Income Tax Severed Letters - 2008-02-29

Ruling

13 February 2008 Ruling 2008-0263891R3 F - Withdrawal of Ruling Request

Unedited CRA Tags
69(1)(b) 40(1) 248(1) "disposition" 15(1)

Principal Issues: Acknowledgment of ruling withdrawal.

Position: The proposed transaction, which consists of amending the articles of the corporation in order to significantly increase the dividend rates attached to some classes of preferred shares, would, among other things, result in a disposition of an interest in the corporation by one shareholder in favour of another. Furthermore, such disposition would be subject to paragraph 69(1)(b).

Reasons: Wording of the Act and previous positions.

2007 Ruling 2007-0245711R3 - full split-up butterfly

Unedited CRA Tags
55(3)(b) 55(2)

Principal Issues: Standard butterfly. No contentious issues.

Position: Rulings given.

Reasons: Complies with paragraph 55(3)(b).

2007 Ruling 2007-0257551R3 - Unit trust - Capital gain allocation

Unedited CRA Tags
104 104(7.1) 245(2)

Principal Issues: Unit trusts propose to modify their trust indenture to maximize the distribution of the trusts' net capital gains to redeeming unitholders (capital gains will first be allocated to redeeming unitholders and then to the remaining unitholders). The rulings requested are:
A) The trust may deduct the taxable portion of the capital gains payable to a redeeming unitholder (104(6)(b)).
B) The taxable portion of the capital gain paid to a redeeming unitholder will be included in his income(104(13)).
C) The taxable portion of the capital gain paid to a redeeming unitholder will be deemed to be a taxable capital gain of the unitholder (104(21)).
D) The proceeds of disposition of the redeemed units will be equal to the excess of the net asset value of the units over the capital gains distribution in respect of those units.
E) 104(7.1) will not apply.
F) 245(2) will not apply.

Position: The Rulings are granted.

Reasons: Consistent with rulings previously issued. The amount allocated and declared payable is paid in the taxation year or is payable in the taxation year if not paid.

Technical Interpretation - External

26 February 2008 External T.I. 2007-0241611E5 - In-Home Care of Disabled Children

Unedited CRA Tags
9(1) 81(1)(h)

Principal Issues: Whether the income received for caring for children with acquired brain injuries is taxable.

Position: Yes.

Reasons: A social assistance payment will not be included in the income of the Caregiver for income tax purposes when all of the requisite conditions in paragraph 81(1)(h) are met. Where not all of the conditions are met, and is earned in the course of a business, the amount is taxable.

2007-024161
XXXXXXXXXX Richard Aronoff
613-941-7239
February 26, 2008

25 February 2008 External T.I. 2007-0237891E5 - Uniforms and Clothing Allowances

Unedited CRA Tags
6(1)(a)

Principal Issues: Whether the provision of a shirt, which bears the company logo and is required to be worn in the course of employment, by an employer to an employee is considered a taxable benefit to the employee?

Position: No

Reasons: The shirt would generally be considered a distinctive uniform (see IT-470R paragraph 29).

2007-023789
XXXXXXXXXX Shaun Harkin, CMA
(613) 957-9229
February 25, 2008

25 February 2008 External T.I. 2007-0254591E5 - test wind turbines

Unedited CRA Tags
1219(3)

Principal Issues: Whether each of XXXXXXXXXX proposed exploratory wind turbines will qualify as a test wind turbine within the meaning of subsection 1219(3) of the Regulations

Position: yes

Reasons: NRCan opinion that criteria have been met

22 February 2008 External T.I. 2006-0214781E5 - Interaction 256(9) and 110.6(2.1)

Unedited CRA Tags
256(9) 110.6(2.1)

Principal Issues: In a given situation, whether or not Mr. A would be entitled to the capital gains deduction, under subsection 110.6(2.1), in respect of the disposition of the shares of the capital stock of Opco given the Federal Court of Appeal's application of subsection 256(9) in La Survivance v. HMQ, 2007 DTC 5096

Position: No.

Reasons: The law.

21 February 2008 External T.I. 2007-0227881E5 - Taxable Benefits - PHSP, GSAI and Life Insurance

Unedited CRA Tags
6(1)(a) 248(1) "private health services plan"

Principal Issues: 1. Whether a "default allocation" in a Flex Program jeopardizes the status of a health care spending account in a private health services plan. 2. Whether a plan that consists of individual insurance policies owned by the employees qualifies as a group sickness and accident insurance plan. 3. Whether a taxable employment benefit will occur if a corporate employer transfers ownership of a life insurance policy to an employee or an employee's spouse.

