Income Tax Severed Letters - 2009-05-22

Principal Issues: Are custom window coverings eligible for the proposed home renovation tax credit?

Position: Any window covering, including blinds, shutters and shades, that is directly attached to the window frame and whose removal would alter the nature of the dwelling, will qualify for the HRTC. However, draperies or curtains would generally not be considered to be fixtures and therefore will not qualify for the HRTC.

Reasons: 2009 federal budget

Principal Issues: Whether a single parent is entitled to claim the wholly dependent person credit for a non-resident child who has not yet immigrated to Canada.

Position: No

Reasons: The parent does not support the child in the self-contained domestic establishment.

Principal Issues: Whether general damages paid by an employer for an alleged human rights violation are taxable.

Position: A portion of the settlement is likely non-taxable, however, the determination of the amount is a question of fact..

Reasons: Where a complaint involving a human rights violation by an employer is settled out of court, a reasonable amount in respect of general damages would not be included in the employee's income from employment. Any amount in excess of a reasonable amount would be included in the employee's income under subsections 5(1) or 6(3). Determination of a reasonable amount is influenced by the maximum amount that can be awarded under the applicable human rights legislation and the evidence presented in the case. Accordingly, a review of comparable cases heard at the XXXXXXXXXX is required.

XXXXXXXXXX 2008-027372
S. Fron
May 8, 2009

Principal Issues: Does constructive payment and receipt of an amount occur when a forfeiture in an RPP is allocated to an employer and the employer asks the administrator to use the amount as directed by the employer? How does this position apply given subsection 8506(2) of the Regulations?

Position: When the administrator is going to make a payment to the employer and instead uses the funds as directed by the employer then constructive receipt will occur. This position has no effect on the application of the Regulation. It assumes that an amount has already been allocated to the employer under the Regulation.

Reasons: There is a constructive receipt and payment. The position takes into consideration the application of subsection 8506(2).

Principal Issues: Can amounts received by an annuitant out of a spousal RRIF that are subject to the attribution rules be included as eligible pension income under subsection 118(7) of the Act?

Position: No

Reasons: While the amounts are included in the income of the spouse, the amounts are not received by the spouse for purposes of section 60.03 of the Act.

Principal Issues: Is a pension paid from a provincial supplemental pension plan eligible for pension income splitting purposes?

Position: Question of fact. Based on the facts, no.

Reasons: A pension paid from the provincial supplemental pension plan would appear to be an unfunded supplemental plan as defined in paragraph 118(8)(f) of the Act. Accordingly, pensions paid from the plan would not be "pension income" or "qualified pension income" as defined in subsection 118(7) and therefore would not be "eligible pension income" for purposes of the pension income splitting legislation in section 60.03 of the Act.

Principal Issues: 1. Should a stock option benefit be determined at the time an employee exercises the stock option or when the shares are fully paid for?
2. Is there any difference if we assume that the shares were transferred into a trust for the benefit of the employee?

Position:
1. The stock option benefit under paragraph 7(1)(a) of the Income Tax Act should be determined at the time the shares are "acquired" by the employee using the fair market value of the shares at the time of acquisition.
2. If it is determined that a trust arrangement exists whereby the shares acquired under the agreement are held for the employee until certain conditions are met, the provisions of subsection 7(2) of the Act will apply and the employee will be considered to have acquired the shares at the time the trust acquired the shares.

Reasons:
Whether shares have been acquired by an employee is a question of fact turning on whether title passes or the incidents of title, such as possession, use and risk pass. The existence of a trust is also a question of fact and is determined under trust law.