Income Tax Severed Letters - 2009-02-20

Technical Interpretation - External

11 February 2009 External T.I. 2008-0271381E5 - Commision Rebates

Unedited CRA Tags
9(1), 12(1)(x)
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x)
rebate received by policyholder from insurance broker is taxable under s. 12(1)(x)

Principal Issues:
1. Whether the rebate payment reduces the broker's commission income or is deductible as a promotion expense?
2. Whether the amount received by broker's client is taxable?

Position:
1. The rebate payment should be treated as an expense subject to the limitations in sections 18 and 67.
2. Generally, the amount should be included in income pursuant to paragraph 12(1)x).
REASONS:
1. The decision of a broker to pay a rebate to a customer is not a factor in determining the amount of commission that the broker is required to include in income. However, the rebate would generally be an expense that is deductible by the broker in computing his income from business.
2. A life insurance policy is generally a property acquired for the purpose of earning income from property.

10 February 2009 External T.I. 2008-0297761E5 - Employer-Provided Emergency Elder and Child Care

Unedited CRA Tags
6(1)(a)

Principal Issues: Whether employer-provided funding for elder and/or child care in the event of an emergency such as a pandemic is a taxable benefit.

Position: Elder and child care are generally personal expenses, however there may be some very limited exceptional situations.

Reasons: Where an employee is required to be away from home due to unusual overtime demands and as a result is unable to supervise young children or provide physical care for dependant family members, has no choice but to incur an expense for such care and the employer pays the incremental cost, it may not be an employment benefit.

10 February 2009 External T.I. 2009-0309111E5 - Eligible Dividend Designations

Unedited CRA Tags
89(14) 89(1)

Principal Issues: Would CRA allow for written notification on T3 and T5 slips as sufficient notification pursuant to subsection 89(14) of the Income Tax Act for the payment of eligible dividends for the 2008 and subsequent years?

Position: No. In accordance with our December 20, 2006 news release titled "Designation of Eligible Dividends" ("2006 Press Release"), CRA would accept designations of eligible dividends on T3 and T5 slips for all corporations solely for the 2006 year. For 2007 and subsequent years, our administrative policy is that notification of eligible dividends must be before or at the time the dividend is paid using an acceptable method as described in our 2006 Press Release.

Reasons: Wording of the Act.

5 February 2009 External T.I. 2008-0302821E5 F - Revenu de biens ou revenu d'entreprise

Unedited CRA Tags
125(7); 129(4); 129(6); 248(1), définition de " entreprise exploitée activement
Summary Under
Tax Topics - Income Tax Act - Section 129 - Subsection 129(6)
carrying on a specified investment business does not preclude the operation of s. 129(6)

Principales Questions: Dans une situation donnée, est-ce que la totalité du revenu d'une société - qui exploite une entreprise de placement déterminé - peut se qualifier à titre de revenu d'entreprise exploitée activement selon l'exclusion prévue au sous-alinéa 129(4)b)ii) de la Loi de l'impôt sur le revenu?

Position Adoptée: Non.

Raisons: Selon l'alinéa 129(4)a), le revenu de la société de gestion (qui exploite une entreprise de placement déterminée) est réputé être un revenu tiré d'une source qui est un bien. En ce qui concerne le revenu de location payée par la société associée à la société de gestion, le paragraphe 129(6) est applicable aux fins de réputer le revenu de bien en tant que revenu provenant d'une entreprise exploitée activement. En ce qui concerne le revenu de location payée par la société non associée, le sous-alinéa 129(4)b)ii) n'est pas applicable puisque la société de gestion ne détient pas un bien qui est utilisé principalement pour tirer un revenu d'une entreprise qu'elle exploite activement.

30 January 2009 External T.I. 2008-0299381E5 - Honorariums paid to Status Indians by a University

Unedited CRA Tags
5(1), 9, 81(1)(a), 237(2) 153(1), Reg 200(1)

Principal Issues: Opinions on:
1. Is an honorarium a gift or income when given to a Status Indian for ceremonial services performed?
2. If the honorariums are paid to Status Indians, are they exempt from tax under 81(1)(a)?

Position: 1. Honorariums are income in this situation.
2. Whether the honorarium is taxable or exempt from tax is a question of fact, but likely taxable. Connecting factors test apply.

Reasons: 1. Honorariums have been determined to be income and do not fall within the common definition of gifts. -Supported by CRA publications and court cases.
2. The income must be evaluated in light of the connecting factors tests. The fact that the income is received by a Status Indian for performing a ceremonial service does not in itself tie the income to a reserve. There appears to be insufficient connecting factors to tie the income to a reserve.