Income Tax Severed Letters - 2008-02-08

Ruling

2007 Ruling 2006-0211941R3 - Canadian exploration expense

Unedited CRA Tags
66.1(6)

Principal Issues: Whether certain expenses incurred in connection with a Bulk Sample Program related to a potential XXXXXXXXXX operation qualify as Canadian exploration expense (CEE).
Whether pre-production revenue will reduce the CEE.

Position: Yes. Yes.

Reasons: Based on an opinion issued by Natural Resource Canada, the Bulk Sample Program will meet the purpose test.
Pursuant to paragraph (k.2) of the definition of CEE, the pre-production revenue will reduce CEE.

2007 Ruling 2007-0250811R3 - Deferred Salary Leave Plan

Unedited CRA Tags
R.6801(a)

Principal Issues: Will the Taxpayer's proposed salary leave plan satisfy the requirements in paragraph 6801(a) of the Regulations.

Position: Yes.

Reasons: Based on the facts and proposed transactions as described.

XXXXXXXXXX 2007-025081

XXXXXXXXXX , 2007

2007 Ruling 2007-0252491R3 - Assumption of debt for assets

Unedited CRA Tags
39(2) 20(1)(c) 212(1)(b)(vii)

Principal Issues: Whether: (1) foreign exchange gain realized when debt assumed by purchaser as part consideration for assets; (2) addition of purchaser as debtor to the existing agreement under State of XXXXXXXXXX law would result in a disposition of debt by the creditor for purposes of subparagraph 212(1)(vii); (3) proposed transactions caused interest previously deductible to no longer be deductible under paragraph 20(1)(c); (4) the general anti-avoidance provision applied?

Position: (1) Yes; (2) No; (3) No; (4) No

Reasons: (1) the debt that was assumed represented part of proceeds of disposition for the assets sold and a foreign exchange gain crystallized vis-a-vis the transferor of the debt at that time; under State of XXXXXXXXXX law, no disposition occurred; (2) under the laws of the State of XXXXXXXXXX , there was no novation or disposition of the debt; (3) to extent interest was deductible for purposes of paragraph 20(1)(c), proposed transactions did not cause interest expense to no longer be deductible under that provision; (4) although the transactions are avoidance transactions, there is no misuse or abuse.

XXXXXXXXXX 2007-025249

XXXXXXXXXX , 2007

Technical Interpretation - External

5 February 2008 External T.I. 2007-0253621E5 - Med. Expenses-At Home Care-Nursing home

Unedited CRA Tags
118.2(2)(b) 118.2(2)(c) 118.2(2)(e)

Principal Issues: Whether taxpayer's home is a "nursing home" under 118.2(2)(b), or an "other place" under 118.2(2)(e). Whether several attendants qualify as one full-time attendant under 118.2(2)(c).

Position: No. No. Yes.

Reasons: Nursing homes, schools and institutions are normally facilities of a public character that offer services to individuals who are not related to the facility owner/operator. An individual's private home is not such a facility. "One full-time attendant" may apply where there are several attendants provided only one attendant is present at any given time.

2007-025362
XXXXXXXXXX Amanda Riddell, LL.B
(613) 957-2128
February 5, 2008

4 February 2008 External T.I. 2007-0261111E5 - geoexchange equipment

Unedited CRA Tags
Class 43.1 Class 43.2

Principal Issues: CCA classification of geoexchange equipment that is used to provide space heating or cooling

Position: general comments provided

Reasons: classification depends on facts of a given situation

31 January 2008 External T.I. 2007-0230111E5 F - Déclaration des remboursements de dépenses

Unedited CRA Tags
153(1)g) 200(1) Reg
Summary Under
Tax Topics - Income Tax Regulations - Regulation 200 - Subsection 200(1)
expense reimbursements, including GST, are included on T4A

Principales Questions: 1. Un payeur doit-il déclarer sur formulaire prescrit différents remboursements de dépenses versés à une personne selon un contrat de services?
2. Doit-on inclure sur le formulaire prescrit le montant versé à titre de TPS et TVQ?

