Income Tax Severed Letters - 2009-06-05

Ministerial Correspondence

26 May 2009 Ministerial Correspondence 2009-0315881M4 - CCA class 52

Unedited CRA Tags
20(1)(a); 18(1)(b); 1100(1)(a)(xxxviii)

Principal Issues: Whether a lap top computer that otherwise qualifies as Class 50 property is eligible for the accelerated CCA rate of 100% announced in the January 27, 2009 Federal Budget.

Position: Yes.

Reasons: January 27, 2009 Federal Budget. P.C. 2009-660/SOR 2009 - 126 April 30, 2009 [2008 and 2009 Budget Measures] adds Class 52 for computers and related system software eligible for the 100% rate announced in the budget.

Technical Interpretation - External

27 May 2009 External T.I. 2009-0315011E5 - Professional corporation's entitlement to the SBD

Unedited CRA Tags
125(7) 256(2.1)

Principal Issues: Tax implications where there is a restriction on a professional's right to compete and whether the CRA would provide an advance income tax ruling.

Position: Terms or arrangements that bring into question the independent status of the professional could deny or restrict access to the SBD. The CRA is unable to provide assurances in an advance ruling where such conditions exist.

Reasons: An evaluation could only be made on an after-the-fact basis.

27 May 2009 External T.I. 2009-0316191E5 - Qualified Farm Property

Unedited CRA Tags
45(1) 110.6(1.3) 110.6(1) "qualified farm property" 70(9.01)

Principal Issues: 1. Whether a deemed disposition occurs when the use of real property such as land changes from rental to the business of farming. 2. Whether real property is qualified farm property when it is sold. 3. If real property is qualified farm property eligible for the capital gains exemption, whether the exemption will apply from the date of purchase or from the time the property is used in the business of farming. 4. Whether the farm property is eligible for a tax free transfer when it is bequeathed to a son.

Position: 1. No. 2. It is a question of fact. 3. From the date of purchase. 4. It is a question of fact.

Reasons: 1. Each use is an income earning function of the same taxpayer. 2. It depends on the use and ownership of the property. 3. The exemption applies to the full period of ownership. 4. It depends on the use of the property and the residence of the son.

26 May 2009 External T.I. 2009-0316841E5 F - Convention de retraite, crédit d'impôt étranger

Unedited CRA Tags
207.5; 149(1)q.1); 126; 20(11)
Summary Under
Tax Topics - Income Tax Act - Section 207.5 - Subsection 207.5(1) - Refundable Tax - Paragraph (b)
usual Pt. I deductions, including under ss. 20(11) and (12), can apply to computing income under para. (b)
Summary Under
Tax Topics - Income Tax Act - Section 126 - Subsection 126(1)
no foreign tax credit can be claimed for non-business income tax paid on income of RCA trust

Principales Questions: Est-ce qu'une fiducie de convention de retraite peut déduire un impôt étranger payé sur un revenu non tiré d'une entreprise?

Position Adoptée: 1) La fiducie ne peut pas réclamer la déduction pour impôt étranger de l'article 126 (partie I).
2) Cependant, dans le calcul de son revenu de bien, les paragraphes 20(11) et 20(12) peuvent être applicables.

Raisons: 1) Conformément à l'alinéa 149(1)q.1), aucun impôt de la partie I n'est payable pour une fiducie de convention de retraite.
2) Le revenu de bien pour les fins de l'impôt remboursable selon 207.5(1) est calculé selon les règles de la partie I.

25 May 2009 External T.I. 2009-0314031E5 - Fundraising Strategy

Unedited CRA Tags
118.1

Principal Issues: Whether a transfer of proceeds to a registered charity is a gift by an individual

Position: No

Reasons: The transfer is made by a third party.

21 May 2009 External T.I. 2009-0318231E5 - METC - whether a special mattress a hospital bed

Unedited CRA Tags
118.2(2)(m) R. 5700(h)

Principal Issues: Whether a special mattress, the RIK Fluid Overlay, is a hospital bed within the meaning of paragraph 5700(h) of the Regulations.

Position: Likely not.

Reasons: It is our longstanding position that a hospital bed is the type found in hospitals.

