Income Tax Severed Letters - 2006-10-20

Ruling

2006 Ruling 2005-0160481R3 - Charitable Organization - Related Business

Unedited CRA Tags
149.1(2)(a)

Principal Issues: Will the charitable organization be considered to be carrying on a business that is not a related business as a consequence of the organization renting excess parking capacity in a parkade being built to provide low-cost parking to members

Position: No

Reasons: Based on the facts contained in the ruling, the provision of a parkade of the size proposed, for use by members, is integral to the furtherance of the charitable objects of the organization.

2006 Ruling 2005-0151121R3 - Transfer - Unit Trust to Master Trust

Unedited CRA Tags
149(1)(o.4) 104(6)(b) 104(13)

Principal Issues: A unit trust will redeem its units and distribute all of its assets to a master trust, the unit trust's sole beneficiary, the unit trust shall cancel all of its units held by the master trust and the unit trust shall cease to exist. Will the unit trust be able to deduct, in accordance with paragraph 104(6)(b), the portion of any income or gains that become payable to the master trust? Will any income that is payable to the master trust from the unit trust be included in the income of the master trust pursuant to subsection 104(13)?

Position: Yes. Yes.

Reasons: In accordance with the relevant provisions of the Act. Before we could provide the 104(13) and 104(6)(b) rulings, we received confirmation from the taxpayer's representative that the unit trust had never made a subsection 107(2.11) election and that, in accordance with the relevant terms of the trust agreement, the unit trust in fact made payable realized gains to the Master Trust and that the Master Trust had the right to enforce such payment.

2006 Ruling 2006-0188371R3 F - Estate Freeze/Gel successoral

Unedited CRA Tags
85(1)(e.2) 74.4(2) 105(2)

Principal Issues: Estate Planning Freeze

Position: Favourable Rulings provided.

Reasons: Meets the requirement of the law.

Ministerial Correspondence

27 September 2006 Ministerial Correspondence 2006-0204981M4 - Pension Income Splitting

Unedited CRA Tags
56(1)(a)

Principal Issues: Is it possible to split pension income from a registered plan between spouses for income tax purposes?

Position: No.

Reasons: The Act does not permit the splitting of pension income from a registered plan for income tax purposes.

27 September 2006 Ministerial Correspondence 2006-0205151M4 - Income Splitting

Unedited CRA Tags
5 6

Principal Issues: Is splitting the income of a single-income family permitted for income tax purposes?

Position: No.

Reasons: There is no provision in the Act that permits splitting the income of a single-income family for income tax purposes.

20 September 2006 Ministerial Correspondence 2006-0203581M4 - Splitting of Registered Pension Income

Unedited CRA Tags
56(1)(a) 146(8) 146.3(5)

Principal Issues: Can amounts paid from registered retirement savings vehicles be split between spouses for income tax purposes?

Position: No.

Reasons: There is no provision in the Act that permits income splitting of amounts paid from registered retirement savings vehicles.

11 September 2006 Ministerial Correspondence 2006-0201251M4 - Qualified Pension Income

Unedited CRA Tags
118(7) 118(8)

Principal Issues: Are amounts transferred from an RPP to an RRIF and subsequently paid from the RRIF eligible for the pension income amount?

Position: Only if the amounts paid from the RRIF are "qualified pension income".

Reasons: Definition of "qualified pension income in subsection 118(7) of the Act.

6 September 2006 Ministerial Correspondence 2006-0198711M4 - Pension Income Credit - RRIF payments

Principal Issues: The taxpayer suggested that the law be changed to allow the pension income credit where RRIF payments are received before age 65.

Position: Confirmed that under the present law, the payment would not qualify and referred issue to Department of Finance for their consideration.

Reasons: Any such change in tax law is the purview of the Tax Policy Branch at Finance.

Technical Interpretation - External

12 October 2006 External T.I. 2006-0175501E5 - Apprentice Mechanics' Tool Costs Deduction

Unedited CRA Tags
8(1)(r) 8(6)

Principal Issues: Whether an apprentice program established in accordance with the laws of Canada qualify for the apprentice mechanics' tool costs deduction.

