Income Tax Severed Letters - 2008-08-22

Ruling

2008 Ruling 2006-0212691R3 - paragraph 88(1)(c) bump

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

Principal Issues: Whether "another person" as referred to in subsection 88(1.7) should include a partnership for the purpose of subparagraph 88(1)(c)(v)?

Position: No.

Reasons: Subparagraph 88(1)(c)(v) specifically includes a reference to the acquisition of property from a "person or a partnership", but subsection 88(1.7) does not contain the same language.

2008 Ruling 2008-0270081R3 F - Sale of a Business

Unedited CRA Tags
84(2) 14(5) "Cumulative eligible capital" 83(2) 55(2)

Principal Issues: Purchase and sale of a business involving the disposition of assets and shares.

Position: Favourable rulings provided.

Reasons: In compliance with the law and previous positions.

2008 Ruling 2008-0277891R3 F - Butterfly Transaction - Papillon

Unedited CRA Tags
55(3)(b) 55(3.1) 55(2) 110.6(7)

Principal Issues: Split-up butterfly transaction.

Position: Favourable rulings provided.

Reasons: Meets the requirements of the law.

Technical Interpretation - External

13 August 2008 External T.I. 2008-0286341E5 F - Pension d'invalidité reçue de la GRC

Unedited CRA Tags
81(1)i) 81(1)d)
Summary Under
Tax Topics - Income Tax Act - Section 81 - Subsection 81(1) - Paragraph 81(1)(i)
pension under s. 11(2) of the RCMP Superannuation Act would not be exempt
Summary Under
Tax Topics - Income Tax Act - Section 81 - Subsection 81(1) - Paragraph 81(1)(d)
RCMP disability pension would not fall within s. 81(1)(d)

Principales Questions: Est-ce que les alinéas 81(1)d) ou i) s'appliquent à une pension reçue en vertu de la Loi sur la pension de retraite de la Gendarmerie Royale du Canada?

Position Adoptée: Commentaires généraux fournis.

Raisons: En l'espèce, il est clair que l'alinéa 81(1)d) ne s'applique pas. En ce qui a trait à l'alinéa 81(1)i), pour que cette disposition s'applique, il faut que la pension soit reçue en vertu des 'articles 32 ou 33 de la Loi sur la pension de retraite de la Gendarmerie royale du Canada.

12 August 2008 External T.I. 2008-0278401E5 F - Pension alimentaire

Unedited CRA Tags
56.1(4) 60b)
Summary Under
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(b)
support payments to fiancée living abroad with her children were not deductible

Principales Questions: Le contribuable désire savoir si certains paiements sont déductibles à titre de pension alimentaire. Dans sa situation, il fait des paiements à chaque mois à sa fiancée qui vit à l'étranger afin de l'aider à subvenir à ses besoins ainsi qu'à ceux des enfants de celle-ci.

Position Adoptée: De tels paiements ne sont pas déductibles.

Raisons: Il ne s'agit pas d'une pension alimentaire puisque le payeur et le bénéficiaire ne vivent pas séparés l'un de l'autre en raison de l'échec de leur union de fait ou de leur mariage.

11 August 2008 External T.I. 2008-0288021E5 - Meaning of Excluded Property

Unedited CRA Tags
95(1); 128.1(1)

Principal Issues: Whether partnership interest qualifies as excluded property

Position: A partnership interest may be excluded property

11 August 2008 External T.I. 2007-0262121E5 - Paragraph 18(2)(e)

Unedited CRA Tags
18(2)(e) 20(1)(cc) 20(1)(dd)

Principal Issues: Whether 'total of all amounts deducted in computing the taxpayer's income from the land for the year' under paragraph 18(2)(e) of the Act includes costs under paragraphs 20(1)(cc) and 20(1)(dd) of the Act ?

Position: Generally, yes

Reasons: Subsection 18(2) applies to a taxpayer whose ordinary business is holding land as inventory for the purpose of resale or inventory and limits the deduction of carrying charges such as interest and property taxes. Pursuant to paragraph 18(2)(e), the deduction for carrying charges incurred in a taxation year is limited to the net income from the land for the year (being the gross income from the land for the year less other deductions exclusive of the carrying charges). There is no provision to exclude costs under paragraphs 20(1)(cc) and 20(1)(dd) that relate to the land from being part of 'amounts deducted in computing the taxpayer's income from the land.'

8 August 2008 External T.I. 2008-0277981E5 - private health services plans

Unedited CRA Tags
248(1)

Principal Issues: Whether a particular plan qualifies as a private health services plan

Position: Question of fact. General comments given.

Reasons: The law.

6 August 2008 External T.I. 2007-0251001E5 - Proposed subsection 96(1.01) - amalgamation

Unedited CRA Tags
96(1.01) 100(2.1) 87(2)(e.1) 249.1

Principal Issues: Whether proposed subsection 96(1.01) would apply where non-related corporate partners amalgamated? If so, how would income be allocated and adjusted cost base adjustments made?

Position: Yes, proposed subsection 96(1.01) would apply. Income allocations and adjusted cost base adjustments would be made under proposed paragraphs 96(1.01)(a) and (b) respectively.

Reasons: Following an amalgamation, three unrelated predecessor corporations ceased to be members of a partnership.

6 August 2008 External T.I. 2008-0279631E5 - Employment Insurance Premiums and CPP Contribution

Principal Issues: Whether an employer should make further deductions for CPP contributions and employment insurance premiums once an employee has paid the maximum insurable earnings.

