Income Tax Severed Letters - 2007-11-02


2007 Ruling 2007-0248021R3 - Cdn Japan Convention: withholding rate deemed div.

Unedited CRA Tags

Principal Issues: whether the lower rate of 5% applies to a deemed dividend, triggered under 84(3) of the Act by Canco's purchase for cancellation shares held by Japanese Company

Position: yes

Reasons: Article 10 of the Convention applies to deemed dividends and all other conditions required under paragraph 2(a) have been met.

2007 Ruling 2007-0237482R3 - Supplemental Ruling

Unedited CRA Tags
88(1)(c) 88(1)(d) 87(11) 18(6)

Principal Issues: Additional facts and proposed transactions brought to our attention.

Position: Confirmation that, subject to the conditions, limitations, qualifications, and comments set out therein, the original Ruling no. E 2007-0237481R3 and rulings B and D of Ruling no. E 2006 0182431R3 will continue to be binding on the CRA.

Reasons: In compliance with the law.

2007 Ruling 2007-0226281R3 - Withholding Exemption - Use of Finco

Unedited CRA Tags
212(1)(b)(vii) 15(2.3) 245

Principal Issues: 1. Are the interest payments made by Finco to an arm's length Non-Resident Bondholder exempt under 212(1)(b)(vii)? 2. Are payments made by a co-trustee, depository, collateral agent on behalf of Finco or if required the Financial Guarantor exempt? 3. Does a disposition of a partnership interest of either a GP or LP affect the withholding tax exemption available to Finco? 4. Is there a new obligation if the Non-Resident bondholder assigns its obligation that would cause the withholding exemption to cease?

Position: 1. YES 2. YES 3.No 4. No

Reasons: 1, 3 and 4. Finco is responsible for the loan and the terms are acceptable for the withholding exemption.

XXXXXXXXXX 2007-022628

2007 Ruling 2007-0244641R3 F - Résidence principale

Unedited CRA Tags

Principales Questions: Modification à la définition du terme "Unité" à la page 2 de la décision anticipée.

Position Adoptée: Nous confirmons que la décision anticipée rendue dans le dossier 2007-023403 demeure valable sous réserve des conditions et des restrictions générales énoncées dans la circulaire d'information IC-70-6R5 et qu'elle lie l'Agence du revenu du Canada pourvu que les transactions projetées soient complétées avant le XXXXXXXXXX .

2007 Ruling 2007-0246461R3 F - Monétisation d'actions d'une société publique

Unedited CRA Tags
20(1)c) 20(1)e) 245(2)
cash settlement of monetization contract on capital account

Principales Questions: Dans une situation où deux actionnaires détenant le contrôle de droit d'une société publique se proposent de mettre en place une opération de monétisation réalisée par la combinaison d'un contrat à terme et d'un prêt: 1) Est-ce que les intérêts payables sur le prêt seront déductibles; 2) Est-ce les dépenses qui seront engagées pour conclure la convention de prêt et l'hypothèque mobilière liée à la convention de prêt seront déductibles; 3) Est-ce que le fait d'hypothéquer des actions et de procéder à un emprunt combiné à un contrat à terme entraînera une disposition de ces actions; 4) Est-ce que les montants qui seront payés ou reçus suite au règlement des obligations ou des droits découlant du contrat à terme seront au titre du capital; 5) Est-ce que le paragraphe 245(2) s'appliquera aux opérations projetées?

Position Adoptée: 1,2 et 4: Oui; 3 et 5: Non

Raisons: 1) Les conditions de l'alinéa 20(1)c) sont respectées. 2) Les conditions de l'alinéa 20(1)e) sont respectées. 3) Il ne s'agit pas d'une "disposition" au sens de la définition de cette expression au paragraphe 248(1). 4) Position antérieure: 2003-0023761I7. 5) Il n'y a pas d'opérations d'évitement ni d'abus de la Loi.

2007 Ruling 2007-0250671R3 - Structured Settlement

Unedited CRA Tags

Principal Issues: An individual (Plaintiff) was injured when the motor vehicle in which XXXXXXXXXX was a passenger was involved in a collision with another motor vehicle. The Plaintiff commenced an action for damages against the driver of the motor vehicle, in which XXXXXXXXXX was a passenger, and various other defendants. Pursuant to an out of court settlement, the casualty insurer of a certain defendant will purchase a single premium annuity contract with a life insurance company to provide the proposed periodic payments to be received under a structured settlement arrangement. The casualty insurer will direct the life insurance company to pay the periodic payments under the annuity contract to the Plaintiff. Will such payments be taxable in the hands of the recipient?

Position: No.

Reasons: The terms of the structured settlement are consistent with the CRA's position as set out in paragraph 5 of Interpretation Bulletin IT-365R2.

2007 Ruling 2007-0225151R3 F - Winding-up of a partnership

Unedited CRA Tags
248(21) 98(3) 248(1) 89(1)

Principal Issues: 1. Whether subsection 248(21) will apply to the partition of common shares? 2. Whether there will be a reduction of the PUC of the common shares?

Position: 1. Yes if certain conditions (FMV test and continuation of the property) in subsection 248(21) are satisfied. 2. No, if no reduction of the stated capital under corporate law.

Reasons: 1. Wording of subsection 248(21), transaction (as described in the proposed transactions) must be valid under corporate law. 2. IT-463R2

2007 Ruling 2007-0225861R3 - Canadian Branch of Foreign NPO (XXXXXXXXXX)

Unedited CRA Tags

Principal Issues: (A) Will establishing the new programs, in and of itself, preclude the Entity from being an organization described in paragraph 149(1)(l) of the Act? (B) Is Part XIII tax applicable to rental income received by the non-resident entity from the leasing of real property in Canada, where the rental income is included in the computation of taxable income of the entity from operations in Canada pursuant to Part I of the Act?