Position: 1. No. 2 and 3. It is always a question of fact.

Reasons: 1. The allocation is beyond the plan member's control, the flex credits are not being saved for allocation after the beginning of the plan year, not being negotiated for cash at any time and have no intrinsic value. 2. It is possible for the individual policies to combine to form a common plan and be considered a group sickness and accident insurance plan provided each employee within a particular class or group of employees is eligible to receive the same benefits under the plan and has the same ratio of employee and employer-paid premiums. 3. Yes, if the fair market value of the policy exceeds any consideration given by the employee for the transfer of the policy. However, in the case of the joint last to die policy, the policy transfer would not give rise to an employment benefit for the surviving spouse because it is not something to which he or she is entitled by virtue of employment.

20 February 2008 External T.I. 2007-0246241E5 F - Records and books

Unedited CRA Tags
2(1)

Principal Issues: Meaning of "other supporting documents" in Chapter 1 under the heading "Keeping records" in the T-4036 Tax Guide.

Position: General comments.

Reasons: Question of fact

20 February 2008 External T.I. 2007-0246721E5 F - Related Corporations

Unedited CRA Tags
251(2); 251(5)b)

Principal Issues: Whether corporations are related

Position: General comments.

Reasons: Question of fact.

20 February 2008 External T.I. 2008-0268151E5 F - Crédit pour la condition physique des enfants

Unedited CRA Tags
118.03

Principales Questions: Si un remboursement partiel est effectué relativement à une dépense admissible pour activités physiques engagée lors de l'année d'imposition précédente, comment l'organisation doit-elle traiter ce remboursement aux fins du crédit d'impôt pour la condition physique des enfants.

Position Adoptée: La dépense admissible pour activités physique sera réduite du montant du remboursement. Ainsi, l'organisation devra émettre un reçu pour l'année reflétant le montant réduit de la dépense admissible. Si un reçu a précédemment été émis pour le montant original, un reçu amendé devra être émis.

Raisons: Élément D du paragraphe 118.03(2) de la Loi de l'impôt sur le revenu.

20 February 2008 External T.I. 2007-0232621E5 F - Pourboires versés électroniquement

Unedited CRA Tags
153(1)a) 100Reg

Principales Questions: 1. Quelle société contrôle les pourboires versés aux employés?
2. Les pourboires versés électroniquement doivent être assujettis aux déductions à la source?

Position Adoptée: 1. Question de faits
2. Tous les pourboires qui sont sous le contrôle de l'employeur, versés par lui-même ou une autre personne en son nom, sont assujettis aux déductions à la source.

Raisons: 1. Question de faits
2. 153(1)a) de la Loi de l'impôt sur le revenu et la politique de longue date de l'Agence.

20 February 2008 External T.I. 2007-0250841E5 F - GRIP addition for 2006

Unedited CRA Tags
89(7)

Principal Issues: Whether in determining the amount to be included in the GRIP addition for 2006 of the recipient corporation in respect of a dividend received during a taxation year ended after 2000 and before 2006, one may consider the total amounts of full rate taxable income of the payer corporation for its taxation year 2001 to 2005?

Position: Yes, the total amounts of full rate taxable income of the payer corporation for it's taxation years 2001 to 2005 have to be taken into account.

Reasons: Wording of the Act

19 February 2008 External T.I. 2007-0255051E5 - Windfall

Unedited CRA Tags
3

Principal Issues: Whether a lump sum received as a result of a class action suit for damages from pollution that was initiated 5 years after the taxpayer sold the land is taxable or a windfall

Position: windfall

Reasons: IT-334R2; IT-365R2

19 February 2008 External T.I. 2008-0266811E5 - T4A requirement for scholarship or bursary

Unedited CRA Tags
56(1)(n) 56(3) 118.6 Reg 200(2)

Principal Issues: Given the recent amendment to the scholarship exemption, is it still necessary for the payor of a scholarship or bursary to issue a T4A slip?

Position: Yes

Reasons: Not all scholarships or bursaries will be completely exempt. Furthermore, the obligation to issue a T4A is contained in subsection 200(2) of the Regulations and applies irrespective of the taxability of the amount in the hands of the student.

2008-026681
XXXXXXXXXX Renée Shields
(613) 957-2049
February 19, 2008

19 February 2008 External T.I. 2007-0246741E5 - nuchal translucency and nasal bone detection

Unedited CRA Tags
118.2(2)

Principal Issues: Whether the cost of a nasal bone detection test and nuchal translucency test qualifies as a medical expense for purposes of the medical expense tax credit.

