Income Tax Severed Letters - 2009-06-12

Principales Questions: Est-ce que des dépenses engagées dans le cadre d'une entreprise de marketing de réseau sont déductibles?

Position Adoptée: Question de fait.

Raisons: Premièrement, il est nécessaire de déterminer si une source de revenu existe. Si une telle source existe (en l'espèce, une entreprise), il est nécessaire d'examiner les diverses dispositions de la Loi de l'impôt sur le revenu pour déterminer si les dépenses engagées sont proprement déductibles.

Principal Issues: What is the taxability of an employer's reimbursement of a gym membership to an employee who is working temporarily in another city?

Position: While the determination of whether certain amounts paid or reimbursed by an employer are primarily for the benefit of the employer or employee is a question of fact, in this case the amount would be taxable.

Reasons: These types of expenses appear to be primarily personal.

Principal Issues: Rate of Part XIII withholding tax applicable to dividends paid by taxable Canadian corporation after 2009 to S-corporation where S-corporation holds greater than 10 percent of the dividend payer's voting shares and dividend payer is fiscally transparent for U.S. tax purposes.

Position: Even if the S-corporation is a qualifying person under Article XXIX-A of the Canada-United States Income Tax Convention (or is entitled to limited treaty benefits under Article XXIX-A(4)) and beneficially owns the dividends, the rate of withholding tax will be 25% of the amount of the dividend due to Article IV(7)(b). Furthermore, the U.S. resident shareholder(s) of the S-corporation would not be considered to derive the dividend income received by the S-corporation.

Reasons: The dividend payer is fiscally transparent for U.S income tax purposes. Consequently, the treatment of the dividend payment under U.S income tax laws is not the same as its treatment would be if the dividend payer were not treated as fiscally transparent under U.S. income tax laws. For U.S. income tax purposes, the shareholders of the S-corporation would not be considered to derive dividend income for U.S. income tax purposes and therefore would not satisfy the requirements of Article IV(6).

Principal Issues: What are the tax consequences of the transfer of a life insurance policy by an individual to his wholly-owned corporation

Position: Amount included in his income under subsection 148(1). Not enough information available to comment on subsection 15(1) and other provisions of the ITA.

Reasons: Statutory provisions.

Principal Issues: The presumed date of the annuitant's death as declared by the Court Order precedes the date of the Court Order by 7 years and as a falls outside the tax free period prescribed in paragraph 146(4)(c) ITA.

Position: The date of the actual Court Order can be used as the date of death for the purposes of paragraph 146(4)(c) ITA.

Reasons: Reliance on the date of the retroactive presumption of the annuitant's death would give rise to an unintended tax consequence.