Income Tax Severed Letters - 2007-10-19

Ruling

2007 Ruling 2007-0227501R3 - XXXXXXXXXX

Unedited CRA Tags
20(1)(c) 87

Principal Issues: Deductibility of interest as part of a corporate reorganization involving an amalgamation which results in a replacement of paid-up capital with debt.

Position: Favourable rulings given.

Reasons: The law.

2007 Ruling 2007-0237511R3 F - Post Mortem Planning

Unedited CRA Tags
84(2) 84.1 245(2)

Principal Issues: Post Mortem Planning.

Position: Favourable rulings provided.

Reasons: Meets the requirements of the law.

2007 Ruling 2006-0195451R3 F - Société exonérée selon 149(1)o.2)(iii)

Unedited CRA Tags
149(1)o.2)(iii) 245(2)

Principales Questions: Un emprunt effectué par une fiducie dont une société possède les unités peut-il faire en sorte que la société ne qualifiera plus en vertu du sous-alinéa 149(1)o.2)(iii)?

Position Adoptée: Non

Raisons: (1) Pour être exonérée selon 149(1)o.2)(iii), la société ne peut pas faire d'emprunt autre que des emprunts dans le but de tirer un revenu d'un bien immeuble ou d'un droit sur un tel bien. Dans le cas sous étude, l'emprunt est effectué par le fiduciaire pour la fiducie.

2007 Ruling 2007-0220141R3 - Lump sum payment in lieu of PHSP Plan

Unedited CRA Tags
3 6(1)(a) 56(1)(a)

Principal Issues: Whether payment of a lump sum to a retiree's spouse in lieu of the discontinuance of post retirement benefits under a PHSP is taxable

Position: No

Reasons: Long-standing CRA position that such payments are not income from any source that is taxable under the Act. Subsection 5(1) does not apply to include the payment in income as the taxpayer is not an employee or officer of the Company. The employer/employee relationship was severed upon the retirement and death of the taxpayer's spouse. The payment is not in the nature of salary, wages or other remuneration. Subsection 6(3) does not apply as the amount will not be received in satisfaction of an obligation arising out of an agreement made by the taxpayer with the payee immediately prior to, during or immediately after a period that the payee was an employee of the payer.

2007 Ruling 2007-0223121R3 - Partnership Reorganization-Personal Services Bus.

Unedited CRA Tags
125(7)("personal services business") 125(7)("specified partnership income") 256(2.1)

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: Question of fact. Generally, yes, if certain conditions are met.

Reasons: Reading of relevant legislation and consistent with other rulings.

XXXXXXXXXX 2007-022312

XXXXXXXXXX , 2007

2007 Ruling 2007-0223291R3 - Partnership reorganization

Unedited CRA Tags
125(7)

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. This ruling is the same as previous rulings given. See 2006-0199731R3 and 2006-0170321R3.

Technical Interpretation - External

12 October 2007 External T.I. 2007-0251101E5 - employee stock option- prescribed shares

Unedited CRA Tags
6204(1)(b) 110(1)(d)

Principal Issues: are specific shares prescribed shares for the purposes of paragraph 110(1)(d)?

Position: No reply could be provided.

Reasons: This would be a question of fact and insufficient information was provided to make any determinations.

12 October 2007 External T.I. 2007-0253901E5 - Refund of non-resident withholding taxes

Unedited CRA Tags
227(6)

Principal Issues: Whether a U.S. resident can apply for a refund in respect of Part XIII taxes withheld.

Position: Yes, if the amount originally withheld is more than that required under the Canada - U.S. Tax Convention, and if the application for refund is made within the time limit specified.

Reasons: Excess withholding taxes may be refunded if the application for refund is made within the time limit specified.

10 October 2007 External T.I. 2007-0252431E5 - Softwood Lumber Duty Refund

Unedited CRA Tags
129(4) 12(1)(z.6) 125(7)

Principal Issues: Whether the interest portion of a softwood lumber duty refund forms part of aggregate investment income for purposes of subsection 129(4).

Position: No

Reasons: It is income from a business source

9 October 2007 External T.I. 2007-0240321E5 - 70(9), 73(3) Transfer farm property to child

Unedited CRA Tags
70(9) 73(3)

Principal Issues: 1. Whether farmland must immediately prior to its transfer (or death of the taxpayer) be used in the business of farming by the taxpayer, the taxpayer's spouse or any of the taxpayer's children in order for subsections 73(3) or 70(9) to apply. 2. What is the meaning of the phrase "used principally in a fishing or farming business" as that is used in Subsections 70(9) and 73(3).

Position: 1. No. 2. Where reference is made to an asset being used "principally" in the business of farming, the asset will meet this requirement if more than 50% of the asset's use is in the business of farming.

Reasons: 1. Current wording of the Act. 2. Principally is generally interpreted to mean more than 50%.

3 October 2007 External T.I. 2007-0248701E5 - medical expenses electric breast pump

Unedited CRA Tags
118.2(2)

Principal Issues: whether the cost of an electric breast pump qualifies as a medical expense

Position: no

Reasons: It is not included in the list of qualifying medical expenses or equipment described in section 5700 of the Regulations.

3 October 2007 External T.I. 2007-0230671E5 F - Paragraphe 12 du IT-338R2

Unedited CRA Tags
98(5)
Summary Under
Tax Topics - Income Tax Act - Section 53 - Subsection 53(1) - Paragraph 53(1)(e) - Subparagraph 53(1)(e)(iv)
there is a s. 53(1)(e)(iv) basis bump for underlying debt under s. 98(5) wind-up

Principales Questions: La position énoncée au paragraphe 12 du bulletin d'interprétation IT-338R2 représente-t-elle toujours la position de l'ARC?

Position Adoptée: oui

Raisons: Il n'y a pas eu de nouvelle jurisprudence ou de changement à la Loi qui pourrait modifier notre position.

28 September 2007 External T.I. 2007-0241341E5 F - Crédit pour la condition physique des enfants

Unedited CRA Tags
118.03
Summary Under
Tax Topics - Income Tax Act - Section 118.03 - Subsection 118.03(1) - Eligible Fitness Expense
summer or sports camp is ineligible if not for a period of at least five consecutive calendar days

Principales Questions: Un camp de mise en forme dispensé par XXXXXXXXXX constitue-t-il un programme d'activité physique aux fins du crédit d'impôt pour la condition physique des enfants si ce camp est d'une durée de XXXXXXXXXX sessions étalées sur une période allant de XXXXXXXXXX à XXXXXXXXXX jours?

Position Adoptée: Selon les commentaires émis par le ministère des Finances, les frais engagés pour un tel camp ne donneraient pas droit au crédit d'impôt pour la condition physique des enfants.

Raisons: Le camp n'est pas d'une durée d'au moins cinq jours civils consécutifs.

28 September 2007 External T.I. 2007-0247341E5 - Children Fitness Credit

Unedited CRA Tags
118.03 118.03(1)

Principal Issues: (1) Is the portion of the registration or membership fee attributable to the cost of hockey jerseys that are given away to participants at the end of the season included in the eligible fitness expense?
(2) Can increased registration or membership fees - due to the fact that participants do not engage in fundraising - give rise to the Children's Fitness Credit?

Position: (1) Yes, provided the jerseys have little or no resale value at the time they are given away.
(2) The increased registration or membership fee may constitute an eligible fitness expense provided the conditions of section 118.03 are met.