Income Tax Severed Letters - 2007-12-14


2007 Ruling 2007-0229541R3 - Article 10(2)(a) of Luxembourg Treaty

Unedited CRA Tags
10(2)(a) Luxembourg ITAR 10(6)

Principal Issues: Whether the reduced rate of tax on dividends under subparagraph (2)(a) of Article 10 of the Luxembourg Treaty would apply to a situation where dividends are paid to a XXXXXXXXXX partnership of which the majority partner is a resident of Luxembourg and the only other partner is a wholly-owned subsidiary of the Luxembourg resident?

Position: Yes to the partner resident in Luxembourg.

Reasons: In this case, we look through the XXXXXXXXXX partnership to the partners as to who the beneficial owner is. The partnership agreement and the relationship between the partners determined that the Luxembourg partner controls at least 10% of the voting power of the payer corporation.

2007 Ruling 2007-0234481R3 - Purchase of Target and Bump

Unedited CRA Tags
88(1)(c) 88(1)(d)

Principal Issues: Acquisition of control of a Target. Winding up of the Target into the Parent, and bump of the capital property held by the Target.

Position: Favourable rulings provided.

Reasons: In compliance with the law.

2007 Ruling 2007-0241581R3 - amendment to a joint spousal trust

Unedited CRA Tags
105(1) 248(1)

Principal Issues: 1. Will the proposed variation result in a resettlement of the trust or a disposition of the trust's assets?
2. Will the proposed variation result in a disposition of any of the beneficiaries' capital interest in the trust?
3.Will either of sections 105 or 245 apply?

Position: No to all.

Reasons: Consistent with past rulings.

2007 Ruling 2007-0241991R3 - Series of loans and repayments

Unedited CRA Tags
214(3)(a) 80.4(2) 15 17(1); 247(2).

Principal Issues: (1) Does interest free loan to Parentco constitute a deemed benefit to Parentco? (2) Is withholding tax at XXXXXXXXXX % applicable on benefit? (3) Do the transactions constitute a series of loans and repayments? (4) Does ss.15(1) apply to the proposed transactions? (5) Does 17(1) apply to the loan? (6) Will subsection 247(2) apply to the proposed transactions?

Position: (1) Yes. (2) Provided Parentco is the beneficial owner of the dividends, yes. (3) No. (4) Only by virtue of subsection 15(9). (5) No. (6) No.

Reasons: (1) Yes, subsection 80.4(2) of the Act deems a shareholder to have received a benefit equal to the interest it should have paid at a prescribed rate on a loan from the corporation. Such benefit is to be included in the shareholder's income as a deemed benefit subject to Part XIII tax through the combined operation of subsections 15(9), 15(1) and 214(3). (2) Application of XXXXXXXXXX of the Canada-XXXXXXXXXX Tax Convention and subsection 212(2) of the Act. (3) Based on the reasoning in Uphill and Attis. (4) Application of subsections 15(9) and 15(1). (5) The loan will be repaid within 365 days. (6) Subsection 15(9) is a more specific provision that applies to the loan.

Technical Interpretation - External

7 December 2007 External T.I. 2007-0254471E5 - Flow through shares

Unedited CRA Tags

Principal Issues: Whether the opinions expressed in a previous letter regarding the tax consequences of flow-through shares issued in a particular situation are still valid.

Position: Generally yes, we are not aware of anything that would invalidate that letter. But we would need to look at some additional factors, including, such as the determination of the corporation that incurred the Canadian exploration expense, whether the transaction represented a "farm out" transaction and the potential application of the benefit provisions.

Reasons: Requirements of the law.

6 December 2007 External T.I. 2007-0256991E5 - Beneficial Ownership

Unedited CRA Tags

Principal Issues: Request for comments regarding ownership of real property where the property is registered in the name of a parent for financing purposes only.

Position: Ownership of the property is a question of fact. Concepts of legal ownership and beneficial ownership discussed.

Reasons: Comments consistent with CRA's interpretation bulletins and previous opinions.

5 December 2007 External T.I. 2007-0228031E5 - Rented Vehicle Taxable Allowance

Unedited CRA Tags
6(1)(e) 6(2) 6(1)(k)

Principal Issues: How is a taxable benefit assessed for an employee's personal use of an employer rented vehicle?

Position: Stand-by charge applies.

Reasons: Legislation

Shaun Harkin, CMA
XXXXXXXXXX (613) 957-9229
December 5, 2007

5 December 2007 External T.I. 2007-0232051E5 - Employer-provided gifts and awards

Unedited CRA Tags
5 6(1)(a)

Principal Issues: Employer-Provided Rewards under an Incentive Program.

Position: General comments.

Reasons: Question of fact.

4 December 2007 External T.I. 2005-0144481E5 - Immovable property-article 13(4) Luxembourg Conv.

Unedited CRA Tags

Principal Issues: Y Co. owns all the shares of two corporations that own commercial real estates in Canada which are fully leased to arm's length lessees. X Co. disposed of the shares of Y Co. Are Y Co. shares shares the value of which is derived principally from immovable property situated in Canada for the purposes of Article 13(4) of the Canada-Luxembourg tax convention?

