Income Tax Severed Letters - 2007-02-09

Ruling

2006 Ruling 2006-0171421R3 - Donation of Land by Non-Resident

Unedited CRA Tags
110.1(1) 248(32)

Principal Issues:
1. Whether the donation of land situated in Canada by a non-resident corporation to a Canadian charity qualifies as a gift for tax purposes.
2. Whether the proposed transactions result in the conferral of an advantage to the donor.

Position:
1. Yes, based on the facts provided.
2. Not in this case.

Reasons: For the purposes of determining the eligible amount of the gift by the donor under proposed subsection 248(31), it is our view that the proposed transactions will not, in and by themselves, result in the conferral of an advantage to the donor under proposed subsection 248(32).

2006 Ruling 2006-0200321R3 F - Intérêt exonéré d'impôt - alinéa 81(1)a)

Unedited CRA Tags
81(1)a)

Principales Questions: Les intérêts qu'un Indien reçoit sont-ils exonérés d'impôt en vertu de l'alinéa 81(1)a)?

Position Adoptée: Oui

Raisons: L'activité qui a généré le revenu est étroitement liée à une réserve, c'est-à-dire qu'elle fait partie intégrante de la vie dans une réserve. L'utilisation du produit des instruments financiers émis n'est pas faite sur le marché ordinaire. Les activités génératrices du revenu de la Société sont exclusivement sur une réserve.

2006 Ruling 2006-0210171R3 - Amendment to existing RSU plan

Unedited CRA Tags
248(1) 6801(d)

Principal Issues: 1) Whether amendments to an existing RSU plan that is exempt from the definition of "salary deferral arrangement" can be made to allow participant to elect to convert outstanding units to DSUs? 2) Whether the conversion of RSUs into DSUs results in an income inclusion in the hands of a participant?

Position: 1) Yes. 2) No.

Reasons: 1) Meets the requirements under paragraph 248(1)(l) and 6801(d). 2) No amount is received by the participant.

2006 Ruling 2006-0177342R3 - Creation of an income trust

Unedited CRA Tags
14 55 97(2) 132(6)
Summary Under
Tax Topics - Income Tax Act - Section 86 - Subsection 86(1)

Principal Issues: None.

Technical Interpretation - External

6 February 2007 External T.I. 2007-0219861E5 - Art Production Grants

Unedited CRA Tags
56(1)(n) 56(3)

Principal Issues:
Whether the correct footnote code for T4As issued in respect of "Art Production Grants" is "05".

Position:
Yes.

Reasons:
IT-75R4 defines "art production grant" as an amount received that is to be used by the taxpayer in the production of a literary, dramatic, musical or artistic work and to be included in computing the income of the said taxpayer under paragraph 56(1)(n).

2 February 2007 External T.I. 2006-0180281E5 - Individual Development Accounts

Unedited CRA Tags
56(1)(u) 56(1)(r) R. 233(2)

Principal Issues: The income tax treatment of amounts paid from "individual development accounts," which are used by some charities, NPOs and governments to assist needy individuals in acquiring basic needs, such as housing, health care and education, by promoting savings.

Position: Generally, amounts paid in respect of housing and health care would be social assistance payments that, because they are paid as lump-sums, would be excluded from income by virtue of subsection 233(2) of the Regulations. The amounts paid for education would generally be considered scholarships or bursaries and included in income under paragraph 56(1)(n).

Reasons: Based on the facts provided and our previous comments on similar payments.

1 February 2007 External T.I. 2006-0218401E5 - Disability payments

Unedited CRA Tags
6(1)(f) ITAR 19

Principal Issues: Whether certain wage loss replacement benefits are exempt from taxation pursuant to section 19 of the Income Tax Application Rules.

Position: Question of fact.

Reasons: Both the event which causes the disability and the loss of employment must have occurred prior to 1974.

2006-021840
XXXXXXXXXX S. Lewis
(613) 941-7239
February 1, 2007

30 January 2007 External T.I. 2006-0211041E5 - SR&ED Used Equipment

Unedited CRA Tags
37(1)(b)(i) 37(1)(a) Reg. 2902 127(9)

Principal Issues: 1) Whether the cost of purchasing previously used equipment qualifies as a scientific research and experimental development ("SR&ED") capital expenditure under subparagraph 37(1)(b)(i) of the Act. 2) Whether discarded switches that have no useful life are current or capital expenditures for SR&ED.

Position: 1) Yes. 2) Question of fact.

Reasons: 1) There is no requirement in paragraph 37(1)(b) that the capital expenditure be in relation to new property. 2) See paragraph 9 of IT-151R5.

26 January 2007 External T.I. 2005-0157751E5 F - Don d'un duplex et changement d'usage

Unedited CRA Tags
45(1) 69(1) 13(7)
Summary Under
Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(b)
generally appropriate to allocate the deemed proceeds between residence and rental portion on building square footage basis, with land to follow suit
Summary Under
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7) - Paragraph 13(7)(b)
1/2 step-up limitation where change of use

Principales Questions:
Trois mois avant son décès, Madame X donne un duplex à son petit-fils qui habite l'une des deux unités de logement pendant un an et demi avant de la louer. Quel est le prix de base rajusté pour le petit-fils de la bâtisse suite au don et au changement d'usage?

Position Adoptée: Commentaires généraux.

Raisons: Application des alinéas 45(1)a) et 13(7)b de la Loi

Technical Interpretation - Internal

17 January 2007 Internal T.I. 2006-0216331I7 F - Association

Unedited CRA Tags
256(1) 256(2) 220(3.2)
Summary Under
Tax Topics - Income Tax Act - Section 256 - Subsection 256(2)
administrative policy regarding late elections by third corporation

Principal Issues: In a given fact situation involving a group of corporations, for the taxation years 2003, 2004 and 2005, whether (1) the corporations of the group are entitled to the small business deduction for those years? (2) any corporation of the group would be entitled to small business deduction for those years if the third corporations of the group late filed the election not to be associated with other corporations under 256(2)?

Position: (1) No. (2) Yes for taxation years 2003 and 2004.

Reasons: The law.