Position Adoptée: 1. Oui. 2. Oui

Raisons: 1. Tout remboursement ayant trait à des dépenses lié à la prestation de service constitue une source de revenu provenant d'une entreprise ou d'un bien et doit être déclaré sur le formulaire prescrit visé au paragraphe 200(1) du Règlement de l'impôt sur le revenu.
2. Le montant de TPS, et conséquemment le montant de TVQ, doivent être inclus sur le formulaire prescrit visé au paragraphe 200(1) du Règlement de l'impôt sur le revenu.

28 January 2008 External T.I. 2005-0165131E5 - Taxation year of a foreign affiliate

Unedited CRA Tags
95(1) 249.1
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Taxation Year

Principal Issues: Whether a change to the fiscal period of a foreign affiliate will be recognized where the foreign affiliate continues into a new jurisdiction

Position: Only if a change in fiscal period is required by the laws in the new jurisdiction.

Reasons: The taxation year of a foreign affiliate is determined in accordance with the taxation year used for purposes of computing income in the country in which the foreign affiliate is resident.

28 January 2008 External T.I. 2005-0144621E5 - Qualified subchapter S subsidiary

Unedited CRA Tags
Article IV Tax Convention

Principal Issues: Whether a qualified subchapter S subsidiary (QSSS) is a resident of the U.S. for the purpose of paragraph 1 of Article IV of the Canada-United-States Income Tax Convention?

Position: Yes

Reasons: If it were not for the election provided for in the Internal Revenue Code, the QSSS would be taxed in the United States as a regular corporation on its worldwide income.

23 January 2008 External T.I. 2007-0253261E5 - Medical Expenses - Accommodation; Daily Travel

Unedited CRA Tags
118.2(2)(h)

Principal Issues: Whether cost of accommodation near hospital to be with newborn baby is an eligible medical expense. Whether spouse's cost of daily travel to hospital to visit baby and its mother is an eligible medical expense.

Position: Yes. No.

Reasons: Cost of accommodation eligible on the basis it was for the baby's attendant. Daily travel not eligible since 118.2(2)(h) is limited to one attendant and also because travel for the purpose of visiting is not travel to obtain medical services.

Technical Interpretation - Internal

29 January 2008 Internal T.I. 2007-0244111I7 - Eligible Dividend - Late Filing

Unedited CRA Tags
89(14)

Principal Issues: Where, pursuant to 184(3), the excess portion of a capital dividend is deemed to be a separate taxable dividend that was payable at the time the original dividend was payable, can the separate taxable dividend be designated to be an eligible dividend pursuant to 89(14)?

Position: No

Reasons: The designation would necessarily be made after the time required by 89(14) and there is no provision for this designation to be late-filed.

23 January 2008 Internal T.I. 2007-0258011I7 - QSBC Shares - Partnership Interest

Unedited CRA Tags
125(7) 110.6(1) 248(1)
Summary Under
Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Specified Investment Business
partnership employees not attributed to partner

Principal Issues: Can the employees of a partnership be considered employees of an individual corporate partner for the purposes of meeting the exclusion in paragraph (a) of the definition of "specified investment business" found in subsection 125(7) of the Act?

Position: No.

Reasons: Consistent with the reasoning found in Lerric Investments Corp. [2001 DTC 5169], the statutory wording "the corporation employs" connotes a direct relationship between the corporation as employer and the employees. In the case of a partnership, the employees are considered employees of the partners collectively, but not of any of them individually.

January 23, 2008

8 November 2004 Internal T.I. 2004-0076271I7 F - Émission d'options d'achat d'actions

Unedited CRA Tags
9(1) 49
Summary Under
Tax Topics - Income Tax Act - Section 9 - Computation of Profit
unclear whether the FMV of options issued in consideration for purchases of property or services is the cost thereof

Principales Questions: Quel devrait être le traitement fiscal appliqué à une société qui émet des options d'achat d'actions en contrepartie de l'acquisition de biens ou à titre de paiements incitatifs à de futurs clients ?

Position Adoptée: Aucune, pas suffisamment de fait.

Raisons: Discussion générale, nous aimerions analyser l'ensemble des faits entourant une transaction réelle avant de nous prononcer.