Income Tax Severed Letters - 2009-09-25

Ruling

2009 Ruling 2008-0294391R3 - transfer to and from a XXXXXXXXXX foundation

Unedited CRA Tags
104(1); 248(1) - (b)(v) disposition

Principal Issues: Whether there is a disposition within the meaning of subsection 248(1) of the Act, where the legal title to shares is transferred by a foundation created pursuant to the laws of XXXXXXXXXX to a corporation (which corporation had transferred legal title to such shares to the foundation at an earlier time)?

Position: No.

Reasons: The transfer of the legal title to the shares by the foundation to the corporation will not result in a disposition within the meaning of subsection 248(1) of the Act, since 1. there is no change in the beneficial ownership of the shares; and 2. pursuant to subsection 104(1) of the Act, the arrangement between the foundation and the corporation is not a trust under the Act (except for certain purposes)

2009 Ruling 2008-0290721R3 F - Réorganisation d'une société de personnes

Unedited CRA Tags
125(7) 256(2.1)

Principales Questions: Dans le cas où un associé d'une société de personnes crée une société par actions par l'entremise de laquelle des services professionnels XXXXXXXXXX seront fournis XXXXXXXXXX , est-ce que cette société par actions serait admissible à la déduction accordée aux petites entreprises?

Position Adoptée: Question de faits. Généralement oui, si certaines conditions sont rencontrées.

Raisons: Selon la Loi de l'impôt sur le revenu actuelle. En accord avec des décisions anticipées précédentes.

Ministerial Correspondence

10 September 2009 Ministerial Correspondence 2009-0332851M4 - Immigrants to Canada

Unedited CRA Tags
2(1)

Principal Issues: Is there a period of exemption from income tax for new immigrants to Canada?

Position: No.

Reasons: Under the Canadian income tax system a person's liability for tax is based on his or her status as a resident of Canada. The liability for income tax begins on the date that the person becomes resident.

20 August 2009 Ministerial Correspondence 2009-0331191M4 - HRTC- Trees and Landscaping Costs

Unedited CRA Tags
2009 Federal Budget Documents

Principal Issues: Is the cost of trees purchased as part of a landscaping project eligible for the HRTC?

Position: The cost of purchasing the trees will qualify for the HRTC where the trees are planted on land that is part of the eligible dwelling.

Reasons: Landscaping projects to an eligible dwelling are considered integral to the dwelling and of an enduring nature.

Technical Interpretation - External

17 September 2009 External T.I. 2009-0310251E5 F - Interaction between sections 89 and 55

Unedited CRA Tags
89(1) "capital dividend account" 55(5)(f) 55(2)
Summary Under
Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account - Paragraph (a)
addition to CDA from redemption engaging s. 55(2) occurs at redemption time

Principal Issues: A corporation ("Opco") redeems the shares of its capital stock held by another corporation ("Holdco"). This redemption of shares generates a deemed dividend pursuant to subsection 84(3). Subsection 55(2) applies. However, Holdco makes a designation under paragraph 55(5)(f). (1) Whether the credit to Holdco's capital dividend account ("CDA") would occur at the time of the share redemption. (2) Whether the moment of the credit to Holdco's CDA would change if Holdco does not make a 55(5)(f) designation. (3) Whether the moment of the credit to Holdco's CDA would change if Holdco makes a late-filed 55(5)(f) designation.

Position: (1) Yes. (2) No. (3) No.

Reasons: Wording of the Act.

8 September 2009 External T.I. 2009-0337901E5 - Eligible expenditures- home renovation tax credit

Unedited CRA Tags
January 27, 2009 federal budget

Principal Issues: Does insulating the exterior of a house and replacing the siding on a house with new siding qualify for the new HRTC.

Position: Yes

Reasons: Budget documents

XXXXXXXXXX 2009-033790
George A. Robertson, CMA
September 8, 2009

8 September 2009 External T.I. 2008-0299771E5 F - Gain on Disposition of Debt

Unedited CRA Tags
248(1) Disposition 43 80.01(8) 80.01(10)
Summary Under
Tax Topics - Income Tax Act - Section 43 - Subsection 43(1)
partial repayment of low-ACB debt generates a capital gain
Summary Under
Tax Topics - Income Tax Act - Section 9 - Computation of Profit
partial repayment of low-cost debt generates business income if held on income account

Principal Issues: A taxpayer ("A") owns all of the issued and outstanding shares of the capital stock of a corporation ("Aco"). Over the years, A made advances (the "Debt") to Aco. A would sell all of the issued and outstanding shares of the capital stock of Aco to an arm's length person ("B"). A would also sell the Debt to B for nominal consideration. Whether there would be tax consequences to B when B would receive payments on account of the outstanding principal amount of the Debt.

Position: General comments provided. If the debt is capital property to B and since the adjusted cost base to B of the debt is nominal, B will incur a capital gain as a result of the repayment of the Debt. When B will receive a payment on account of the outstanding principal amount of the Debt, B will be considered to have disposed of a portion of the Debt with the amount of the payment constituting the proceeds of disposition of that portion. If the Debt is not capital property to B (for example, the Debt is used in a business carried on by B), the reimbursement of the Debt will give rise to business income in the hands of B. Finally, the debt parking rules could possibly apply to Aco, depending on the facts

Reasons: Wording of the Act and previous positions.

1 September 2009 External T.I. 2009-0314781E5 - Eligible expenditures- home renovation tax credit

Unedited CRA Tags
January 27, 2009 federal budget

Principal Issues: Do wood fired outdoor boilers qualify as an eligible expenditure for the HRTC?

