Income Tax Severed Letters - 2007-02-16

Ruling

2006 Ruling 2005-0159771R3 - Employee Donations

Unedited CRA Tags
118.1 Reg. 3501

Principal Issues: Whether a Charity can issue tax receipts for donations received from its employees to a donor-supported fund the purpose of which is to further the professional development of the employees of the Charity.

Position: Yes.

Reasons: Based on the particular facts, the proposed employee donation policy and the proposed guidelines for the disbursement of funds from the donor-supported fund.

2006 Ruling 2006-0210641R3 - Letter of credit, withholding

Unedited CRA Tags
214(15) 56(2) 247(2)

Principal Issues: Whether fees paid under a specific letter of credit facility utilized to provide performance guarantee of contractual obligations fall within paragraphs 214(15)(a) and (b)?

Position: No.

Reasons: Based on the facts, the letter of credit is a standby letter of credit that provided assurances of the taxpayer's ability to perform under the terms of a contract between it and the specified beneficiary. For purposes of paragraph 214(15)(a), an amount paid or credited in respect of the guarantees provided under the letter of credit was not for the repayment, in whole or in part, of the principal amount of a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation. For the purposes of paragraph 214(15)(b), there would be no lending of money or making money available whereby interest was payable under an obligation issued.

2006 Ruling 2006-0211021R3 - Lease Option

Unedited CRA Tags
38, IT Regulations SC II Class 9

Principal Issues: 1. Upon the exercise of an option to acquire property one minute after signing a lease agreement, is there an acquisition and disposition? 2. Does the sales tax form part of the purchase price?

Position: 1. Yes 2. Yes

Reasons: 1. Terms of the Agreement - 2. Part of the cost of property

2006 Ruling 2006-0208001R3 - Post-amble to paragraph 212(1)(b)

Unedited CRA Tags
212(1)(b)(vii)
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(b)
participation based on mutual funds
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(3) - Participating debt interest
participation based on mutual funds unrelated to issuer

Principal Issues: Are XXXXXXXXXX notes linked to the performance of 3 mutual funds subject to the post-amble under 212(1)(b)?

Position: No

Reasons: Issuer is not related to mutual funds nor are the profits of the mutual funds linked to the issuer.

Ministerial Correspondence

9 February 2007 Ministerial Correspondence 2007-0220941M4 - Lifelong Learning Plan

Unedited CRA Tags
146.02(1)

Principal Issues: Are part-time students at a university eligible to participate in the Lifelong Learning Plan (LLP)?

Position: No, only full-time students in a qualifying educational program are eligible for the LLP. Policy issue referred to Finance.

Reasons: Conditions of subsection 146.02(1) of the Act.

Technical Interpretation - External

13 February 2007 External T.I. 2007-0221141E5 - Involuntary Disposition - Rental Property

Unedited CRA Tags
44(2) 54 248(1)

Principal Issues: When is a disposition of a rental property, destroyed by fire, reportable?

Position: Generally, the earliest of (1) date full compensation agreed to under an insurance policy (2) when two years have elapsed after the destruction of the property if no proceeding before a tribunal or court has been taken before that time.

Reasons: Subsection 44(2) of the Act provides detailed rules deeming the timing of the disposition and receipt of proceeds of disposition.

12 February 2007 External T.I. 2006-0203361E5 - Commission Salesperson Expense Limitation

Unedited CRA Tags
8(1)(f) 8(1)(h) 8(1)(h.1) 8(1)(j)

Principal Issues: Clarification of allowable claim options for employed commission salesperson

Position: Options clarified

Reasons: N/A

12 February 2007 External T.I. 2006-0205981E5 F - DAS programme de soutien financier pour handicapés

Unedited CRA Tags
56(1)r) 153(1)s)
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(r)
assistance paid to those with disabilities to assisting taking up employment came within s. 56(1)(r)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 100 - Subsection 100(1) - Remuneration - Paragraph (h)
assistance paid to those with disabilities to assisting taking up employment was “remuneration” subject to source deductions

Principales Questions: Est-ce qu'un OSBL ayant un Accord de soutien financier avec DRHC est tenu de prélever des déductions à la source et d'émettre des feuillets de renseignements pour les versements effectués aux personnes handicapées qu'il aide à accéder ou à retourner sur le marché du travail?

Position Adoptée: Oui. Le payeur (OSBL) doit prélever des déductions à la source et émettre des feuillets T4A.

