Income Tax Severed Letters - 2009-08-07

Principal Issues: Are regular payments received by a parent for the attendant care of a disabled child as a result of an accident, from the proceeds of a non-taxable award of damages, taxable to the parent for income tax purposes

Position: Question of fact but probably not.

Reasons: The Tax of Canada (Informal Procedure) decisions in Maurice v. The Queen, [2002] 1 CTC 2172 and Pellerin v. The Queen, 2008 DTC 3210.

Principal Issues: Does the permanent installation of security window film qualify as an eligible expenditure for the home renovation tax credit.

Position: Yes, the permanent installation of security window films at an eligible dwelling qualifies for the HRTC.

Reasons: Provided the installation is to an eligible dwelling and incurred within the required time period, it is our view that the installation is integral to the dwelling and of an enduring nature.

XXXXXXXXXX Robert Dubis
2009-031443
July 28, 2009

Principal Issues:
1 - was the employee employed by one or two employers and if 2, are they related employers or are they deemed to be related employers?
2 - Is the employee entitled to the $1,500 per year for service before 1989 available under 60(j.1)(ii)(B) in addition to the $2,000 per year for service before 1996 available under 60(j.1)(ii)(A)?

Position:
1 - The employee had one employer.
2 - No.

Reasons:
1 - The employee has one employer being the crown in right of Canada.
2 - In general, the additional $1,500 transfer is available for each year or part year (described in 60(j.1(ii)(A) that a taxpayer was employed by the employer (or a person related to the employer) prior to 1989 for which the employer's (or a person's related to the employer's) contributions to a RPP or DPSP had not vested in the taxpayer at the time the retiring allowance is paid.

Principal Issues: The terms of the collective agreement require the employer to top up life insurance and long term disability benefits and pay the premiums for the retirees' health benefits. What are the tax implications to the employees?

Position: Factual determination. Provided general comments.

Reasons: The tax implications can be ascertained only after a review of all of the relevant facts and documentation. Based on the facts provided, the top up life insurance benefit is likely a death benefit which is included in the income of the beneficiary under subparagraph 56(1)(a)(iii). The top up long-term disability benefits may be taxed under paragraph 6(1)(a), (f) or (g) depending on how the plan is structured. If the plan to provide health benefits to retired employees constitutes a private health services plan, any benefit derived from the employer contributions to the plan would be excluded from employment income under subparagraph 6(1)(a)(i).

XXXXXXXXXX 2008-026565
Nancy Shea-Farrow
July 21, 2009

Principal Issues: 1.Whether the dividend paid would be deemed to have been paid out of pre-acquisition surplus.
2. Whether the dividend would reduce the ACB of the shares pursuant to subsection 92(2) of the Act such that the holder of the shares would realize a deemed gain pursuant to subsection 40(3) of the Act.
3.Whether paragraph 95(2)(f.1) of the Act would apply to exclude the taxable capital gain from the FAPI of the holder of the shares.
4. Whether the capital gain would create any exempt or taxable surplus for the holder of the shares.

Position: 1. Yes
2. Yes
3. No position taken
4. Our answer would depend on whether or not the capital gain is excluded from the FAPI of the holder of the shares pursuant to paragraph 95(2)(f.1) of the Act.

Reasons: 1. Paragraphs 5900(1)(c) and 5901(1)(c) of the Regulations.
2. Wording of the Act.
3. Question of fact.
4. Subsection 5907(5) of the Regulations provides that each capital gain of a foreign affiliate from the disposition of property shall be computed in accordance with the rules set out in subsection 95(2) of the Act.

Principal Issues: Aux fins du crédit d'impôt pour emploi à l'étranger, quand commence et quand finit la période admissible de plus de six mois consécutifs?

Position: Aucune mais quelques exemples illustrent certaines situations.

Reasons: Question de fait.

Principal Issues: Can an employee forgo the payment of a retiring allowance and as a consequence be credited with pensionable service under an unfunded SERP such that the employee will receive increased benefits under the SERP

Position: No.

Reasons: The SERP would not reflect provisions that are normally found in a pension plan or a registered pension plan since it is generally not considered appropriate to provide benefits under a pension for periods of service that do not exist. Furthermore, the SERP would not reflect the same terms of any underlying RPP. Accordingly, the Plan would not be excluded from the salary deferral arrangement rules.
If a retiring allowance is payable as a result of the involuntary termination of an employee and the employee directs the amount to be paid into a SERP, it is arguable that the employee has constructively received the retiring allowance at the time the amount is paid into the SERP.