Position: Generally yes

Reasons: Eligible expenditures for the home renovation tax credit include only expenditures that relate to a renovation or an alteration of an eligible dwelling (including land) that is enduring in nature and integral to the dwelling. Wood fired outdoor are a specific type of boiler [located outside of the dwelling, rather than in the dwelling.] Boilers are listed as an eligible expenditure for the HRTC.

1 September 2009 External T.I. 2009-0324301E5 - Eligible expenditures- home renovation tax credit

Unedited CRA Tags
January 27, 2009 federal budget

Principal Issues: Is an automated hot tub cover gazebo an eligible expenditure for the HRTC?

Position: Generally, yes

Reasons: Eligible expenditures for the home renovation tax credit include only expenditures that relate to a renovation or an alteration of an eligible dwelling (including land) that is enduring in nature and integral to the dwelling. The automated hot tub cover gazebo that is permanently attached to land that forms part of an eligible dwelling is enduring and integral to the dwelling.

XXXXXXXXXX 2009-032430
George A. Robertson, CMA
September 1, 2009

28 August 2009 External T.I. 2009-0325881E5 F - Application of Subsection 89(8)

Unedited CRA Tags
89(8) 256(9) 249(4) 89(4)
Summary Under
Tax Topics - Income Tax Act - Section 89 - Subsection 89(8)
no deduction under element C for loss of target incurred in the year after the change of control

Principal Issues: 1) In the first given fact situation, a public corporation acquires all of the issued and outstanding shares of the capital stock of a target corporation ("Target") on January 1, 2006. Prior to this acquisition, Target was a Canadian-controlled private corporation. No election under subsection 256(9) is made in that respect. The fiscal period of Target normally ends on December 31 of each year. Whether subsection 89(8) (low rate income pool ("LRIP") addition) would apply in this first given fact situation. 2) The facts relating to the second given situation are identical to those relating to the first given situation, except for the following elements. The acquisition of control of Target occurs on January 1, 2008. The application of subsection 89(8), without taking into consideration variable C of such provision, would result in an LRIP addition of $XXXXXXXXXX at Target level. However, Target would also sustain a non-capital loss of $XXXXXXXXXX in its 2008 taxation year. The deductibility of such non-capital loss would not be restricted under the ITA. Furthermore, Target would not carry-back this non-capital loss to offset taxable income in taxation years prior to 2008. Whether the amount of the LRIP addition under subsection 89(8) would be $XXXXXXXXXX in the second given fact situation.

Position: 1) Yes. 2) No. The amount of the LRIP addition under subsection 89(8) should be $XXXXXXXXXX in the second given fact situation.

Reasons: Wording of the Act.

25 August 2009 External T.I. 2009-0313371E5 - Motor Vehicle Travel Expenses

Unedited CRA Tags
8(1)(h.1)

Principal Issues: Whether motor vehicle expenses for travel between an employee's home and place of work are deductible.

Position: Question of fact but generally not deductible.

Reasons: Such travel is generally personal travel and not travel undertaken in the course of employment.

20 August 2009 External T.I. 2009-0314691E5 - Transplant Patient Expense Reimbursement Program

Unedited CRA Tags
3(a)

Principal Issues: Are accommodation expense reimbursements made to certain organ transplant patients taxable for income tax purposes where the payment is to reduce the financial hardship associated with the requirement to relocate within a prescribed distance of a transplant hospital in order to be placed on a transplant waiting list or to receive a transplant?

Position: No.

Reasons: Payments are not income from a source for the purpose of paragraph 3(a) of the Income Tax Act. It is also our view that the payments would not be taxable under any other provision of the Act.

2009-031469
XXXXXXXXXX Renee Sigouin
(613) 957-2128
August 20, 2009

18 August 2009 External T.I. 2009-0313851E5 - Taxable Benefits - Relocation

Unedited CRA Tags
6(1)(a) 62 6(6)

Principal Issues: Whether certain travel benefits paid by the employee's employer on the employee's relocation are taxable.

Position: The benefits are taxable to the employee and are subject to proper withholding and reporting.

Reasons: The Law

14 August 2009 External T.I. 2009-0332161E5 - Distributions from an NPO on Winding-Up

Unedited CRA Tags
149(1)(l); 84(2); 248(1)

Principal Issues: Are the comments in archived IT-409 that state that a member's interest in a non-share corporation is likely capital property to the member, such that a distribution received by the member on the winding-up of the corporation would be proceeds of disposition of the membership, still correct?

Position: Yes.

Reasons: It is a question of fact as to whether a member meets the definition of "shareholder" in subsection 248(1) of the Act. If a member is found to be a shareholder, then a distribution to a member upon dissolution of a non-share corporation may be subject to subsection 84(2) of the Act. If a member is found not to be a shareholder, then it is likely that the membership is a capital property and any amounts received upon dissolution of the non-share corporation will be proceeds of disposition of that interest. Depending on the membership interest's adjusted cost base, the member may incur a capital gain. The adjusted cost base of the membership interest only includes amounts paid to obtain the membership; it does not include annual fees.

Technical Interpretation - Internal

14 September 2009 Internal T.I. 2009-0330871I7 - HRTC - Sandblasting of exterior brick

Principal Issues: Does the sandblasting of exterior brick on an eligible dwelling qualify as an eligible expenditure for the home renovation tax credit.

Position: Yes

Reasons: The sandblasting of the exterior brick on a building that is an eligible dwelling would be a "renovation" that is of an enduring nature and the brick is integral to the eligible dwelling. Furthermore, sandblasting exterior brick of an eligible dwelling is not an annual, recurring or routine repair or maintenance.