Income Tax Severed Letters - 2008-12-05


2008 Ruling 2006-0217321R3 - Variation of a trust indenture

Unedited CRA Tags
248(1) 105(1) 56(2)

Principal Issues: Whether the variation of a trust to modify administrative powers and powers affecting the unitholders'voting rights, to cancel the transferability of the units, to give to the Manager a right to redeem, any time, the units, would result: (1) in a disposition by the trust of its assets or in a resettlement of the trust; (2) in a disposition by the existing unit holders of their units;(3) in the application of 245(2)?

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

Reasons: Modifications are administrative and not substantial. Previous rulings on similar issue.

2008 Ruling 2008-0292761R3 - Supplemental ruling - Distribution to the public

Unedited CRA Tags

Principal Issues: Supplemental ruling to 2007-0234421R3
Where units of a mutual fund trust (assuming that it otherwise meets the conditions in 132(6)) are to be issued to various trusts, will this be a lawful distribution to the public of shares or units, for purposes of subparagraph 4801(a)(ii) of the Income Tax Regulations?

Position: Yes.

Reasons: Same reasons as presented in original ruling 2007-0234421r3

Technical Interpretation - External

24 November 2008 External T.I. 2007-0228301E5 - FAPI & Capital Dividend Account

Unedited CRA Tags
91(1); 89(1) - CDA; 12(1)(k)

Principal Issues: Whether FAPI of a foreign affiliate of a corporation can be added to the corporation's capital dividend account when the FAPI was derived from capital gains of the foreign affiliate?

Position: No

Reasons: FAPI is income from property.

20 November 2008 External T.I. 2008-0296181E5 - renewable Energy Projects - Tidal Energy

Unedited CRA Tags
Ewg 1100; reg 1219(1); 66(15)

Principal Issues: Discussion of tax incentives available for renewable energy projects-- tidal wave energyprojects - tidal wave energy

Position: general discussion

17 November 2008 External T.I. 2008-0282461E5 - Principal residence - beneficial ownership

Unedited CRA Tags

Principal Issues: Father purchased home for daughter -- daughter has lived in the home and paid all the expenses since that time. Can property be transferred to daughter without tax consequences as she has been the beneficial owner since the property was acquired.

Position: General comments only -- question of fact.

Reasons: Consistent with previous answers and IT 437R

4 November 2008 External T.I. 2008-0264181E5 - Income recognition and ACB - trust units

Unedited CRA Tags
53(2)(h); 104(13)
amount paid to beneficiary "was included" in its taxation year in which trust's taxation year ends/beneficiary return for previous year re-opened to avoid double taxation
Words and Phrases

Principal Issues: 1- When must income amounts paid by a trust to a corporate beneficiary be included in computing the beneficiary's income?
2- After receiving an income distribution from a trust in its 2007 taxation year, a corporation disposes of all its trust units before the end of that year. Is the ACB of the trust units reduced by the amounts paid as income distributions for purposes of computing the gain or loss on the disposition of the trust units?

Position: 1. The income amounts payable in a trust's taxation year must be recognized by the beneficiary in the beneficiary's taxation year in which the relevant trust taxation year ends.
2. The amounts paid by a trust that are included in the taxpayer's income by virtue of subsection 104(13) would be included in the 2008 taxation year. The corporation would have to reduce in its 2007 taxation year the ACB of its units by virtue of subparagraph 53(2)(h)(i.1), increasing the gain computed pursuant to section 40 of the Act by an amount equal to the amount eventually included in the corporation's income by subsection 104(13) of the Act. The exception in clause 53(2)(h)(i.1)(A) is not applicable.
However, subsection 39(1) of the Act provides that a gain that is otherwise included in computing the taxpayer's income for the year or any other taxation year is not a capital gain. Therefore, the part of the gain that would be included in income by virtue of subsection 104(13) in the 2008 taxation year would not be considered as a capital gain in 2007 pursuant to subsection 39(1). When filing the 2008 income tax return, the corporation will be able to request an adjustment to its 2007 income tax return to reduce the capital gain consequently.

Reasons: 1. Paragraph 104(13)(a) of the Act.
2. The wording of the subparagraph 53(2)(h)(i.1) allows a reduction of the ACB because the amounts paid that are included in the taxpayer's income by virtue of subsection 104(13) of the Act after the date of the ACB computation. However, an adjustment to reduce the capital gain included in 2007 may be requested after the inclusion of the amounts in income pursuant to subsection 104(13) in 2008 pursuant to the definition of capital gain in subsection 39(1) of the Act even if the ACB is reduced.

Technical Interpretation - Internal

24 November 2008 Internal T.I. 2008-0295151I7 - Buy PEI Initiative

Unedited CRA Tags
9(1); 12(1)(x); Reg. 234(2)

Principal Issues: Whether the Prince Edward Island Department of Agriculture must issue information slips to recipients under the Agri-Food Promotion Program ("AFPP") or the Agri-Food Market Development Program

Position: No in respect of AFPP payments. To the extent that AFMDP payments are made to persons engaged in the business of farming, yes.

Reasons: The law

November 24, 2008