Income Tax Severed Letters - 2008-11-07

Principales Questions: Comment déterminer le pourcentage des prestations qui est exonéré d'impôt lorsque ces prestations découlent de cotisations attribuables en partie à du revenu d'emploi imposable et en partie à du revenu d'emploi exonéré.

Position Adoptée: Question de fait.

Raisons: Dans le cas où une période de service est prise en compte aux fins de la détermination des prestations payables, le pourcentage exonéré des revenus d'emploi gagnés au cours de la période de service pertinente doit être pris en compte afin de déterminer le pourcentage exonéré des prestations de retraite. Dans le cas où aucune période de service n'est prise en compte aux fins de la détermination des prestations payables, il est raisonnable de se référer au traitement fiscal du revenu d'emploi de l'Indien inscrit immédiatement avant le début du versement de la prestation.

Principal Issues: Will salary paid by a non-resident employer to a non-resident employee be subject to Canadian tax if the employment is exercised in a foreign country?

Position: No, as long as the employee is not resident in Canada, and the employee is not deemed to have been employed in Canada.

Reasons: Not taxable under subsection 2(3). The fact that the employee is not resident in the foreign country under the income tax convention with Canada is not relevant.

Principal Issues:
1) Can an employee earning salary (with no commission income) deduct amounts paid to a self-employed assistant (i.e., assistant is not an employee)?
2) Can a commissioned employee deduct amounts paid to a self-employed assistant?
3) With respect to Form T2200, Question 9 asks: "Did you require this employee under a contract of employment to pay for a substitute of assistant?" In situations 1) and 2) above, is the question required to be answered "Yes" in order for the employee to deduct expenses relating to the assistant?

Position:
1) No.
2) Yes.
3) N/A for situation 1) and 2) above.

Reasons:
1) Subparagraph 8(1)(i)(ii) of the Act allows a taxpayer to deduct amounts paid in the year to an assistant or substitute. Where the assistant is a bona fide self-employed individual, the employee would not have paid the assistant "salary" for purposes of subparagraph 8(1)(i)(ii), as he was not the assistant's "employer".
2) If the employee were remunerated in whole or in part by commission, he would be permitted to deduct amounts paid to a self-employed assistant provided each of the conditions of paragraph 8(1)(f) were met.
3) Where an employee is non-commissioned, Q. 9 of the T2200 should ordinarily be answered in the affirmative in order to receive a deduction under subparagraph 8(1)(i)(ii). Here, no deduction is available. Where an employee is commissioned, this question should not be completed (the form specifically states: "Do not complete for employees earning commission income").

Principal Issues: Will a subsidiary entity of an income trust also be a SIFT entity?

Position: Provided the subsidiary entity is an excluded subsidiary entity, it will not be a SIFT entity. Otherwise, it is a question of fact.

Principal Issues: Whether the taxpayer is required to include a taxable benefit from the payment of a premium by his ex-employer for a group term life insurance policy.

Position: None

Reasons: Question of fact. Provided general comments on the application of subsection 6(4) of the Act.

Principal Issues: Whether the air fare to a warmer climate for a taxpayer and an accompanying individual qualify as medical expenses

Position: No

Reasons: Travel to a warmer climate is not considered to be for medical services under paragraphs 118.2(g) and 118.2(h)