Income Tax Severed Letters - 2007-11-30


2007 Ruling 2007-0241351R3 - butterfly reorganization

Unedited CRA Tags

Principal Issues: Whether Canco's distribution, for the purpose of paragraph 55(3)(b), would include the First Canadian Dividend (as described below)?

Position: No.

Reasons: Because the First Canadian Dividend would not be part of the Butterfly Reorganization (as referred to in paragraph 55(3)(b)) under the circumstances.

Technical Interpretation - External

22 November 2007 External T.I. 2007-0226001E5 F - Jugement de divorce - Montant forfaitaire

Unedited CRA Tags
56.1(4) 60 b) 15(1)

Principales Questions: Un montant payable à une ex-épouse à l'issue d'un jugement de divorce est-il déductible dans la situation particulière où le montant est payé par une société qui l'a déjà employée et dont l'ex-époux est l'actionnaire exclusif?

Position Adoptée: Possiblement que non. Le paragraphe 15(1) pourrait s'appliquer.

Raisons: Nous ne nous sommes pas prononcés de façon définitive car il manquait trop de faits et d'information.

21 November 2007 External T.I. 2007-0232351E5 - Child Care Expenses

Unedited CRA Tags

Principal Issues: Whether certain fees levied by a particular educational institution would qualify as child care expenses and whether the invoice issued by the particular institution could include amounts for tuition as well as child care.

Position: General comments but yes invoice can include both.

Reasons: The law.

21 November 2007 External T.I. 2007-0254851E5 - Structured settlement Assignment

Unedited CRA Tags
12.2 12(1)(c)

Principal Issues: 1. Is a casualty insurer relieved from the requirements of par 5 of IT-365R2 to remain liable for the payments when it assigns an action to an assignee with consent from the claimant in a structured settlement? 2. Is the casualty insurer relieved from reporting the interest income after it has assigned the structured settlement to an assignee?

Position: 1. Yes 2. Yes

Reasons: 1 and 2. The assignment consented and agreed to by the claimant transfers the responsibilities to another owner who will purchase an annuity, as part of the structured settlement arrangement, from a life insurance company.

21 November 2007 External T.I. 2007-0259631E5 - Art 21(5)(b) Canada Norway Income Tax Convention

Principal Issues: Whether the remuneration of seafarers aboard a ship which does repair work in respect of a site where activities are carried on in connection with the exploration or exploitation of the seabed and subsoil and their natural resources situated in Canada is exempt from Canadian income tax pursuant to subparagraph 5(b) of the Canada-Norway Income Tax Convention?

Position: No.

Reasons: Pursuant to Paragraph 5(a) of Article 21 of the Canada-Norway Income Tax Convention, the salary and wages of the Norwegian resident seafarers is subject to tax in Canada, unless the employment is carried on in Canada for a period or periods not exceeding in aggregate 30 days in any 12-month period.

15 November 2007 External T.I. 2007-0254941E5 - Interest Deductibility - Second Loan

Unedited CRA Tags

Principal Issues: A taxpayer borrows money to acquire shares of a corporation. To pay interest on the first loan, the taxpayer borrows money under a second loan. Is the interest on the second loan deductible under paragraph 20(1)(c)?

Position: Yes

Reasons: Previous position taken in Ruling's interpretations.

13 November 2007 External T.I. 2007-0230391E5 - State pension received from Italy

Unedited CRA Tags
56(1) 110(1)(f)(i) 126(1)

Principal Issues: Tax consequences for a resident of Canada of receiving a pension from the Italian state for services rendered to the Italian State when the individual was a non-resident of Canada.

Position: Amount included in subparagraph 56(1)(a)(i) of the Act and deducted from taxable income pursuant to subparagraph 110(1)(f)(i) of the Act. Not entitled to a foreign tax credit.

Reasons: According to paragraph 2 of Article XVIII of the tax treaty between Canada and Italy which is in force (and paragraph 3(a) of Article 18 of the tax treaty that is not yet in force), the pensions paid by, or out of funds created by, the Italian State or a political or administrative subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in Italy.

31 October 2007 External T.I. 2007-0242651E5 - Education Tax Credit - Qualifying Educational Program

Unedited CRA Tags

Principal Issues: Discussion of the application of the education tax credit. POSITION: General comments provided

Reasons: Position consistent with IT-515R2 and other published interpretations
M. Thomson
XXXXXXXXXX (613) 957-3496
October 31, 2007

Technical Interpretation - Internal

23 November 2007 Internal T.I. 2007-0258051I7 F - REÉR - Hypothèque légale

Unedited CRA Tags
146(12) 146(13) 146(2)c.3)(ii)

Principales Questions: Les dispositions du paragraphe 146(12) seraient-elles applicables advenant que l'Agence acquiert une hypothèque légale sur le REÉR du contribuable?

Position Adoptée: Non

Raisons: Les conditions d'application du paragraphe 146(12) ne seraient pas satisfaites.

19 November 2007 Internal T.I. 2007-0232081I7 - Push-down Accounting

Unedited CRA Tags

Principal Issues: Whether the CRA would accept certain push-down accounting journal entries in computing retained earnings and contributed surplus for purposes of subsection 18(4) of the Act.

Position: Question of fact.

Reasons: To the extent that journal entries reflect actual expenses of the Canadian corporation, the corresponding permanent reduction in retained earnings will be reflected in the computation for purposes of subsection 18(4) of the Act.

14 November 2007 Internal T.I. 2007-0254601I7 F - Paiement incitatif - Bon de souscription

Unedited CRA Tags

Principales Questions: Un bon de souscription est-il un paiement incitatif visé à l'alinéa 12(1)x)?

Position Adoptée: Oui

Raisons: Le bon de souscription a été reçu par le contribuable pendant qu'il tirait un revenu d'une entreprise à titre d'incitatif pour octroyer un contrat d'exploitation XXXXXXXXXX à un tiers.