Income Tax Severed Letters - 2007-12-28


2007 Ruling 2007-0241271R3 - Withholding- minor change

Unedited CRA Tags

Principal Issues: Minor change to Trust Indenture

Position: Amended paragraph 21(g) of the Ruling

Reasons: Change does not affect ruling provided

2007 Ruling 2007-0260861R3 - Entity Classification

Unedited CRA Tags
248(1) "corporation" 85.1(3)

Principal Issues: Whether the proposed XXXXXXXXXX cooperative will be treated as a corporation for purposes of the Act.

Position: Question of fact depending on the articles creating the cooperative. In this particular case, it will be treated as a corporation.

Reasons: The provisions of the foreign legislation and the articles creating the cooperative support the conclusion that this cooperative will be treated as a corporation for purposes of the Act.

Ministerial Correspondence

21 November 2007 Ministerial Correspondence 2007-0256591M4 - Deductibility of fines and penalties

Unedited CRA Tags

Principal Issues: Are fines and penalties levied by the Investment Dealers Association deductible?

Position: No

Reasons: The IDA is authorized under provincial securities legislation to govern and regulate members in order to ensure compliance with that legislation. As such, it is the CRA's view that section 67.6 applies to deny a deduction

Technical Interpretation - External

19 December 2007 External T.I. 2007-0228411E5 - Gift to a charity subject to a condition precedent

Unedited CRA Tags
118.1(3) 118.1(4)

Principal Issues: Clarify the date on which a gift known at common law as a Donatio Mortis Causa ("DMC") is made to a registered charity.

Position: The gift will be considered to have been made on the date that the gift vests completely in the donee, which is the date of the donor's death.

Reasons: By definition a DMC is subject to a condition precedent, which is the death of the donor. Therefore, even though the subject matter of the gift has been delivered to the charity at an earlier date, legal title therein does not vest in the donee until the death of the donor. At any time up until death, the donor may revoke the gift. Accordingly, it is not until the condition precedent has been satisfied that the gift will be considered completed for tax purposes.

XXXXXXXXXX 2007-022841
M. Thomson
December 19, 2007


18 December 2007 External T.I. 2007-0224761E5 F - Changement d'usage partiel et choix 45(3)

Unedited CRA Tags
45(1)(b) 45(1)(c) 45(3)

Principales Questions:
Dans le contexte d'un changement d'usage partiel, est-ce qu'on peut faire le choix au paragraphe 45(3) afin de reporter les conséquences fiscales reliées à une disposition réputée?

Position Adoptée:

Selon le paragraphe 30 du bulletin d'interprétation IT-120R6, on ne peut faire le choix au paragraphe 45(3) dans le cadre d'un changement d'usage partiel.

13 December 2007 External T.I. 2007-0227511E5 - Workspace in Home

Unedited CRA Tags
8(13) 8(10) 8(1)(f) 8(1)(i)

Principal Issues: 1) Is an annual payment a Bonus or Commission? 2. Does the employer have to ensure the conditions are met before signing Form T2200? 3) How should the 50% principal use condition be determined, specifically, which total hours should be used, the standard workweek or otherwise?

Position: 1) Question of fact. However, in this case, the payment appears to be a bonus. 2) In order for an employee to claim a deduction for home office expenses under either paragraph 8(1)(f) or (i) of the Act, a completed form T2200 is required. Subsection 8(10) of the Act indicates that by signing the form, the employer certifies that the employee meets the conditions set out in the provisions described above. It follows that the best course of action is for the employer to be reasonably certain the employee meets the conditions before signing Form T2200. For the employee to claim the deduction, however, he or she must be able to demonstrate that the requirements of the Act have in fact been met. 3) Although the term "principally" is not defined in the Act, the CRA has accepted the view that it means "more than 50% of the time". With respect to the appropriate "total hours" to use to determine this percentage, it is our view that it would be reasonable to begin with the number of hours that the employee is required to work under the terms of his or her employment contract. Depending on the particular facts, it may be that an employer approves overtime or different working hours, which would have an impact on this calculation. Such a determination involves a finding of fact in each case as to where a particular individual "principally performs the duties of the office or employment".

Reasons: Reading of the legislation and consistent with prior positions.

13 December 2007 External T.I. 2007-0228811E5 - Holdbacks Receivable

Unedited CRA Tags
9 12(1)(a) 20(1)(m) 20(7)

Principal Issues: Does the non-arm's length relationship between Canco and USco affect Canco's ability to exclude the amount of holdbacks receivable from USco as described in paragraph 3 of IT-92R2?

Position: Not necessarily - question of fact.

Reasons: Must determine based on actual facts on a case-by-case basis.

30 November 2007 External T.I. 2007-0261421E5 - Foreign Post-doctoral fellowship.

Unedited CRA Tags

Principal Issues: Clarification regarding the scholarship exemption.

Position: The exemption under subparagraph 56(3)(b)(ii) is only available for fellowships described under subparagraph 56(3)(b)(i).

Reasons: Wording of subparagraph 56(3)(b)(i).

Technical Interpretation - Internal

18 December 2007 Internal T.I. 2007-0255741I7 - Medical Expenses - Block Fees

Unedited CRA Tags

Principal Issues: Whether a block fee paid to cover the cost of certain ancillary or incidental uninsured medical services qualifies as an eligible medical service under 118.2(2)(a).

Position: Yes

Reasons: 118.2(2)(a) includes any amount paid to a medical practitioner or a public or licensed private hospital in respect of medical services provided. The block fee paid to the medical centre relates almost entirely to eligible medical services that are likely to be rendered to the vast majority of Plan members.

17 December 2007 Internal T.I. 2007-0236841I7 - GST and Taxable Benefits

Unedited CRA Tags
15(1) 15(1.3) 56(2) 246(1)

Principal Issues: Where 56(2) or 246(1) include a benefit in a shareholder's income, does 15(1.3) include GST in the benefit amount?

Position: Depends on the basis for determination of the benefit amount.

Reasons: Where the benefit is determined by reference to a cost described in subsection 15(1.3) and the benefit amount would be included in the shareholder's income pursuant to section 15 had the benefit been conferred on the shareholder directly, the amount of the benefit will include the taxes described in 15(1.3).