Position: Yes.

Reasons: Pursuant to proposed amendments to subparagraph 8(6)(a)(i), the Department of Finance clarified that federally-established programs, as well as provincial ones, qualify for this purpose.

11 October 2006 External T.I. 2006-0202791E5 - Retiring Allowance

Unedited CRA Tags
248(1)

Principal Issues: Will the payment of an early retirement benefit offered by an employer to its employees be considered a retiring allowance for purposes of subsection 248(1) of the Income Tax Act?

Position: Question of fact, only general comments provided

Reasons: wording of the legislation

2 October 2006 External T.I. 2006-0208121E5 - RESP - Withdrawals

Unedited CRA Tags
146.1(1) 146.1(2)

Principal Issues: When may amounts be withdrawn from an RESP where the beneficiary is enrolled in an apprenticeship program as an automotive service technician?

Position: Question of fact.

Reasons: Provided general comments concerning when contributions may be returned out of an RESP and when educational assistance payments may be made.

28 September 2006 External T.I. 2006-0197841E5 F - Shareholders agreement & 256(1.4)

Unedited CRA Tags
256(1.4)

Principal Issues: Whether subsection 256(1.4) applies because of a provision of a shareholder agreement?

Position: Yes

Reasons: Wording of subscetion 256(1.4).

Technical Interpretation - Internal

11 October 2006 Internal T.I. 2006-0204641I7 - Qualifying Retroactive Lump Sum Payment

Unedited CRA Tags
110.2

Principal Issues: Will the payment of prior years pension benefits by an RPP to a plan beneficiary after the death of the annuitant, qualify as a "qualifying retroactive lump sum payment" for purposes of section 110.2 of the Act in the following two scenarios: 1) A plan member's spouse receives a lump sum in respect of missed periodic pension payments of prior years that were due to the member before his or her death? 2) Where the RPP provides the continuation of benefits to a spouse after the death of the member, this member's spouse receives a lump sum in respect of these missed continuation benefit payments?

Position: 1) No 2) Question of fact, but likely yes

Reasons: 1) As the member's spouse was not entitled to receive the benefits from the RPP in the year to which benefits relate, the conditions of 110.2 have not been met. 2) As the spouse had entitlement to receive the pension benefits as the continuation of benefits were due to the spouse in the prior year, the provisions of 110.2 may be applicable, provided the other conditions of the provision have been satisfied

4 October 2006 Internal T.I. 2006-0204341I7 - Cyprus Limited Liability Company

Unedited CRA Tags
Canada-Cyprus tax Convention

Principal Issues: Whether a Cyprus Limited Liability Company is entitled to the treaty benefits under the Canada-Cyprus Tax Convention (the "Treaty").

Position: Question of fact.

Reasons: Where a Cyprus Limited Liability Company is subject to tax in Cyprus, under Cyprus tax law as a resident of Cyprus, such a company will be entitled to the benefits under the Treaty.

28 September 2006 Internal T.I. 2006-0202901I7 F - Subsection 80(4) - Impact on the CDA

Unedited CRA Tags
80(4) 89(1) Capital Dividend Account 111(8) 38

Principal Issues: Whether the reduction of amounts pursuant to subsection 80(4) should be taken into consideration in computing the capital dividend account ("CDA") of a private corporation.

Position: No.

Reasons: Wording of the Act. Paragraph 80(4)(b) reduces the net capital losses of a corporation where a commercial obligation issued by a debtor is settled and a forgiven amount results from such settlement of debt. Technically, paragraph 80(4)(b) has no effect on the amount of capital losses and allowable capital losses sustained by a taxpayer. In comparison, subparagraph (a)(ii) of the definition of CDA in subsection 89(1) deals with the capital losses and allowable capital losses sustained by the taxpayer in the relevant period. Technically, this provision does not refer to the net capital losses of a taxpayer.