Raisons: Respect de la LIR et de ses Règlements

8 February 2007 External T.I. 2006-0186091E5 - Tree Planting - Employment expenses

Unedited CRA Tags
8(1)(iii) 8(1)(h.1) 8(2) 8(10)

Principal Issues: 1) Can equipment and supplies be claimed as employment expenses?
2) Can transportation from residence to the tree planting camps be claimed as an expense?

Position: Question of fact.

Reasons: 1) Depends upon the facts and whether subparagraph 8(1)(i)(iii) applies.
2) No.

7 February 2007 External T.I. 2007-0219871E5 - Splitting interest on GICs between spouses

Unedited CRA Tags
56(4) 69(1)(c) 74.1 248(1)

Principal Issues: Will CRA authorize the taxpayer's proposal that he and his spouse be allowed to split the interest income on GICs that have become the property of his spouse as a consequence of the death of her father?

Position: No.

Reasons: There is no provision in the Act that would allow it.

6 February 2007 External T.I. 2006-0170921E5 F - Capital Gain Strip

Unedited CRA Tags
55(2) 55(3) 55(3.01)
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a) - Subparagraph 55(3)(a)(ii)
s. 55(3)(a)(ii) exclusion applies when Opco, in which two unrelated individuals having special voting shares, spins off real estate to Opco’s Holdco

Principal Issues: Whether 55(2) could apply in a given fact situation.

Position: Yes.

Reasons: 55(3)(a)(ii) applies.

6 February 2007 External T.I. 2006-0216941E5 - Disposition of Property on Separation

Unedited CRA Tags
54 40(2)(g)(iii)

Principal Issues: Whether family residence disposed of pursuant to a court order can be treated as an investment property and capital loss claimed

Position: No. Question of fact whether property personal-use or income earning property

Reasons: Question of fact whether property acquired and used as personal use or income earning property. Facts suggest that property used as family residence and not to earn income.

5 February 2007 External T.I. 2006-0187391E5 - Personal Injury Settlement - Taxable amounts

Unedited CRA Tags
3 118.2(3)(b) 204.1(2.1)

Principal Issues: 1) Whether a personal injury settlement is taxable
2) Whether related legal fees are deductible 3) If repayment from settlement proceeds of expenses that were originally covered by OHIP qualifies as an eligible medical expense for purposes of the non-refundable medical expense tax credit 4) Whether a registered retirement savings plan that was purchased to offset potential tax liability arising from the settlement could be withdrawn if the settlement is not taxable.

Position: 1) The Canada Revenue Agency's general position on the taxable status of a personal injury settlement is discussed in Interpretation Bulletin IT-365R2, Damages, Settlements and Similar Receipts. As indicated in paragraph 2 of IT-365R2, amounts received by a taxpayer as special or general damages for personal injury are excluded from income and, as a result, are not subject to income tax. 2) Any legal fees incurred in respect of a non-taxable personal injury settlement would therefore not be deductible for income tax purposes. 3) The repayment of expenses that were originally covered by OHIP would not qualify for the medical expense tax credit by virtue of subparagraph 118.2(3), where the reimbursement of the medical expenses was not required to be included into income. 4) RRSP's can be withdrawn; however there will be tax implications of doing so.

Reasons: 1) IT-365R2 2) ITA 3) IT-519R2 4) Guide T4040

5 February 2007 External T.I. 2006-0202891E5 - Tax Withholding on Tips

Unedited CRA Tags
153(1)

Principal Issues: Whether income tax required to be withheld from employee tips distributed through the employer

Position: It depends on whether the employer has control over the how the tips will be paid.

Reasons: Gratuities form part of remuneration from employment for withholding purposes as long as the employer can be considered the payer.

31 January 2007 External T.I. 2006-0213111E5 - RRIF TRUST - CARRYING ON A BUSINESS

Unedited CRA Tags
146.3(3)
Summary Under
Tax Topics - Income Tax Act - Section 146.3 - Subsection 146.3(3) - Paragraph 146.3(3)(c)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business
securities lending for a fee likely would be a business

Principal Issues: Is a RRIF Trust that engages in securities lending practice for a fee considered to be carrying on a business?

Position: Carrying on a business is a question of fact and if the RIFF was found to be carrying on a business, the RRIF would be liable for tax on its taxable income for any year in which it is carrying on a business.

Reasons: The law is clear if a RRIF is carrying on a business.