11 May 2009 External T.I. 2008-0296171E5 - Indian Act-Employment Income; Creation of Reserve

Unedited CRA Tags
81(1)(a), 153(1)

Principal Issues: Will employment income of certain Indians be exempt from tax under 81(1)(a) once their place of employment is situated on a reserve?

Position: General comments only.

Reasons: Reserve is not yet created at the place of employment. Also, we will not provide a ruling based on the ongoing application of the Guidelines or section 87 of the Indian Act. These are questions of fact.

Conference

1 May 2009 Roundtable, 2009-0316371C6 - CLHIA 2009 - IFRS

Principal Issues: What is the status of the CRA review if IFRS?

Position: See below.

Reasons: NA

1 May 2009 Roundtable, 2009-0316671C6 - Criss-Cross Buy Sell Life Insurance Arrangement

Unedited CRA Tags
148(7) 148(9)

Principal Issues: A series of questions regarding the tax implications of a series of transactions involving policy loans, transfers of policies and repayments of policy loans.

Position: The "value" of a policy at any particular time will depend upon the facts of the particular situation. Generally, the taking of a policy loan will result in a taxable gain to the extent the amount of the loan exceeds the adjusted cost basis of the policy; the transfer of a policy in circumstances to which subsection 148(7) applies will result in the transferor being considered to have received proceeds of disposition on the transfer equal to the "value" of the policy at that time and the transferee will be considered to have acquired the policy for an amount equal to that "value"; the repayment of a policy loan where the amount of the repayment has been included in the taxpayer's income for the current or a previous taxation year will be deductible to the extent it had been so included. Application of GAAR should be considered.

Reasons: The legislation

1 May 2009 Roundtable, 2009-0316681C6 - CLHIA Roundtable 2009, Q#6 - Tracking Property

Unedited CRA Tags
142.2(1)

Principal Issues: Can the Agency provide examples of the types of property that would fall under the definition of "tracking property"?

Position: Question of fact.

Reasons: Whether the fair market value of a property is primarily determined by reference to criteria, as per 142.2(1), in respect of tracked property is a question of fact determined on a case by case basis.

1 May 2009 Roundtable, 2009-0316721C6 - T1134

Unedited CRA Tags
233.4

Principal Issues: See Q&A

Position: See Q&A

Reasons: See Q&A
LEGISLATIVE REFERENCE: 233.4

1 May 2009 Roundtable, 2009-0316731C6 - CLHIA 2009 - Electronic Filing

Unedited CRA Tags
150.1

Principal Issues: See Q&A

Position: See Q&A

Reasons: See Q&A

10 October 2008 Roundtable, 2008-0284401C6 F - Fractionnement du revenu de pension

Unedited CRA Tags
118(7)

Principales Questions: Le contribuable a-t-il reçu un revenu de pension admissible dans les situations spécifiques décrites dans l'énoncé de la question.

Position Adoptée: Oui si reçu par suite du décès de son époux ou conjoint de fait.

Raisons: Le texte législatif

1 May 2009 CLHIA Roundtable Q. 8, 2009-0316711C6 - Accountants' Working papers

Principal Issues: See Q&A

Position: See Q&A

Reasons: NA

Technical Interpretation - Internal

27 May 2009 Internal T.I. 2009-0310751I7 F - Usufruit d'un immeuble avant 1991

Unedited CRA Tags
248(3) alinéas 192(35)b) et c) du chapitre 49 des L.C. de 1991
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(3)
re a usufruct created prior to 1991, the usufructuary was considered to continue as the beneficial owner
Summary Under
Tax Topics - Income Tax Act - Section 54 - Principal Residence
usufructuary under usufruct created prior to 1991 was beneficial owner on his death in 2007 for principal residence exemption purposes

Principales Questions: En 1985, un particulier a cédé un immeuble à ses enfants sur lequel il s'était réservé pour lui-même le droit d'usufruit et d'habitation. Dans cette situation, est-ce qu'il est possible de considérer que le particulier est toujours le propriétaire de l'immeuble au moment de son décès en 2007 malgré la cession effectuée en faveur des enfants?