Position: (A) No. (B) No.

Reasons: (A) Based on the legislation, organizational documents and other Rulings given in similar situations. However, whether or not the corporation is operated for purpose other than profit as required under 149(1)(l) will be a question of fact each year. (B) To the extent the rental income is included in income of the taxpayer for purposes of Part I of the Act; subsection 805(1) of the Regulations provides that Part XIII will not apply. Is should be noted that subsection 805(2) of the Regulations grants the Minister discretion in this regard.

2007 Ruling 2007-0231331R3 - Amalgamation and bump

Unedited CRA Tags
87(11) 88(1)

Principal Issues: Availability of the bump under 87(11) and 88(1)(d).

Reasons: We issued a favourable opinion on proposed 88(1)(c.3)(vi).

2007 Ruling 2007-0234031R3 F - Résidence principale

Unedited CRA Tags

Principales Questions:
Est-ce qu'une unité indivisible (en raison des statuts, des règlements de la société et du bail en propriété exclusive) qui est composée d'un bail en propriété et d'un nombre d'actions de la société détenant l'immeuble est considérée comme étant un logement aux fins de la définition de résidence principale de l'article 54 de la Loi?

Position Adoptée:
Pourvu que les administrateurs de la Société, en plus de ne pouvoir généralement pas verser de dividendes, ne puissent autrement payer ou procurer de revenu ou d'avantages aux actionnaires pour leur bénéfice personnel, l'unité composée du bail et d'actions, indivisible en raison de l'effet combiné des statuts et règlements de Société et du bail en propriété exclusive et donnant à son détenteur le droit de jouir personnellement de l'unité d'habitation à laquelle elle se rattache se qualifiera au titre de logement pour les fins de la définition de " résidence principale " à l'article 54 de la Loi.

Situation particulière de faits pour laquelle nous avons déjà rendu des décisions positives.

Technical Interpretation - External

30 October 2007 External T.I. 2007-0223871E5 - T4A Slip and Summary Form Reporting

Unedited CRA Tags
153(1)(g) Reg 200(1)

Principal Issues: Is the payer required to issue a T4A slip to a self-employed contractor who receives compensation for services provided to the payer by the contractor?

Position: Yes.

Reasons: The law

30 October 2007 External T.I. 2007-0223341E5 - Shareholder/Director dependant Scholarship

Unedited CRA Tags
18(1)(a); 15(1); 6(1)(a)

Principal Issues: Deductibility to a corporation of amounts paid as scholarships to the children of shareholders and directors.

Position: General comments.

Reasons: Question of fact.

XXXXXXXXXX Joy Bertram, B.Comm.,
CGA, CPA (vt)
October 30, 2007 (613) 957-8954

30 October 2007 External T.I. 2007-0224001E5 - Motor Vehicle Travel Expenses

Unedited CRA Tags

Principal Issues: Whether a supply/substitute teacher can deduct motor vehicle expenses for travel between the home and the school at which the teacher is temporarily assigned to teach.

Position: No.

Reasons: Travel between home and the place of work, being the school at which the supply/substitute teacher has been assigned, is a personal expense and therefore not deductible in computing income from employment.

XXXXXXXXXX 2007-022400
Michael Cooke
October 30, 2007

26 October 2007 External T.I. 2005-0137641E5 - Dissolution of Foreign Affiliate

Unedited CRA Tags
88(3) 69(5)
share proceeds include upstream loan extinguished on wind-up

Principal Issues: How does subsection 88(3) apply where a loan is made by a controlled foreign affiliate of a taxpayer to the taxpayer before the dissolution of the affiliate?

Position: An amount equal to the fair market value of the loan is included in the taxpayer's proceeds of disposition of the shares of the affiliate

Reasons: Required by subsection 88(3)

23 October 2007 External T.I. 2007-0228011E5 - workspace in home expenses

Unedited CRA Tags
8(1)(f) 8(13)

Principal Issues: Can employees deduct expenses related to home offices?

Position: Question of Fact

Reasons: General information provided

XXXXXXXXXX 2007-022801

22 October 2007 External T.I. 2007-0234001E5 - Conversion of Currency

Unedited CRA Tags
12(1)(c) 39(2)

Principal Issues: Are there tax implications in respect of conversion at maturity the proceeds from one currency to another?

Position: YES

Reasons: The provisions of subsection 39(2).

10 October 2007 External T.I. 2007-0249251E5 F - Utilization of Losses - Acquisition of control

Unedited CRA Tags
111(4) 111(5) 249(4)

Principal Issues: In the particular situation, whether there is an acquisition of control of a corporation.

Position: General comments

Reasons: Question of fact

Technical Interpretation - Internal

29 October 2007 Internal T.I. 2007-0257121I7 - Cushion gas

Unedited CRA Tags
248(1) Class 8(i)

Principal Issues: Whether cushion gas (or base pressure gas) is depreciable property or inventory

Position: generally depreciable property

Reasons: review of jurisprudence, accounting treatment and classification by various regulators

16 October 2007 Internal T.I. 2007-0253161I7 F - Revenu d'intérêts réputés

Unedited CRA Tags

Principales Questions: Le 1er juin 2004, Canco a un solde de prix de vente à recevoir, ne portant pas intérêt, de 500 000 $ d'Étrangère Co. Au 2 juin 2005, Étrangère Co a remboursé 300 000 $. Aux fins du calcul des intérêts prévu aux alinéas 17(1)a) et 17(1)b) de la Loi, à combien s'élève la créance de Canco au 31 mai 2005?

Position Adoptée:
La créance s'élève à 200 000 $ soit la portion de la créance qui " est impayée depuis plus d'un an ou le demeure pendant plus d'un an ".

Raisons: Interprétation de la Loi.