Income Tax Severed Letters - 2007-09-28

Ruling

2007 Ruling 2006-0213241R3 - XXXXXXXXXX Partnership Notes - 4900(1)

Unedited CRA Tags
4900(1)(i)

Principal Issues: Will notes issued by a XXXXXXXXXX partnership be a qualified investment for trusts governed by RRSPs, RRIFs, RESPs and DPSPs?

Position: Question of fact, in this particular file yes.

Reasons: Based on the facts, all of the partners are Canadian corporations that if they issued the Notes directly, as opposed to the XXXXXXXXXX partnership issuing the Notes, the Notes would be prescribed as qualified investments in accordance with paragraph 4900(1)(i) of the Income Tax Regulations.

2006 Ruling 2006-0168861R3 - Share Unit Plan for Non-Employee Directors

Unedited CRA Tags
6801(d)

Principal Issues: Will the proposed amendments to the Share Unit Plan cause it to no longer be a prescribed plan or arrangement pursuant to paragraph 6801(d) of the Regulations?

Position: No.

Reasons: The proposed amendments do not offend the requirements of paragraph 6801(d).

Technical Interpretation - External

21 September 2007 External T.I. 2007-0251651E5 - Excluded property

Unedited CRA Tags
95
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property
disposition of partnership interest as excluded property

Principal Issues: Whether the interest in a partnership that carries on an active business in Canada would be considered to be excluded property.

Position: Yes.

Reasons: Definition of excluded property.

20 September 2007 External T.I. 2007-0251711E5 - Calculation of Foreign Tax Credits

Unedited CRA Tags
126

Principal Issues: How should foreign tax credits be calculated on capital gains realized on the sale of bonds?

Position: In accordance with the rules set out in section 126 of the Act.

Reasons: Section 126 sets out the rules for the calculation of foreign tax credits.

19 September 2007 External T.I. 2007-0252761E5 - Canadian exploration expense

Unedited CRA Tags
66.1(6)

Principal Issues: Whether CRA would publish its position on whether community consultation, feasibility and environmental study costs incurred by mining companies at the exploration stage will be included in CEE under paragraph (f) of that definition.

Position: Guidelines have been provided

Reasons: Actual determination will depend on the facts of a particular situation

17 September 2007 External T.I. 2007-0248391E5 - Conversion of Farm Land - Subsection 110.6(2)

Unedited CRA Tags
110.6(1) 110.6(2)

Principal Issues: Can a capital gains exemption be claimed pursuant to subsection 110.6(2) in respect the "notional" gain on farmland that is qualified farm property, subsequently converted to inventory as a consequence of development, in the ultimate year the property is disposed?

Position: Yes.

Reasons: Consistent with previous positions.

13 September 2007 External T.I. 2006-0214631E5 F - Déboursé pour usufruit ou droit d'usage

Unedited CRA Tags
248(3)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(3)
instalments of purchase price for usufruct were cost of capital interest in a trust

Principales Questions: Traitement fiscal accordé à un montant déboursé pour l'acquisition d'un usufruit ou d'un droit d'usage.

Position Adoptée: Aucune déduction lors de l'acquisition ni lors du paiement. Lors de la disposition de la participation qui pourrait survenir à la fin de l'usufruit ou du droit d'usage, il se pourrait que le payeur ait une perte en capital.

Raisons: Pour les biens assujettis à un usufruit ou un droit d'usage après 1990, le paragraphe 248(3) s'applique et le bien est réputé disposé en faveur d'une fiducie. La fiducie n'est pas une fiducie personnelle parce qu'une participation est acquise pour une considération. Le payeur détient donc une participation au capital dont le coût est égal au montant payé ou payable pour l'acquisition.

12 September 2007 External T.I. 2007-0219991E5 - Overseas employment tax credit

Unedited CRA Tags
122.3

Principal Issues: Eligibility to the overseas employment tax credit.

Position: General comments.

Reasons: Insufficient information given by the taxpayer. A detailed analysis would be necessary.