Position: 1. No; for employment insurance premiums.
2. Yes; for contributions to the Canada Pension Plan.

Reasons: 1. S. 82(2) Employment Insurance Act.
2. S. 21 Canada Pension Plan.

6 August 2008 External T.I. 2008-0282481E5 - Reassignment or Redirection of Refunds

Principal Issues: Whether an income tax refund can be assigned

Position: No.

Reasons: Section 67 of the Financial Administration Act provides that, unless provided in an Act, a Crown debt is not assignable.

22 July 2008 External T.I. 2008-0277681E5 - Terminal Loss - Cessation of Business

Unedited CRA Tags
20(16) 13(7)(a) 54 248

Principal Issues: Is a terminal loss available in respect of depreciable property upon the cessation of a business?

Position: No. No terminal loss may be claimed until the property is disposed of.

Reasons: The law. Consistent with pp.8 of IT-478R2, pp.6 of IT-172R, and previous positions.

16 July 2008 External T.I. 2008-0272121E5 - Ownership of Property

Unedited CRA Tags
54

Principal Issues: Whether an individual would be considered to be the owner of his brother's house.

Position: No.

Reasons: The individual's name appeared on the mortgage of his brother's house only to help in obtaining financing. The individual would not be considered to have beneficial ownership.

16 July 2008 External T.I. 2007-0257021E5 - Article XXIX A (3) (LOB) of the Fifth Protocol

XXXXXXXXXX 					2007-025702
						Angelina Argento
July 16, 2008

Re: Proposed Limitation on Benefits Provision in Fifth Protocol to the Canada-Unites States Income Tax Convention

This is in reply to your letter dated December 3, 2007 regarding the above-mentioned matter.

FACTS

1. EU Corp is a corporation resident in a country within the European Union for the purposes of the Income Tax Act (Canada) (the "Act").

Conference

25 July 2008 Roundtable, 2008-0275871C6 - Form T1261 / S. 116 certificate

Unedited CRA Tags
116 150

Principal Issues: June 2008 STEP Question #7 - Form T1261 / Section 116 Certificate for dispositions of an interest in an estate resident in Canada.

Position: See the response

Reasons: The response sets out the current filing requirements, and the changes that will take place in 2009 as a result of Bill C-50.

18 July 2008 Roundtable, 2007-0261911C6 - S Corporation and Article IV(6) Canada-US Treaty

Principal Issues: Can an S Corporation be considered fiscally transparent under Article IV(6) of the Fifth Protocol to the Canada-US Income Tax Convention?

Position: Yes

Reasons: See below

17 July 2008 Roundtable, 2007-0261901C6 - Article IV(6) "fiscally transparent"

Principal Issues: Definition of the term "fiscally transparent entity" as used in Article IV(6) of the Fifth Protocol to the Canada-US Income Tax Convention

Technical Interpretation - Internal

23 July 2008 Internal T.I. 2008-0280301I7 - Excluded right or interest

Unedited CRA Tags
128.1(10)

Principal Issues: Whether shares of an employer corporation that were acquired by an employee as a condition precedent to receiving stock options under a long term incentive plan and that have certain restrictions as to their disposition would be considered to be a right of the employee under a plan or arrangement referred to in subparagraph (a)(vii) of the definition of "excluded right or interest" in subsection 128.1(10) of the Income Tax Act?

Position: No.

Reasons: See memo.

22 July 2008 Internal T.I. 2008-0284351I7 - Subsection 20(12)

Unedited CRA Tags
20(12)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(12)
deduction available where no current distributions from the source of income
Words and Phrases
paid for the year

Principal Issues: Whether a subsection 20(12) deduction is available in the year with respect to U.S. income tax paid for the year on the taxpayer's share of income of an S Corporation where there is no distribution of income by the S Corporation in the year?

Position: Yes.

Reasons: There is no restriction on the deductibility of foreign tax under subsection 20(12) to the actual amount of gross income received from property.

2 July 2008 Internal T.I. 2007-0262341I7 - Definition of CCPC under 125(7)

Unedited CRA Tags
125(1) 125.1 127(10.1) 127(10.2)

Principal Issues: 1) Where a corporation elects under subsection 89(11) to not be a CCPC what is the amount determined for paragraph 125.1(1)(a) for the purposes of the M&PP deduction? 2) Whether subsection 127(10.1) and 127(10.2) would be impacted by a subsection 89(11) to not be a CCPC

Position: 1) No amounts are calculated under paragraphs 125(1)(a) to (c) and the related amount used in the calculation under paragraph 125.1(1)(a) is nil. 2) A corporation can determine a business limit under subsection 125(2) even though a subsection 89(11) election has been filed.

Reasons: 1) Subsection 125(1) indicates that "There may be deducted from the tax otherwise payable under this Part for a taxation year by a corporation that was, throughout the taxation year, a Canadian-controlled private corporation, an amount equal to the corporation's small business deduction rate for the taxation year multiplied by the least of ...". Where a corporation elects under subsection 89(11) to not be a CCPC this condition has not been met and no amounts are determined under paragraphs 125(1)(a) to (c). 2) A corporation's business limit is determined under subsection 125(2) while new paragraph (d) of the definition of a CCPC refers to "in applying subsection (1)" (i.e. subsection 125(1)). Accordingly, a corporation can determine a business limit under subsection 125(2) even though a subsection 89(11) election has been filed.