External

12 October 2006 External T.I. 2006-0180041E5 - CRCE- feasibility studies

Unedited CRA Tags
Reg. 1219(1) Reg. 1219(2)(b) Reg. 1219(3)

Principal Issues: Whether the cost of pre-feasibility and feasibility studies purchased by a taxpayer or carried out by a contractor on behalf of a taxpayer will be CRCE, an eligible capital expenditure or part of the capital cost of Class 43.1 or Class 43.2 property?

Position: Question of fact depending on the nature and purpose of the studies.

Reasons: As per Reg. 1219(1) and 1219(2)

3 October 2006 External T.I. 2006-0195531E5 - Subsection 162(2.1)

Unedited CRA Tags
162(1) 162(2.1)

Principal Issues: Proper application of Subsection 162(2.1) where no amount is computed under subsection 162(1).

Position: Penalty still applies.

Reasons: The law.

3 October 2006 External T.I. 2006-0203911E5 F - Allocations pour l'usage d'un véhicule à moteur

Unedited CRA Tags
6(1)b)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(vii.1)
travel from home to attend service calls not in the course of employment

Principales Questions: Les allocations pour l'usage d'un véhicule à moteur reçues par un employé pour la distance parcourue entre sa résidence et son lieu de travail sont-elles imposables en vertu de l'alinéa 6(1)b) de la Loi de l'impôt sur le revenu ("LIR").

Position Adoptée: Oui, puisqu'il s'agit d'allocations pour frais personnels ou de subsistance. Cette conclusion est conforme à la jurisprudence ainsi qu'à la politique de l'Agence du revenu du Canada.

Raisons: Loi de l'impôt sur le revenu. La jurisprudence.

3 October 2006 External T.I. 2006-0207801E5 - Capital cost allowance - Class 43.1

Unedited CRA Tags
Class 43.2 Reg. 1102(1)(c) Reg. 1100(24)

Principal Issues: additional queries relating to our comments in 2006-019584 relating to Class 43.1 and/or Class 43.2

Position: general comments provided

Reasons: legislation

26 September 2006 External T.I. 2006-0189141E5 - Beneficiaries of a RRIF

Unedited CRA Tags
248(1) 146.3(6) 146.3(6.2) 60(l)

Principal Issues: Can a taxpayer who is legally married and also living in a common-law relationship with a different individual have two spouses for purposes of the RRIF legislation, particularly with respect to the tax-deferred rollover on death of the annuitant?

Position: Question of fact, but likely yes

Reasons: wording of the legislation

XXXXXXXXXX 2006-018914
Kimberly Duval, CA
September 26, 2006 (613) 599-6054

25 September 2006 External T.I. 2006-0169371E5 F - Résidence principale -Détermination du PBR

Unedited CRA Tags
54 69 107(1) 248(3)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(1) - Paragraph 107(1)(a)
relinquishing to their father by the children of the bare ownership in a residence subject to a usufruct of their father resulted in a deemed trust interest disposition with a gain equal to the residence’s appreciation

Principales Questions: Est-ce que la rétrocession de la propriété par les 2 enfants ( détenue en nue-propriété 50%-50%) au père (détenteur d'un titre usufruitier sur la propriété) peut amener des conséquences fiscales?

Position Adoptée: Commentaires généraux sur le calcul du gain et sur le calcul du PBR aux fins de la détermination d'un gain en capital.

Raisons: Le gain sera fonction PD et du PBR calculer selon les règles prévues à l'alinéa 107(1)a) et au paragraphe 107(2).

21 September 2006 External T.I. 2005-0147821E5 F - Utilisation d'un véhicule

Unedited CRA Tags
6(1)e) 6(1)k) 6(1)l) 6(2)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(e)
standby benefit where vans available to foremen during after hours

Principales Questions: (1) Un avantage imposable doit-il être ajouté aux revenus des employés de la Ville de XXXXXXXXXX au titre du droit d'usage d'une automobile?

Position Adoptée: Oui, puisque les véhicules en question sont utilisés en partie à des fins personnelles.

Raisons: Loi de l'impôt sur le revenu.

14 September 2006 External T.I. 2006-0167861E5 F - Frais de représentation

Unedited CRA Tags
67.1(1) 67.1(2)
Summary Under
Tax Topics - Income Tax Act - Section 67.1 - Subsection 67.1(2) - Paragraph 67.1(2)(a)
taxpayer is not considered to receive compensation for restaurant bills where they are included in its estimates but not explicitly in its invoices
Summary Under
Tax Topics - Income Tax Act - Section 67.1 - Subsection 67.1(2) - Paragraph 67.1(2)(c)
"specifically notified in writing" requirement is not satisfied where restaurant bills are included in fee estimates to clients but not explicitly in the ultimate invoices

Principales Questions: Question #1:
Est-ce que les exceptions selon 67.1(2)a) et 67.1(2)c) peuvent s'appliquer aux frais de restaurant?
Question #2:
Est-ce que l'article 67.1 s'apllique sur des frais d'achats de XXXXXXXXXX même si ces frais font partie des matières premières (coût direct) des activités de l'entreprise?

Position Adoptée: Non à la première question. Les frais de restaurants ne répondent pas à l'exception en vertu de 67.1(2)a) puisqu'aucune compensation n'est reçue " dans le cours normal des activités de l'entreprise " et ils ne répondent pas à l'exception en vertu de 67.1(2)c) puisque la société n'indique pas de façon précise par écrit les montants pour frais de représentation que les clients ont à payer. À la deuxième question, Les frais d'achats de XXXXXXXXXX ne répondent pas à l'exception en vertu de 67.1(2)c) puisque la société n'indique pas de façon précise par écrit les montants pour frais de représentation que les clients ont à payer.