12 September 2007 External T.I. 2006-0211121E5 F - Fiducie non-résidente

Unedited CRA Tags
94 233.3
Summary Under
Tax Topics - Income Tax Act - Section 94 - Subsection 94(1) - Resident Contributor
must generally consider whether the mooted resident contributor was resident in Canada at the trust’s year end and had made a contribution thereto then or prior thereto
Summary Under
Tax Topics - Income Tax Act - Section 233.3 - Subsection 233.3(1) - Specified Foreign Property
generally no reporting obligations on T1135 where interest in non-resident trust acquired for not consideration

Principales Questions: 1. À quel moment doit-on considérer si un particulier est résident du Canada et s'il a fait une contribution à une fiducie non-résidente aux fins de déterminer si les règles du paragraphe 94(3), telles que proposées, s'appliquent?
2. Demande de précisions concernant la déclaration prévue au paragraphe 233.3(3) de la Loi.

Position Adoptée: 1. Au moment déterminé qui est généralement la fin de l'année d'imposition de la fiducie.
2. Commentaires généraux.

Raisons: 1. Dispositions législatives proposées.
2. Dispositions législatives.

12 September 2007 External T.I. 2006-0217331E5 - Special Work Site

Unedited CRA Tags
6(6) 122.3

Principal Issues: 1. May an employee benefit from the overseas employment tax credit if his employer is not resident of Canada?
2. May an employee claim a deduction for special work site according to subsection 6(6) of the Act if his employer is not resident of Canada?

Position: 1. To benefit from the overseas employment tax credit, an employee has to be employed by a specified employer. A corporation is a specified employer only if it is a person resident in Canada or if it is a foreign affiliate of a person resident in Canada.
2. An employee may claim a deduction under subsection 6(6) of the Act even if his employer is not a resident of Canada.

Reasons: Provisions of the Act.

11 September 2007 External T.I. 2006-0195851E5 F - Crédit pour impôt étranger

Unedited CRA Tags
126(1)
Summary Under
Tax Topics - Income Tax Act - Section 126 - Subsection 126(7) - Non-Business-Income Tax
if Romania denies refund of withholding tax improperly held on management fees, CRA nonetheless will deny FTC
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 7
reasonable management fees come within the business profits rather than other income Article

Principales Questions:
Peut-on considérer que les frais de gestion reçus par Société X sont visés par l'article 21 de la Convention Canada-Roumanie?
Si les frais de gestion ne sont pas visés par l'article 21 de la Convention, un crédit pour impôt étranger peut-il être réclamé par Société X selon l'article 126 de la Loi sur les retenues d'impôt faites par la société roumaine?

Position Adoptée:
Non.
Non si Société X obtient des autorités fiscales roumaines un remboursement des retenues.

Raisons:
Dans la plupart des conventions dans lesquelles les frais/honoraires de gestion ne font pas l'objet d'un traitement spécifique, on considère que les dispositions relatives aux bénéfices d'entreprise englobent les honoraires de gestion raisonnables.
Si Société X n'obtient pas de remboursement auprès des autorités fiscales roumaines pour l'impôt de retenue effectué sur les honoraires de gestion, Société X peut en vertu de l'article 25 de la Convention adresser une demande auprès des autorités compétentes afin d'obtenir qu'un crédit pour impôt étranger lui soit accordé.

Technical Interpretation - Internal

24 September 2007 Internal T.I. 2007-0242181I7 - Bursary for theological studies in the US

Unedited CRA Tags
56(1)(n) 56(3) 118.6 Reg.200

Principal Issues: 1. Are bursaries awarded to Canadian students to attend a seminary in the United States taxable? 2.What are the bursary payor's reporting and withholding requirements?

Position: 1. Question of fact
2. The Payer must report the payments to CRA by filing a T4A information return and must provide a T4A slip to the recipient. No tax is required to be withheld on bursaries.

Reasons: 1. Although a bursary must be included in income pursuant to paragraph 56(1)(n), the amount to be included is net of the scholarship exemption. Here, it is unknown how much the scholarship exemption would be because it is unclear whether the students would be eligible for the education tax credit. Certain factual determinations would have to be made, including whether the seminary qualifies as a "university" and whether any particular student is in receipt of a benefit in respect of free tuition.
2. Reading of subsection 200(2) of the Regulations.