Income Tax Severed Letters - 2007-01-26

Ruling

2006 Ruling 2006-0208881R3 - Health Care Expense Account

Unedited CRA Tags
5(1) 6(1)(a) 248(1) "private health services plan" 248(1) "salary deferral arrangement"

Principal Issues: Whether the allocation of health care spending account credits to a flexible benefits plan, which is linked to a bonus the employee may receive, would result in employment income to the employee.

Position: No.

Reasons: The allocation of credits falls within the guidelines for flex plans set out in IT-529. There is an irrevocable election made prior to the plan year and prior to the employee being entitled to receive a bonus.

2006 Ruling 2006-0195501R3 - Withholding Tax Exemption

Unedited CRA Tags
212(1)(b)(vii)
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Subparagraph 212(1)(b)(vii)

Principal Issues: 1. Use of Finco - on-loan to an LP 2. Events of Default acceptable

Position: 1. Acceptable 2. YES

Reasons: 1. Accepted before in 2005-015364, 2006-017101 2. Standard Triggering Events

2006 Ruling 2005-0135761R3 - Class of German Arrangement & Treaty Benefits

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 2006-0195411R3 - Income Trust Reorganization

Unedited CRA Tags
132.2 131(8) 253.1

Principal Issues: Whether transferring the business of the income trust's corporate subsidiary to partnerships on a rollover basis using section 85, 97(2) and 132.2 meets the requirements of the Act and is within policy. Before the proposed transactions, the trust owns notes and shares of the corporate subsidiary that holds the shares of the corporations carrying on a business. At the end of the proposed transactions, it owns a limited partnership and shares of the general partners of partnerships that carry on the business.

Position: The proposed transactions meet the requirement of the Act and rulings on the various rollover provisions and section 245 are granted.

Reasons: The provisions of the Act; the trustees of the trust do not form the majority of the directors of the corporate general partner.

2006 Ruling 2006-0207381R3 - Bonus - Employee Benefit Plan

Unedited CRA Tags
5(1) 6(1)(a)

Principal Issues: Whether the allocation of health spending account credits to a flexible benefits plan, which is linked to a bonus the employee may receive, would result in employment income to the employee.

Position: No.

Reasons: The allocation of credits falls within the guidelines for flex plans set out in IT-529. There is an irrevocable election made prior to the plan year and prior to the employee being entitled to receive any bonus.

Ministerial Correspondence

22 January 2007 Ministerial Correspondence 2006-0218181M4 - Deductibility of membership fees

Unedited CRA Tags
8(1)(i) 18(1)

Principal Issues: The Organization's executive director has written to an MP with several questions about its membership fees. The main reply was written by GST Rulings, but an insert was provided by IT Rulings with respect to the deductibility of membership fees.

Position: A deduction from employment income is not available. A member who is self-employed or a company that pays the membership fees for its employees may be entitled to a deduction from employment income if the expense can be shown to have been incurred for the purpose of earning business income.

Reasons: A deduction from employment income is not available because membership in the particular organization is not required in order to maintain a professional status recognized by statute.

Conference

6 October 2006 Roundtable, 2006-0197031C6 F - Obligation achetée à prime

Unedited CRA Tags
12(1)c) 39(1)b) 12(9.1)
Summary Under
Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base
premium paid on secondary purchase of bond is part of bond ACB
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(9.1)
purchase of bond at a premium does not engage s. 12(9.1)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 7000 - Subsection 7000(1) - Paragraph 7000(1)(b)
bond that was purchased at a premium is not a Reg. 7000(1)(b) obligation

Principales Questions: 1. Quel est le traitement fiscal d'une prime payée par un investisseur à l'acquisition d'une obligation sur le marché secondaire?
2. Est-ce que le paragraphe 12(9.1) s'applique dans la situation donnée?

Position Adoptée: 1. La prime fait partie du coût de l'obligation pour l'établissement du prix de base rajusté. La perte réalisée lors de la disposition de l'obligation afférente à la prime est une perte en capital.
2. Non.

Raisons: 1. Texte de LIR
2. Le libellé de 12(9.1).

6 October 2006 Roundtable, 2006-0197091C6 F - Sens de série de paiements périodiques

Unedited CRA Tags
60j) 60.01
Summary Under
Tax Topics - Income Tax Act - Section 60.01
successive partial IRA surrenders are excluded as “a series of periodic payments”
Words and Phrases
series of periodic payments periodic payment lump sum

Principales Questions: Lorsque le retrait d'un régime s'effectue sur une période de quelques années par rachats partiels, est-ce que les paiements se qualifient de paiements non périodiques aux fins de l'alinéa 60j)?

Position Adoptée: Non.

Raisons: Les alinéas 60j) et 60.01a) sont généralement limités aux paiements forfaitaires. Selon les dictionnaires, une somme forfaitaire est un paiement effectué en une seule fois.

Technical Interpretation - Internal

19 January 2007 Internal T.I. 2006-0216451I7 F - Fondation privée investissant dans une S.P.

Unedited CRA Tags
149.1(4)a)
Summary Under
Tax Topics - Income Tax Act - Section 96
separate legal personality of DRUPA (or DRULPA) partnerships does not preclude them from being partnerships
Summary Under
Tax Topics - Income Tax Act - Section 149.1 - Subsection 149.1(4) - Paragraph 149.1(4)(a)
foundation’s registration subject to revocation because it had invested in a Delaware partnership (with stated separate existence) carrying on business

Principales Questions: Est-ce que notre position exposée dans le document portant le numéro E2006-016742 est toujours valable suite aux représentations additionnelles du contribuable?

Position Adoptée: Oui.

Raisons: Conforme à notre position de longue date.

10 January 2007 Internal T.I. 2006-0189601I7 - Sale of residence by officer of U.S. government

Unedited CRA Tags
40(2)(b) 149(1)(a)

Principal Issues: Whether capital gains realized by a U.S. officer or servant of the U.S. government on sale of his principal residence would be exempt from tax in Canada?

Position: Paragraph 40(2)(b) would not exempt the entire gain. There is no other disposition of the Act providing for an exemption for tax.

Reasons: There is no similar privilege granted by the U.S. to Canadian officer or servant of the Canadian government as required by subparagraph 149(1)(a)(ii). Therefore the conditions of paragraph 149(1)(a) are not met.