25 January 2007 External T.I. 2006-0213961E5 F - Rémunération, assurance salaire, indemnité CSST

Unedited CRA Tags
5(1) 6(1)f) 8(1)n) 110(1)f)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(f) - Subparagraph 6(1)(f)(iii)
wage maintenance amount paid in advance of workers’ compensation was reportable as s. 6(1)(f)(iii) income, with s. 8(1)(n) deduction when repaid after receipt under s. 56(1)(v)
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(v)
amount paid by employer in advance of workers’ compensation was reportable as s. 6(1)(f)(iii) income, with the employee later taking a s. 8(1)(n) deduction and a s. 56(1)(v) inclusion

Principales Questions: (1) Comment l'employé doit-il traiter les paiements d'assurance salaire reçus de l'employeur pendant la période où la CSST étudie le dossier de l'employé?
(2) Comment faut-il traiter le remboursement par l'employé des sommes d'assurance salaire précédemment versées par l'employeur?
(3) Comment l'employé doit-il traiter les sommes reçues par la CSST?
(3) Comment l'employeur doit-il indiquer les informations précitées et sur quels feuillets doit-il le faire.

Position Adoptée: Les montants de salaire sont imposables dans les mains de l'employé et doivent être inscrits sur un feuillet T4 à la case 14. Les sommes qu'un employé reçoit en vertu d'un régime d'assurance salaire doivent être incluses dans son revenu en vertu de l'alinéa 6(1)f) et sont inscrites à la case 28 du feuillet T4A. Le montant sur lequel l'employeur opère compensation doit être inscrit à la case 28 du feuillet T4A et est imposable dans les mains de l'employé en vertu de l'alinéa 6(1)f). Enfin, le montant reçu par l'employé de la CSST est imposable en vertu de l'alinéa 56(1)v) et sera inscrit sur le feuillet T5007.

Raisons: Loi de l'impôt sur le revenu.

22 January 2007 External T.I. 2006-0212641E5 F - Crédit de taxe sur le capital du Québec

Unedited CRA Tags
12(1)x) 13(7.1) 127(11.1)b)
Summary Under
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7.1)
Quebec tax credit for qualified investments is government assistance recognized under s. 13(7.1) rather than s. 12(1)(x)
Summary Under
Tax Topics - Income Tax Act - Section 127 - Subsection 127(11.1) - Paragraph 127(11.1)(b)
Quebec tax credit for qualified investments is deducted under s. 127(11.1)(b) in accordance with the ITTN No. 29 timing

Principales Questions: Quel traitement fiscal l'ARC applique-t-il au crédit de taxe sur le capital du Québec?

Position Adoptée: Le crédit de taxe sur le capital du Québec est un paiement incitatif et représente une aide gouvernementale. Il ne doit pas être inclus aux revenus selon l'alinéa 12(1)x) de la LIR mais doit plutôt réduire le coût en capital du bien ayant généré ce crédit. Selon l'alinéa 127(11.1)b), le coût en capital du bien ayant généré ce crédit doit également être réduit afin de tenir compte de l'aide gouvernementale.

Raisons: Loi de l'impôt sur le revenu.

2006-021264
XXXXXXXXXX Nancy Turgeon, CGA
(613) 957-2082
Le 22 janvier 2007

16 January 2007 External T.I. 2006-0178881E5 - DSU Plan Transfer to Stock Option Plan

Unedited CRA Tags
6801(d) 7(1.1)

Principal Issues: Can participation under a DSU plan be terminated and effectively converted into participation under an employee stock option plan on a tax-deferred basis?

Position: No

Reasons: The granting of rights under the employee stock option plan in satisfaction of the amount the employee would be entitled to on termination of participation under the DSU plan (the value of DSUs credited to the employee at that time) would cause the DSU plan to fail to comply with subparagraph 6801(d)(i) of the Regulations. As a result, the DSU plan would be a salary deferral arrangement and taxed accordingly.

18 December 2006 External T.I. 2006-0214161E5 - Spousal RRSP, Taxation of Withdrawals

Unedited CRA Tags
146(8.3)

Principal Issues: Will the attribution rules in subsection 146(8.3) apply to withdrawals from a spousal RRSP?

Position: No

Reasons: Not if annuitant's spouse did not contribute to a spousal RRSP in the year of withdrawal or in the previous two years.

2006-021416
XXXXXXXXXX Bruce Hartt
(613) 946-3558
December 18, 2006

5 December 2006 External T.I. 2006-0181721E5 - transfer of insured RRSP to a RRIF

Unedited CRA Tags
146(16)

Principal Issues: Can an individual transfer an insurance policy to a RRIF where the savings portion of the policy is an RRSP and if so can the life insurance portion of the policy be maintained?

Position: No, the life insurance cannot be maintained.