Position: The amount paid for such tests will be eligible for the medical expense tax credit if the tests are done by a medical practitioner or a nurse for the purpose of diagnosing, treating or preventing disease.

Reasons: The law. 118.2(2)(a) and 118.42)

18 February 2008 External T.I. 2006-0205321E5 F - BAA-corpropriété indivise, QFP-undivided interest

Unedited CRA Tags
44(1) 44(5) 248(1) 110.6(1)

Principales Questions:
1) Est-ce qu'un fonds de terre détenu en copropriété indivise pourrait être considéré comme un bien agricole admissible pour les fins du paragraphe 110.6(1)?
Whether an undivided interest in farmland could be considered qualified farm property as defined in subsection 110.6(1)?
2) Est-ce qu'une part indivise pourrait constituer un bien de remplacement au fin du paragraphe 44(1) tel que défini au paragraphe 44(5)?
Whether an undivided interest in farmland could qualify as replacement property for purposes of section 44(1) as defined in subsection 44(5)?

Position Adoptée:
1) Il est de notre avis possible, qu'une part indivise dans un immeuble soit, aux fins de la Loi, incluse dans l'expression bien réel ou immobilier de la définition bien agricole admissible au paragraphe 110.6(1). Cette interprétation représente un changement de position par rapport à notre position antérieure. La question de savoir si une part indivise est utilisée principalement dans le cadre de l'exploitation d'une entreprise agricole est une question de fait qui ne peut être résolue qu'après l'examen de tous les faits et documents pertinents à une situation donnée.
It is our view that the definition of property in subsection 248(1), as used in the definition of qualified farm property in subsection 110.6(1) is broad enough to include an undivided interest in farmland. This interpretation represents a change in position. The question of whether an undivided interest in farmland is principally used is a business of farming is a question of fact that needs to be examined is light of all relevant facts and documentation specific to the situation.
2) Oui, ça pourrait être possible.
Yes, it is possible.

18 February 2008 External T.I. 2007-0228491E5 F - Heures travaillées hors décret de la CCQ

Unedited CRA Tags
127(9)

Principales Questions:
Est-ce que les salaires versés pour les heures travaillées hors décret de la Commission de la construction du Québec sont des salaires admissibles aux fins du crédit d'impôt pour la création d'emplois d'apprenti?

Position Adoptée:
Non

Raisons:
Les heures travaillées hors décret de la CCQ n'étant pas comptabilisées au carnet d'apprentissage de la CCQ, elles ne mènent pas à l'obtention d'un certificat de qualification ou une licence.

11 February 2008 External T.I. 2007-0248181E5 - Scholarships

Unedited CRA Tags
56(1)(n) Reg 200(2)(a)

Principal Issues: Whether T4As are required to be issued for scholarships.

Position: Yes

Reasons: Under paragraph 200(2)(a) of the Regulations, every payer of a scholarship must file a T4A Summary and related T4A Supplementaries to report such amounts. However, under CRA's administrative position, a payer is only required to issue a T4A slip when the total of such payments exceeds $500 or when income taxes are withheld from such payments.

2007-024818
XXXXXXXXXX Charles Rafuse
613-247-9237
February 11, 2008

Conference

19 February 2008 Roundtable, 2007-0258991C6 - Question #14 2007 TEI Conference

Unedited CRA Tags
6(1)(e) 6(2) 6(1)(b)(v.ii) 6(1)(b)(x)

Principal Issues: Position of CRA regarding a terminal charge in the stand-by calculation.

Position: The terminal charge can be included on a prorated basis in the calculation of the stand-by charge for each taxation year in which the employee enjoyed a benefit in respect of personal use and availability of the automobile.

Reasons: Consistent with previously published views.

5 October 2007 Roundtable, 2007-0243301C6 F - Prêt par une société étrangère sans intérêt

Unedited CRA Tags
245(2) 247

Principales Questions: Une filiale étrangère qui gagne du revenu d'entreprise dans une juridiction n'ayant pas conclu une convention fiscale avec le Canada, prête une somme d'argent à sa société-mère qui réside au Canada et ce, sans intérêt. Est-ce que Canco est imposable sur les sommes prêtées? A foreign subsidiary generating business income in a jurisdiction that did not conclude a tax treaty with Canada makes an interest-free loan to its shareholder, a corporation resident in Canada. Is Canco taxable on the borrowed money?

