Income Tax Severed Letters - 2007-05-11

Ruling

2007 Ruling 2006-0215851R3 - Incorporation of professional partnership

Unedited CRA Tags
125(7)("personal services business") 85(2) 85(3) 97

Principal Issues: Whether a professional corporation, providing XXXXXXXXXX services to another corporation, will be carrying on a "personal services business" within the meaning thereof in subsection 125(7) of the Act.

Position: No.

Reasons: As long as the former partners that are providing services through a professional corporation do not provide services to Newco in the capacity of employees or officers of Newco, the new structure does not create a personal services business.

2007 Ruling 2007-0222921R3 - Utilization of ITCs in an affiliated group

Unedited CRA Tags
20(1)(c) 112(1)

Principal Issues: Utilization of ITCs in an affiliated group of corporations.

Position: The utilization is acceptable.

Reasons: The position is consistent with previous rulings and the policy of the Department of Finance.

2007 Ruling 2006-0198101R3 - Partnership Reorganization Professional Corp.

Unedited CRA Tags
125(7)("personal services business") 125(7)("specified partnership income")

Principal Issues: Where a partner of a professional partnership creates a professional corporation through which professional services will be provided to the partnership, will the corporation be eligible for the small business deduction?

Position: Yes.

Reasons: As long as the partner in his or her role of an employee of the professional corporation providing the services of the "professional function" would not, but for the corporation, be considered an employee of the partnership, then the business of the corporation is not a personal services business. Also, provided that the professional corporations are not themselves carrying on business in partnership, there is no specified partnership income.

Ministerial Correspondence

7 May 2007 Ministerial Correspondence 2007-0230731M4 - Assistance for ex-employees re retraining courses

Unedited CRA Tags
56(1)(r) 110(1)(g)

Principal Issues: Whether tuition assistance received from Service Canada is taxable.

Position: Yes.

Reasons: Financial assistance received by a taxpayer under a program established by the Canada Employment Insurance Commission under Part II of the Employment Insurance Act is taxable under subparagraph 56(1)(r)(ii) of the Act.

1 May 2007 Ministerial Correspondence 2007-0228551M4 F - Crédit pour la condition physique des enfants

Unedited CRA Tags
118.03

Principales Questions: Quelles sont les exigences relatives à l'émission des reçus aux fins du crédit d'impôt pour la condition physique des enfants?

Position Adoptée: L'ARC recommande que les reçus comprennent le nom et l'adresse de l'organisation, le nom du programme ou de l'activité admissible, le montant total reçu, la date de réception et le montant qui est admissible au crédit d'impôt, le nom complet du payeur, le nom et l'année de naissance de l'enfant et une signature autorisée.

Raisons: Politique administrative de l'Agence du revenu du Canada.

25 April 2007 Ministerial Correspondence 2007-0227181M4 - Mess Dues

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

Principal Issues: Are mess dues paid by members of the Canadian Forces deductible as professional dues under the Income Tax Act?

Position: No.

Reasons: Reading of the legislation.

Technical Interpretation - External

3 May 2007 External T.I. 2007-0224191E5 - SR&ED Government Assistance

Unedited CRA Tags
127(9) 37(1)(d)

Principal Issues: Whether amounts received from a government agency are considered government assistance?

Position: Yes.

Reasons: The contributions are not ordinary commercial investments.

30 April 2007 External T.I. 2007-0230441E5 F - Crédit d'impôt pour condition physique des enfants

Unedited CRA Tags
118.03(1)
Summary Under
Tax Topics - Income Tax Act - Section 118.03 - Subsection 118.03(1) - Eligible Fitness Expense
determination as to whether the program qualifies should be made by sponsor

Principal Issues: Est-ce que l'équitation est une activité se qualifiant au CICPE?

Position: Commentaires généraux

Reasons: De façon générale, l'ARC n'indiquera pas si un programme d'activités est admissible puisque l'entité offrant le programme est davantage en mesure de faire cette détermination.

30 April 2007 External T.I. 2006-0212631E5 - Municipal Officer's Allowances

Unedited CRA Tags
81(3)

Principal Issues: Taxability of Municipal Officer's Reimbursements and Allowances.

