Income Tax Severed Letters - 2009-03-06


2008 Ruling 2008-0292121R3 - Alter ego trust for XXXXXXXXXX

Unedited CRA Tags
73(1); 40(3.4); 40(3.6); 84(3); 256(7); 251.1; 118.1; 245

Principal Issues: (1) Will subsection 73(1) apply to the contribution of the existing Aco shares by XXXXXXXXXX ? (2) Will the transmission of the shares of Trustco from XXXXXXXXXX to the executors of his estate result in an acquisition of control of Trustco or Aco? (3) As a consequence of the transaction contemplated in the Share Exchange Agreement, and pursuant to subsection 84(3), will the alter ego trust be deemed to receive a dividend? (4) Is a capital loss realized when the alter ego trust makes a gift of shares of capital property to the Foundation pursuant to provisions in the trust's indenture that gives its trustees the discretion to do so? (5) Will the gifts of property by the alter ego trust to the Foundation be included in the trust's total charitable gifts? (6) Does GAAR apply to post-mortem tax planning where capital gains of an alter ego trust realized under subsection 104(4) are effectively sheltered?

Position: (1) Yes. (2) No. (3) Yes. (4) Yes. (5)Yes. (6) No.

Reasons: (1) All the conditions apply in subsections 73(1.01) and (1.02) so that a roll-over under subsection 73(1) can apply. (2) Clause 257(1)(i)(C) applies. (3) Plain reading of paragraph 84(3)(b). (4) The alter-ego trust will wind-up, at which point any suspended capital losses will be realized under paragraph 40(3.4)(b)(i) for it will not be possible for the alter ego trust to be affiliated with any person or partnership upon winding-up. (5) The trustee has absolute discretion as to whether to make the gift and the possibility exists that all the property could be gifted to an entity that is not a qualified donee. (6) It is arguable whether there is a tax benefit, and in the event that there is one, there is no clear policy against such dispositions. Previous Rulings have also been given

Technical Interpretation - External

23 February 2009 External T.I. 2008-0301351E5 - Application fees and the tuition tax credit

Unedited CRA Tags

Principal Issues: Can application fees paid to an institution in which the student has enrolled qualify for the tuition tax credit if they were paid in relation to a program in which the student was not accepted?

Position: Yes, as long as they otherwise qualify.

Reasons: The student must be enrolled in the institution, but there is no requirement that the application fees must relate to the specific program of study in which the student ultimately is enrolled.

4 February 2009 External T.I. 2008-0295641E5 - 39(2) accrued FX on mortgage of the deceased

Unedited CRA Tags
70(5); 70(6); 39(2)

Principal Issues: Treatment of accrued foreign exchange gain on mortgage when U.S. residential property and mortgage are assumed by (1) spouse of the deceased taxpayer or (2) other beneficiaries of the deceased.

Position: Mortgage is considered to be repaid or replaced with newly issued mortgage at time of assumption by either the spouse of the deceased taxpayer or other beneficiaries and would be considered to be a transaction which may result in a gain. Subsection 39(2) applies and the estate may realize a capital gain with respect to the foreign exchange gain in the mortgage.


10 October 2008 Roundtable, 2008-0285211C6 F - Concept of Influence and De Facto Control

Unedited CRA Tags

Principal Issues: The simple existence of influence may be sufficient to result in de facto control. Can the CRA indicate to what extent the existence of such influence, even if not exercised, can confer control in fact? Can the CRA provide examples of circumstances which would permit one to conclude that sufficient influence exists, resulting in control in fact?