Position Adoptée: Oui, le cédant est le propriétaire de fait de l'immeuble au moment de son décès en 2007.

Raisons: Puisque l'immeuble est devenu sujet à un usufruit avant 1991, les anciennes règles concernant le paragraphe 248(3) ne nous permettent pas de traiter l'usufruit (ou le droit d'habitation) comme une fiducie. Dans cette situation, selon les anciennes règles régissant le paragraphe 248(3), une personne qui est l'usufruitier d'un bien immeuble, est considéré comme étant le propriétaire de fait du bien immeuble.

22 May 2009 Internal T.I. 2009-0312791I7 F - Transfert de biens entre un rentier et son REÉR

Unedited CRA Tags
69(1) 146(1) 251(1)
Summary Under
Tax Topics - Income Tax Act - Section 146 - Subsection 146(1) - Premium
purchase of RRSP property at cost is viewed as premium to the extent of excess over FMV
Summary Under
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c)
an RRSP trust’s annuitant does not deal at arm’s length under s. 251(1)(c) with the RRSP

Principal Issues: Quelles sont les conséquences fiscales applicables lorsqu'un rentier acquiert, de la fiducie régie par son REÉR, des biens pour une contrepartie supérieure à la JVM de ces biens?

Position: L'excédent constitue une prime au sens du paragraphe 146(1), et pourrait donner lieu à une contribution excédentaire si le " maximum déductible au titre des REÉR " du rentier n'est pas suffisant.

Reasons: Tout transfert de biens entre un rentier et la fiducie régie par son REÉR doit être effectué à la JVM en vertu du paragraphe 69(1).

19 May 2009 Internal T.I. 2009-0307911I7 - Application of ss2400(6) to Identified Intangibles

Unedited CRA Tags
2400(6)

Principal Issues:
Do intangible assets consisting of distribution networks and group life and health and individual health contracts constitute "goodwill" referred to in ss2400(6)?

Position:
If the intangible assets are recognized apart from goodwill under generally accepted accounting principles, the assets do not constitute "goodwill" for purposes of ss2400(6).

Reasons:
As the term "goodwill" is not defined in the Act, its' meaning should be based on its' meaning under generally accepted accounting principles.

20 April 2009 Internal T.I. 2008-0302511I7 - LYONS - Open Market Purchase

Unedited CRA Tags
39(3), 80
Summary Under
Tax Topics - Income Tax Act - Section 39 - Subsection 39(3)
s. 80 does not apply to open market purchases
Summary Under
Tax Topics - Income Tax Act - Section 80 - Subsection 80(1) - Forgiven Amount
s. 80 does not apply to open market purchases

Principal Issues: Because of the open market purchase and the application of 39(3):1. Does section 80 apply? 2. Is there an apportionment between principal and interest? 3. Is the interest income deducted in prior years now subject to income?

Position: 1. No, 2. No 3.YES

Reasons: 1. 39(3) is the more specific section 2. Wording of subsection 39(3) postamble. 3. Interest no longer payable.

19 March 2009 Internal T.I. 2008-0304651I7 - Foreign Exchange

Unedited CRA Tags
9(1); 39(2)

Principal Issues: Are foreign exchange gains or losses on account of income or capital?

Position: Depends on the purpose of the use of the funds

Reasons: Ethicon Sutures and various court decisions

30 October 2008 Internal T.I. 2008-0297081I7 - Foreign Exchange

Unedited CRA Tags
9(1); 39(2)
Summary Under
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Foreign Exchange
general corporate borrowing on income account

Principal Issues: Are foreign exchange gains or losses on account of income or capital?

Position: Depends on the purpose of the use of the funds

Reasons: Ethicon Sutures and various court decisions

14 May 2005 Internal T.I. 2008-0304841I7 - Interest deductibility

Unedited CRA Tags
20(1)(c); 20(1)(d)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c)
interest not deductible after CCAA stay

Principal Issues: Whether interest on borrowings is deductible during the period when the borrower company is under the protection of Corporation's Creditors Arrangement Act ("CCAA").

Position: No

Reasons: Unless otherwise expressly mentioned in the Court order, there is no legal obligation to pay interest, during the period of suspension ordered by the CCAA