Reasons: Its not possible to hold a whole life insurance policy in a RRIF.

28 November 2006 External T.I. 2006-0214641E5 - Deferred Salary Leave Plans

Unedited CRA Tags
6801(a)

Principal Issues: Deferred Salary Leave Plan - Do the Regulations allow a plan with a deferral period of six years and the leave taken in the seventh year.

Position: Yes

16 November 2006 External T.I. 2006-0203131E5 F - Régime à traitement différé

Unedited CRA Tags
5(1) 6(9) 80.4 6801 REG
Summary Under
Tax Topics - Income Tax Regulations - Regulation 6801 - Paragraph 6801(a) - Subparagraph 6801(a)(v)
failure for leave to be taken at the end of the deferral period
Summary Under
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)
advances received were salary rather than loans and, when repaid, reduced employment income
Words and Phrases
loan

Principales Questions: (1) Quel est le traitement à accorder à des retenues sur la paie servant à diminuer le solde à un contrat à traitement différé?
(2) Quel est le traitement à accorder au remboursement du solde au contrat à traitement différé effectué par le biais de chèques postdatés reçus avant la fin de l'année 2006?
(3) La réponse à la question (2) change-t-elle si les remboursements s'échelonnent jusqu'en 2007?
(4) Quelles sont les exigences en matière de production des feuillets gouvernementaux dans une telle situation?

Position Adoptée: (1) Le montant du salaire payé - net des retenues effectuées par l'employeur - devra être inclus dans le revenu de l'employé pour l'année 2006.
(2) Les montants des remboursements serviront à réduire le revenu d'emploi de l'employé pour l'année 2006.
(3) S'il y a lieu, les montants des remboursements effectués en 2007 réduiront le revenu d'emploi reçu en 2006.
(4) Les montants reçus par l'employé seront inscrits à la case 14 du relevé T-4. Si des remboursements sont effectués en 2007, l'employeur devra produire un relevé T-4 amendé pour l'année d'imposition 2006.

Raisons: Loi de l'impôt sur le revenu et son Règlement.

Technical Interpretation - Internal

2 January 2007 Internal T.I. 2006-0214281I7 - Contribution Limit to a DPSP

Unedited CRA Tags
14(5.1) 147.1(1)

Principal Issues: When an employee is receiving long-term disability benefits from an insurance company sponsored by an employer group plan, can the employer still continue to make contributions to a DPSP on behalf of the employee?

Position: Yes, subject to the limitations of 147(5.1) and the terms of the wage loss replacement plan

Reasons: The term "compensation", as defined in subsection 147.1(1) of the Act, includes amounts in respect of an office or employment that are required by section 5 or 6 of the Act to be included in income. To the extent the benefits received under a wage loss replacement plan are taxable to the recipient under paragraph 6(1)(f) of the Act, these amounts would be included for purposes of calculating an employee's compensation for any year.

18 December 2006 Internal T.I. 2006-0208611I7 F - Indemnités pour lésions professionnelles

Unedited CRA Tags
56(1)(v) 110(1)(f)(ii) REG 232 239.1(2) du Code canadien du travail
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(v)
application of ss. 56(1)(v) and 110(1)(f)(ii) to non-contractual amounts paid by bank pursuant to Canada Labour Code to Ontario employees, not in excess of the WSIB scales
Summary Under
Tax Topics - Income Tax Regulations - Regulation 232 - Subsection 232(4)
Reg. 232(4) exclusions are broader than those listed

Principales Questions: Est-ce que les indemnités versées par une banque en vertu du Code canadien du travail peuvent être considérées comme des sommes visées à l'alinéa 56(1)(v) de la Loi de l'impôt sur le revenu et au sous-alinéa 110(1)(f)(ii) de la Loi? Quelles sont les formalités administratives à respecter?

Position Adoptée: Oui à la première question si certaines conditions sont respectées. Relativement aux formalités administratives, il faut se référer à l'article 232 du Règlement de l'impôt sur le revenu.

Raisons: Les indemnités reçues par un employé en vertu d'une obligation de l'employeur, prévue par le Code canadien du travail, d'indemniser en raison d'un accident du travail ou d'une maladie professionnelle sont considérées reçues selon une loi fédérale sur les accidents du travail. Le paragraphe 239.1(2) du Code canadien du travail n'a pas fait l'objet de modifications législatives quant à l'obligation d'un employeur soumis à la juridiction fédérale de verser des indemnités relatives à des lésions professionnelles à un taux équivalent à celui prévu aux termes d'une législation provinciale.