Position: The CRA mentions in paragraph 21 of Interpretation Bulletin IT-64R4 (Consolidated), "Corporations: Association and Control", that with respect to subsection 256(5.1) of the ITA, the existence of the influence of the "controller" would be sufficient to result in de facto control, even if this influence is not actually exercised. This position is based on the wording of subsection 256(5.1) of the ITA and is supported by case law. Up to the present, jurisprudence has established that control in fact of a corporation could generally result from three major types of influence, which is moral influence, economic influence and contractual influence. Furthermore, the CRA has formulated general comments in paragraphs 19 to 23 of Interpretation Bulletin IT-64R4 on the notion of control in fact which is mentioned in subsection 256(5.1) of the ITA. Particularly, paragraph 23 of Interpretation Bulletin IT-64R4, contains a non-exhaustive list of certain general factors that permits one to determine whether control in fact exists. Whether or not a "controller" has any direct or indirect influence that, if exercised, would result in control in fact of a corporation within the meaning of subsection 256(5.1) of the ITA, can be determined only after an analysis of all the facts and circumstances with respect to a given particular situation. Consequently, we do not believe that it is appropriate, under the circumstances, to formulate other general comments on the notion of control in fact.

Reasons: Wording of the Act and previous positions.

10 October 2008 Roundtable, 2008-0285301C6 F - Impôts futurs-exploitation active d'une entreprise

Unedited CRA Tags

Principales Questions: Est-ce que l'actif d'impôts futurs est un élément d'actif utilisé dans l'exploitation active d'une entreprise?

Position Adoptée: Non

Raisons: L'affaire Munich ne peut être utilisée afin de déterminer si un actif d'impôt futurs est un élément d'actif utilisé principalement dans une entreprise exploitée activement aux termes de l'article 110.6.

10 October 2008 Roundtable, 2008-0285401C6 F - Crédit d'emplois d'apprentis - crédit RS&DE

Unedited CRA Tags
127(18) 127(9)

Principales Questions: Une société peut-elle profiter à la fois du crédit d'emplois d'apprentis et du crédit d'impôt à l'investissement (pour la recherche scientifique et le développement expérimental) sur le salaire versé à un employé?

Position Adoptée: Question de fait. Toutefois, lorsqu'une dépense constitue à la fois une dépense admissible de recherche et de développement et une dépense d'apprentissage, nous sommes d'avis que le contribuable peut comptabiliser cette dépense deux fois aux fins du crédit d'impôt à l'investissement.

Raisons: Libellé de la loi.

10 October 2008 Roundtable, 2008-0285411C6 F - Déclarations renseignements sociétés de personnes

Principales Questions: a) Quelles sont les obligations de produire la Déclaration de renseignements des sociétés de personnes T5013?
b) Quelles est le statut du réexamen des exigences de productions des Déclarations de renseignements des sociétés de personnes T5013?
c) S'il y a des changements à ces obligations, comment celles-ci seront-elles communiquées?

Position Adoptée: a) Les exigences de production du formulaire T5013 pour les sociétés de personnes sont celle énumérées.
b) Il n'y a aucune changement à annoncer pour le moment.
c) L'ARC dispose d'un éventail de mécanismes par lesquels elle pourrait en informer la communauté fiscale et les contribuables canadiens.

Technical Interpretation - Internal

23 February 2009 Internal T.I. 2008-0300001I7 - Motor Vehicle Allowance - "Out-of-Pocket" costs

Unedited CRA Tags

Principal Issues:
Whether the motor vehicle CCA or lease payment limits provided in section 67.3 and paragraph 13(7)(g) of the Act give any meaning to the term "reasonable" when assessing the taxability of motor vehicle allowances under paragraph 6(1)(b) of the Act.


These provisions limit the deductibility of expenses relating to "luxury" motor vehicles and are not determinative of the reasonableness of motor vehicle allowances for purposes of paragraph 6(1)(b) of the Act.

17 February 2009 Internal T.I. 2009-0306421I7 - U.S. 2008 Economic Stimulus Package

Unedited CRA Tags
3; 126

Principal Issues: Canadian tax treatment of tax credits and advance payments provided to a Canadian resident individual under the U.S. 2008 Economic Stimulus Package

Position: Not included in income but may reduce an individual's foreign tax credit

Reasons: See memo