Position: To determine whether the value of Y Co. shares is derived principally from immovable property, a consolidated basis approach would be used. Therefore the immovable properties held by the subsidiaries of Y Co. would be taken into account even if only held indirectly by Y Co.

Reasons: The look-through provision using the expression "derived from" is broader than the look-through provision using the expression "consist of", the latter expression referring to the assets being held directly by the corporation. The use by Canada of an expanded definition of immovable property to include specifically the shares of a company, the underlying value of which is derived from immovable property in some of its tax conventions is for greater certainty purposes.

30 November 2007 External T.I. 2007-0228281E5 - Interaction between 69(1)(b) and 84.1(1)(b)

Unedited CRA Tags
69(1)(b) 84.1(1)(b)

Principal Issues: Whether the amount of the deemed dividend determined under paragraph 84.1(1)(b) in the situation described, would be affected by the application of subparagraph 69(1)(b)(i)

Position: No.

Reasons: Wording of the provisions.

15 November 2007 External T.I. 2006-0201411E5 - Donation to Charitable Found. by Financial Adv.

Unedited CRA Tags
248(31) 248(32)

Principal Issues: Are trailer fees received by an advisor, on mutual funds acquired by the advisor's charitable fund, an advantage to the advisor?

Position: No.

Reasons: The trailer fees are not related to the making of the gift.

XXXXXXXXXX Helen Zelobowski
(519) 571-6987
November 15, 2007

13 November 2007 External T.I. 2007-0250731E5 - exempt amount as defined in proposed 94(1)

Unedited CRA Tags

Principal Issues: Whether either of two types of transfers to a deemed resident trust will qualify as an "exempt amount" such that the deemed resident trust will not be required to withhold Part XIII tax on distributions of income (other than amounts not deductible by the trust under 104(7.01)) to the non-resident beneficiaries. The response addresses the issuance of shares of a US corporation to the deemed resident trust in exchange for cash (on a commercial basis) and the payment of a trust expense by a beneficiary.

Position: Provided the issuance of shares by the US corporation is not part of a series of transactions within the meaning of 248(10) that includes a contribution, the issuance of shares for cash equal to the FMV of those shares will likely meet the definition of "arm's length transfer" such that the transfer will not be a "contribution" for the purpose of (c)(iv) of the def'n of "exempt amount". However, the payment of a trust expense will likely qualify as a "contribution" (and thus a subsequent distribution of income other than income described in paragraph 104(7.01) will not be an "exempt amount") with the result that the trust would be deemed resident for the purposes set out in 94(3)(a)(ix) and other provisions at all times after the payment of that expense.

7 November 2007 External T.I. 2007-0256521E5 - existence of a trust

Unedited CRA Tags

Principal Issues: taxpayer has asked whether the CRA would consider that a trust exisits...

Position: the determination is a legal matter

Reasons: taxpayer referred to CTF article indicating likely no trust however no comment given as quedtion did not involve a matter of tax law interpretation

Technical Interpretation - Internal

4 December 2007 Internal T.I. 2007-0237461I7 F - Définition d'activité de construction

Unedited CRA Tags
238 Reg

Principales Questions: Est-ce que l'installation de câblage, de lignes publiques ou résidentielles, constituent des activités de construction?

Position Adoptée: Question de faits

Raisons: Application du Règlement 238.

4 December 2007 Internal T.I. 2007-0255041I7 F - Employé de l'OTAN

Unedited CRA Tags
81(1)a) 146(1)

Principales Questions: 1. Est-ce qu'une somme exonérée d'impôt en vertu de l'alinéa 81(1)a) de la Loi fait partie du revenu gagné aux fins de l'article 146?
2. Selon la résidence et le lieu de l'emploi de l'employé de l'OTAN, quel sera l'impact de l'article 19 de la convention du statut de l'organisation du traité de l'Atlantique Nord à l'égard de l'imposition au Canada du revenu d'emploi?

Position Adoptée: 1. Non.
2. Commentaires généraux sur la résidence d'un particulier et sur l'article 19 de la convention.

Raisons: 1. La somme ne fait pas partie du revenu.

4 December 2007 Internal T.I. 2007-0255381I7 F - Dommages reçus suite à la perte d'un emploi

Unedited CRA Tags
5(1) 56(1)a)ii) 248(1), définition de "allocation de retraite"

Principales Questions: Est-ce qu'un montant versé par un employeur à son employé pour l'indemniser suite à un congédiement et à une plainte pour harcèlement psychologique est imposable?

Position Adoptée: Nous sommes d'avis que dans la situation en cause le montant reçu est imposable à titre d'allocation de retraite conformément au paragraphe 56(1)a)ii)

Raisons: La définition de l'expression "allocation de retraite" prévue au paragraphe 248(1) vise un montant reçu par un employé suite à la perte de son emploi.