Income Tax Severed Letters - 2007-11-16


2007 Ruling 2007-0237921R3 - Thin capitalization

Unedited CRA Tags
Subsections 18(4) - (6)

Principal Issues: Whether administrative position not to apply subsection 18(6) is applicable?

Position: Administrative position not to apply subsection 18(6) applies.

Reasons: Arrangement does not circumvent or frustrate subsection 18(6) and is in compliance with the position in ITTN #15.

XXXXXXXXXX 2007-023792

Ministerial Correspondence

17 October 2007 Ministerial Correspondence 2007-0250661M4 - Deferral of capital gains

Unedited CRA Tags

Principal Issues: Does the Act currently permit capital gains on rental properties to be deferred when a replacement property is purchased?

Position: No.

Reasons: Section 44(1)

Technical Interpretation - External

13 November 2007 External T.I. 2007-0251041E5 - Foreign Pensions

Principal Issues: Whether a pension received by a Canadian resident from the South African government is exempt from income tax in Canada.

Position: In this case, no.

Reasons: The pension is an amount described in paragraph 56(1)(a) of the Act and paragraph 81(1)(e) of the Act does not apply.

8 November 2007 External T.I. 2006-0181621E5 F - Article 67.1 - Frais de transport et de logement

Unedited CRA Tags
67.1(1) 67.1(4) 18(1)l)

Principales Questions: La somme payée pour un divertissement inclut-elle les frais de transport et de logement accessoires?

Position Adoptée: Question de fait. En l'espèce, oui.

Raisons: L'article 67.1 de la Loi de l'impôt sur le revenu. La jurisprudence.

8 November 2007 External T.I. 2007-0252721E5 - Photovoltaic equipment

Unedited CRA Tags
class 43.1

Principal Issues:
The calculation of CCA for individuals who acquire photovoltaic equipment to generate electrical energy for sale under the Renewable Energy Standard Offer Program for the Province of Ontario.

Position: Since the taxpayer is not a principal business corporation, the property will be a "specified energy property" and CCA on the property cannot be deducted to the extent that doing so would create or increase a loss from such property owned by the taxpayer.

Reasons: Application of the legislation.

6 November 2007 External T.I. 2007-0257601E5 - Disposition - Interest in a Life Insurance Policy

Unedited CRA Tags
148 56(1)(j)

Principal Issues: General comments on the tax consequences of the disposition of a life insurance policy with a "return of premium" benefit. This was a follow up to document 2007-023032.

Position: Based on the information provided the disposition of the policies will result in an amount being included in the income of the policyholders.

Reasons: The legislation

XXXXXXXXXX 2007-025760

6 November 2007 External T.I. 2007-0241541E5 - Clergy Residence

Unedited CRA Tags

Principal Issues: Is a Coordinator of Youth Ministry or a Pastoral Minister entitled to the clergy residence deduction under paragraph 8(1)(c)?

Position: No.

Reasons: Neither meets the status test as described in IT-141R (Consolidated)

XXXXXXXXXX 2007-024154
L. Carruthers, CA
November 6, 2007

22 October 2007 External T.I. 2007-0244941E5 - Disposition of Rental property

Unedited CRA Tags
45(1) 18(1)(a) 9; 69(1)(b)(i)

Principal Issues: Taxpayer owns a rental property. His daughter moves in. Taxpayer receives monthly payments from his daughter for ten months then sells the property to her. Taxpayer's intention from the start has been to treat the monthly payments received from his daughter as deposits towards her down payment on the property.
1. Whether taxpayer may continue to deduct property taxes, insurance costs, maintenance, and interest expenses after his daughter moved in up until the time it is sold to his daughter.
2. Whether the taxpayer's POD from the eventual sale of the property will include the sum of the monthly payments he received from his daughter, which he treated as deposits towards the down payment for the property.

Position: 1. Depends. 2. Yes.

Reasons: 1. It is a question of fact whether the monthly payments received by the taxpayer from his daughter constitute rental income or refundable deposits held by the taxpayer to be applied in the future against the purchase price of the property. If in fact the monthly payments received by the taxpayer are non-refundable in the event that the sale does not transpire then the amounts received by the taxpayer will likely be considered rental income. In that case, any related outlays or expenses incurred by the taxpayer to earn rental income from the property would be deductible. Conversely, as a question of fact, if the daughter is living rent-free such that the amounts received by the taxpayer are in fact refundable deposits then the taxpayer's outlay and expenditures relating to the property would be personal expenses and would be non-deductible by virtue of paragraph 18(1)(a) of the Act. 2. Regardless of how the daughter's down payment is financed, be it by way of a gift from the taxpayer inter vivos or otherwise, the entire down payment forms part of the sale price and would be fully included in the taxpayer's POD.

17 October 2007 External T.I. 2007-0253461E5 - Ownership of Property

Unedited CRA Tags

Principal Issues: Whether a father would be considered to be the owner of his son's house.

Position: No.

Reasons: The father's name will appear on the mortgage and deed only to help his son obtain financing. The father would not be considered to have beneficial ownership.

1 May 2007 External T.I. 2007-0230321E5 - Disposition - Interest in a Life Insurance Policy

Unedited CRA Tags
56 148

Principal Issues: General comments on the tax consequences of the disposition of a life insurance policy with a "return of premium" benefit.

Position: Generally results in a taxable gain.

Reasons: The legislation

Technical Interpretation - Internal

1 November 2007 Internal T.I. 2007-0245311I7 - Prescribed Prize

Unedited CRA Tags
56(1)(n) Reg. 7700

Principal Issues: Whether the Leadership in Faculty Teaching Award is a prescribed prize pursuant to section 7700 of the Income Tax Regulations.

Position: Yes

Reasons: Satisfies criteria of Regulation 7700.