Position Adoptée: Il n'y a pas de disposition de la Loi qui permettrait d'imposer la société résidant au Canada à l'égard d'une telle transaction. There is no provision in the Act that would allow CRA to tax a corporation resident in Canada in this type of transaction.

Raisons: Les paragraphes 15(2) et 80.4(2) ne s'appliquent pas à une société résidant au Canada. Le paragraphe 22 de la Circulaire d'information 87-2R prévoit que nous n'appliquerons pas l'article 247 à l'égard de ce genre de transaction. Le comité de la DGAÉ a établi, lors de l'étude antérieure d'une telle transaction, que la règle générale anti-évitement ne s'appliquait pas. Subsections 15(2) and 80.4(2) do not apply to a corporation resident in Canada. Paragraph 22 of Information Circular 87-2R provides that CRA will not apply section 247 to this type of transaction. The GAAR committee established, when this type of transaction was previously studied, that the general anti-avoidance rule did not apply.

TABLE RONDE SUR LA FISCALITÉ FÉDÉRALE
APFF - CONGRÈS 2007

5 October 2007 Roundtable, 2007-0243331C6 F - Prêt sans intérêt à une société-mère étrangère

Unedited CRA Tags
17(1) 212(2) 214(3)a)

Principales Questions: Est-ce que l'impôt de la Partie XIII s'applique, en plus de l'intérêt présumé qui doit être inclus dans le revenu de la société canadienne en vertu du paragraphe 17(1) L.I.R., lorsqu'une filiale canadienne consent un prêt sans intérêt pour un terme de 13 mois à sa société-mère étrangère? Do Part XIII tax apply, in addition to the deemed interest which should be included in computing the income of the Canadian corporation pursuant to subsection 17(1) of the ITA, when a Canadian subsidiary makes an interest-free loan to its foreign parent corporation for a period of 13 months?

Position Adoptée: Oui. Yes

Raisons: Il y a un montant qui serait réputé être un avantage conformément au paragraphe 80.4(2) L.I.R.. Ce montant serait inclus dans le revenu de la société-mère étrangère si la Partie I s'appliquait. Par conséquent, conformément à l'alinéa 214(3)a) L.I.R., le montant serait réputé versé à titre de dividende qui serait visé au paragraphe 212(2) L.I.R. Le paragraphe 17(7) L.I.R. ne prévoit pas une exception à l'application du paragraphe 17(1) L.I.R. pour la société canadienne lorsque l'impôt de la Partie XIII est à l'égard de l'avantage réputé reçu parce que le prêt est sans intérêt. An amount would be deemed to be a benefit pursuant to subsection 80.4(2) of the ITA. This amount would have been included in the income of the foreign parent corporation if Part I were applicable. Therefore, in accordance with paragraph 214(3)(a) of the ITA, the amount would be deemed to have been paid as a dividend and would be provided for in subsection 212(2) of the ITA. Subsection 17(7) of the ITA does not provide an exception to the application of subsection 17(1) of the ITA to the Canadian corporation when Part XIII tax is in respect of the deemed benefit received because the loan is interest-free.

Technical Interpretation - Internal

25 February 2008 Internal T.I. 2007-0243871I7 F - Avantages imposables

Unedited CRA Tags
6(1)(a) 6(1)(e) 6(1)k) 6(1.1); 6(2); 6(7); 246(1);

Principales Questions: Quelles sont les dispositions de la LIR qui sont applicables aux fins de pouvoir imposer les avantages personnels payés par une société pour le bénéfice personnel de son administrateur? Quels sont les éléments qui peuvent démontrer qu'un administrateur non rémunéré est également un employé au sens de la LIR?

Position Adoptée: Un administrateur qui ne reçoit pas de rémunération de la part de la société peut être considéré comme étant un employé. L'alinéa 6(1)a) a une portée très large d'application et prévoit l'inclusion des "avantages quelconques" dans le revenu d'emploi si ceux-ci ont été reçus au titre, dans l'occupation ou en vertu d'une charge ou d'un emploi. Les dépenses personnelles qui ont été payées par la société pour le bénéfice personnel de l'administrateur doivent être incluses dans le calcul de son revenu selon 6(1)a). Les avantages reçus concernant les frais de location d'une automobile payée par la société sont inclus selon 6(1)e), 6(1)k), 6(1.1), 6(2), 6(7).

Raisons: Jurisprudence et application de la LIR