Position: Reasonable reimbursements of expenses for specific duties or activities of members for which they are accountable are not taxable. Where the applicable provincial Municipal Act deems 1/3 (or any other lesser proportion) of remuneration paid to an elected member of a municipal council as an allowance for expenses, it is the Agency's policy that the deemed amount would be accepted as an expense allowance to be excluded from taxable income. Where there is no such deeming provision in the applicable Municipal Act, the Agency will consider the lesser of actual allowances paid and 1/3 of remuneration to be the excludable amount.

Reasons: Consistent with CRA position contained in IT-292, paragraphs 6 and 7.

23 April 2007 External T.I. 2006-0218131E5 - medical reports for the purpose of litigation

Unedited CRA Tags
118.2(2)(a) 118.4 118.2(3)

Principal Issues: Do medical legal reports and other reports created for the purpose of litigation qualify as medical services under paragraph 118.2(2)(a) of the Income Tax Act for the purposes of the medical expense credit.

Position: Question of fact.

Reasons: In order to qualify as a medical service the service must be performed by a medical practitioner.

2006-021813
XXXXXXXXXX Shelley Lewis
(613) 941-7239
April 23, 2007

19 April 2007 External T.I. 2007-0223981E5 - Medical Expense - Remedies and Supplements

Unedited CRA Tags
118.2(2)(n) 118.2(2)(k) 118.2(2)(r) 118.2(2)(s)

Principal Issues: Whether any payments for remedies and supplements dispensed to a patient without a prescription would be eligible as a medical expense for purposes of the medical expense tax credit.

Position: No.

Reasons: Payments for remedies dispensed to a patient must be recorded by a pharmacist to qualify as a medical expense for purposes of the medical expense tax credit pursuant to paragraph 118.2(2)(n) of the Income Tax Act. This paragraph also requires that a medical practitioner prescribe the remedy. Remedies described in this paragraph will not qualify as medical expenses if they have been dispensed to a patient without satisfying both of these requirements.

19 April 2007 External T.I. 2007-0226071E5 - Medical Expense - Naturopath Invoices

Unedited CRA Tags
118.2(2) 118.4(2)

Principal Issues: Whether specific invoices from a Naturopathic Physician would be eligible as a medical expense for purposes of the medical expense tax credit.

Position: General Comments provided.

Reasons: The law.

Technical Interpretation - Internal

2 May 2007 Internal T.I. 2007-0231881I7 - Clearing and Levelling Land - Farming

Unedited CRA Tags
30 18(3.1)

Principal Issues: Does section 30 of the Act, which permits as a current deduction amounts paid for clearing and levelling land in a farming business, override subsection 18(3.1) which otherwise requires such amounts to be capitalized in certain circumstances (i.e., when related to the construction of a building and attributable to that period).

Position: No.

Reasons: The express wording of the preamble to subsection 18(3.1), when read in conjunction with the preamble to section 30, indicates that subsection 18(3.1) takes precedence. Accordingly, amounts that might otherwise be deductible pursuant to section 30 may be restricted, and required to be capitalized, if the circumstances described in paragraph 18(3.1)(a) exist.

19 April 2007 Internal T.I. 2007-0222951I7 - Scholarship exemption and non-residents

Unedited CRA Tags
56(3) 115 118.74 118.6(2)

Principal Issues: Whether the operation of the amended subsection 56(3) of the Act, when applied to a non-resident, creates a problem that is circular in nature.

Position: In our view, the problem as described in the operation of the current or the proposed amended subsection 56(3) does not exist. In our view, a non-resident could have an income inclusion of nil pursuant to paragraph 56(1)(n). If as a result, the "all or substantially all" rule in section 118.94 is not met in respect of the taxable income earned in Canada of the non-resident pursuant to section 115, then the non-resident would not be eligible to apply the education credit in subsection 118.6(2). However, if a non-resident has other sources of income in Canada and the "all or substantially all" rule in section 118.94 is met, the non-resident would be eligible to apply the education credit.

Reasons: Reading of the legislation.