Raisons: Position exprimée aux paragraphes 5 et 7 du bulletin d'interprétation IT-518R

12 September 2006 External T.I. 2006-0181011E5 - Reward Points

Unedited CRA Tags
5 6(1)(a)

Principal Issues: Whether the value of the reward redeemed should be included in income as a taxable benefit.

Position: Yes.

Reasons: Where an employee receives a prize or other award related to sales or other work performance from his or her employer, the fair market value of such an incentive is regarded as remuneration to be included in income.

Technical Interpretation - Internal

10 October 2006 Internal T.I. 2006-0169051I7 - Successor Pool Issues

Unedited CRA Tags
66.7 66(15)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 103 - Subsection 103(1)
Summary Under
Tax Topics - Income Tax Act - Section 66.7 - Subsection 66.7(5)

Principal Issues: Various issues regarding successor pool claims.

Position: Generally, rely on and maintain previous positions.

Reasons: As per previous positions.

3 October 2006 Internal T.I. 2006-0181191I7 - Deduction of Legal Fees by an Inter Vivos Trust

Unedited CRA Tags
54 40(1)(a) 18(1)(a)

Principal Issues: (1) Can a trust deduct any portion of cost of legal fees that it incurred to litigate its right to amounts in respect of the shares proceeds under an oppression remedy? (2) Can the trust deduct a portion of the legal fees against the interest income it was awarded pursuant to the Judgment Interest Act?

Position: Yes, if the amounts are reasonable and pro-rated on a reasonable basis.

Reasons: The amount the trust received under its claim constitutes compensation for the shares that were injuriously affected by virtue of the majority shareholders' actions. As such, the amount awarded constitutes proceeds of disposition of a capital property and the legal fees that were incurred to establish the right to compensation should be deducted from the proceeds of disposition pursuant to paragraph 40(1)(a). In litigation there is often the expectation of an interest award, and pro-rating the legal fees between the amount awarded in respect of the shares and the amount awarded for interest related to that award reasonably reflects that expectation.

3 October 2006 Internal T.I. 2006-0208161I7 F - Projet pilote - Alternative jeunesse

Unedited CRA Tags
56(1)u) 110(1)f)
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(u)
Quebec youth alternative payments are social assistance

Principales Questions: (1) Quel est le traitement fiscal des sommes versées dans le cadre du programme "Alternative jeunesse" du Ministère de l'emploi et de la solidarité sociale du Québec?
(2) Ces sommes doivent-elles être inscrites sur le formulaire T5007?

Position Adoptée: (1) Ces sommes - soit l'allocation jeunesse et les montants remboursés aux participants du programme - constituent des prestations d'assistance sociale imposables aux termes de l'alinéa 56(1)u) de la Loi de l'impôt sur le revenu et déductibles dans le calcul du revenu imposable en vertu de l'alinéa 110(1)f) de cette loi.
(2) Le formulaire T5007 doit être rempli à la fois pour l'allocation jeunesse et pour certains des montants remboursés.

Raisons: Loi de l'impôt sur le revenu.

2 October 2006 Internal T.I. 2006-0168081I7 F - Actions d'une société en faillite

Unedited CRA Tags
50(1)b) 128(3)
Summary Under
Tax Topics - Income Tax Act - Section 50 - Subsection 50(1) - Paragraph 50(1)(b) - Subparagraph 50(1)(b)(i)
s. 50(1)(b)(i) satisfied if notice of intention under BIA does not lead to timely filing of proposal – but election must be filed for that rather than subsequent year
Summary Under
Tax Topics - Income Tax Act - Section 50 - Subsection 50(1) - Paragraph 50(1)(b) - Subparagraph 50(1)(b)(iii)
if s. 50(1)(b)(iii) conditions are satisfied in a year, the election can be made in a subsequent year – but not if the corporation was a bankrupt in the first year

Principales Questions:
1) Aux fins de l'application du sous-alinéa 50(1)b)(i) de la Loi, au cours de quelle année d'imposition de la société-mère, les deux sociétés filiales sont-elles devenues des faillis?
2) Si les deux sociétés filiales sont devenues des faillis au cours de l'année d'imposition de la société-mère se terminant le XXXXXXXXXX , la société-mère peut-elle faire un choix en vertu du sous-alinéa 50(1)b)(iii) au XXXXXXXXXX ?
3) Les pertes en capital qui découlent pour la société-mère de la disposition réputée de ses actions dans ses deux sociétés filiales selon le paragraphe 50(1) de la Loi sont-elles des pertes au titre de placement d'entreprise au XXXXXXXXXX ?

Position Adoptée:
1) Les sociétés filiales sont devenues des faillis à la date du dépôt de l'avis d'intention soit au cours de l'année d'imposition de la société-mère se terminant le XXXXXXXXXX .
2) Non.
3) Oui, sous réserve que les sociétés filiales étaient des SEPE.

Raisons:
1) Application, notamment, du paragraphe 50.4(8) de la Loi concernant la faillite et l'insolvabilité au cours des années d'imposition sous examen.
2) Application de la Loi. Référence aux notes explicatives du Ministère des Finances.
3) Application de la Loi.

26 September 2006 Internal T.I. 2006-0202181I7 - PSE - Self-governing Yukon First Nation

Unedited CRA Tags
81(1)(a)

Principal Issues: Will post secondary education assistance payments received by a status Indian of a self-governing First Nation be tax exempt to the recipient pursuant to paragraph 81(1)(a) of the Income Tax Act and 90(1)(b) of the Indian Act in circumstances where the student no longer resides in the Yukon?

Position: No

Reasons: The Indian Act entitlement with respect to PSE does apply to self-governing First Nations or its status Indian members, regardless of residence