Income Tax Severed Letters - 2009-10-02

Ruling

2009 Ruling 2009-0332861R3 - Supplementary Ruling to 2007-025724

Unedited CRA Tags
95(2)(a) 17(1) 95(6)(b)

Principal Issues: Changes of facts and proposed transactions regarding financing of cost overruns.

Position: No change in rulings given.

Reasons: No direct impact on rulings given.

Ministerial Correspondence

14 September 2009 Ministerial Correspondence 2009-0333261M4 - HRTC- Pre-budget expenditures

Unedited CRA Tags
2009 Budget Documents

Principal Issues: 1. Do home renovations completed or contracted before January 28, 2009 qualify for the HRTC?
2. Would the purchase of a gas barbecue or a rechargeable lawnmower qualify for the HRTC?

Position: 1. No. The budget documents did not propose to grandfather any expenditure incurred or contracted before January 28, 2009.
2. No. The purchase of a gas barbeque or a rechargeable lawnmower is not a renovation or an alteration to a dwelling.

Reasons: 1. The budget documents state that only expenditures incurred or contracted after January 27, 2009 qualify for the HRTC.

10 September 2009 Ministerial Correspondence 2009-0332021M4 - HRTC- Murphy Bed

Unedited CRA Tags
2009 Budget Documents

Principal Issues: Does the purchase and installation of a Murphy bed qualify for the HRTC?

Position: The purchase and installation of a Murphy bed in an eligible dwelling will qualify for the HRTC.

Reasons: The design of a Murphy bed generally requires that it be attached to the wall, thereby becoming integral to the dwelling.

13 August 2009 Ministerial Correspondence 2009-0313631M4 - GST on home renovations and HRTC

Unedited CRA Tags
January 27, 2009 Federal Budget - Annex 5

Principal Issues: (1) Are there any exemptions of the goods and services tax (GST) for home renovations? (2) Will the incentives for purchasing energy efficient products for homes be increased?

Position: (1) No. (2) The new home renovation tax credit (HRTC) provides an additional incentive.

Reasons: (1) There are no specific exemptions of the GST for home renovations in the Excise Tax Act. (2) The legislation regarding the HRTC has not yet been made public. However, the budget documents state that the HRTC will provide individuals with a temporary 15% non-refundable income tax credit on eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009, and before February 1, 2010, for agreements entered into after January 27, 2009. The HRTC will not be reduced by any other tax credits or grants to which a taxpayer is entitled under other government programs.

7 August 2009 Ministerial Correspondence 2009-0315001M4 - Home renovation tax credit

Unedited CRA Tags
2009 federal budget

Principal Issues: Do certain types of expenditures qualify for the home renovation tax credit (HRTC)?

Position: Expenditures for work performed or goods acquired, after January 27, 2009 and before February 1, 2010 will qualify for the HRTC if they relate to a renovation or alteration of an eligible dwelling and they are of an enduring nature and integral to the eligible dwelling. These would include expenditures to renovate a kitchen or bathroom, install new carpet or hardwood or laminate floors or a new gas fireplace into an eligible dwelling.

Reasons: 2009 federal budget

21 July 2009 Ministerial Correspondence 2009-0326661M4 - HRTC- Non Residents

Unedited CRA Tags
2009 Budget Documents

Principal Issues: Is the HRTC available to a non-resident for renovations or alterations undertaken at a Canadian property.

Position: No. in general, the ITA does not allow a non-resident to claim a non-refundable tax credit unless all or substantially all of the individual's income for the year is earned in Canada.

Reasons: The ITA generally prevents non-residents from claiming non- refundable tax credits.

Technical Interpretation - External

24 September 2009 External T.I. 2009-0308041E5 - Tax Withholdings on Directors' Fees

Unedited CRA Tags
6(1)(c), 153(1)(a), 212(1)(a), Reg. 102 2(1), 105(1)(c) CBCA 118(1), 1(1) OBCA

Principal Issues: Whether corporate directors can have their fees paid to personal corporations without income tax withholdings and without reporting on T4 information slips? Are there any circumstances under which directors' fees paid to a non-resident director for work performed in Canada would not be subject to income tax withholdings or reported on a T4 information slip?

Position: Corporate directors cannot have their fees paid to personal corporations. Directors' fees earned in respect of work performed in Canada by a non-resident director are subject to withholdings and T4 reporting.

Reasons: Under corporate law only a natural person can be a director; accordingly, directors' fees are normally included in the computation of the income of the individual. Directors' fees paid to a non-resident director for work performed in Canada are subject to withholdings under paragraph 153(1)(a) and regulation 102 and are to be reported on a T4 information slip.

16 September 2009 External T.I. 2008-0295951E5 F - Article XVI de la Convention Canada-É.U

Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 16
$15,000 gross receipts exclusion under Art. XVI(1) of US Convention is inapplicable where the income is earned by the artist’s corporation

Principales Questions: En vertu du paragraphe 1 de l'article XVI de la convention Canada-États-Unis, un artiste ou sportif américain n'a aucun impôt à payer au Canada si ses recettes brutes (liées au domaine artistique ou sportif) de source canadienne sont inférieures à 15 000$.
Cette exemption est-elle également permise à ce même artiste ou sportif faisant affaire au Canada par l'entremise d'une corporation dont il est l'unique actionnaire et ce tel que prévu au paragraphe 2 de l'article XVI de la Convention?

Position Adoptée: Non.

Raisons: Interprétation de la convention.

16 September 2009 External T.I. 2009-0331791E5 - Payments to Non-residents

Unedited CRA Tags
Reg. 105; 212(1)(d);

Principal Issues: Whether amounts paid to a non-resident person could be considered to be for services rendered in Canada, such that subsection 105(1) of the Regulations would apply

Position: General comments provided

16 September 2009 External T.I. 2008-0297161E5 - Regulation 105

Unedited CRA Tags
153(1)(g) Regulation 105

Principal Issues: Whether reimbursements of subcontractor's fees and travel costs are subject to Regulation 105 withholdings?

Position: No, under the current practice of the CRA.

Reasons: Following the decision of Weyerhaeuser.

15 September 2009 External T.I. 2009-0332771E5 - Functional currency tax reporting

Unedited CRA Tags
261

Principal Issues: Application of the functional currency tax reporting rules

Position: General comments provided

15 September 2009 External T.I. 2009-0314421E5 - Overseas Employment Tax Credit - Qualifying Period

Unedited CRA Tags
122.3

Principal Issues: Does an individual qualify for the OETC if they are hospitalized in Canada during the qualifying period.

Position: Question of fact

Reasons: Section 122.3 requires that "all or substantially all" of the duties of employment be performed outside of Canada for the qualifying period of more than six consecutive months. An individual's entitlement to the OETC will not be denied only because the individual was not actually outside of Canada or at the work location outside Canada for the entire qualifying period. The employee will be eligible provided that throughout the qualifying period substantially all of the employment duties are performed outside of Canada.

14 September 2009 External T.I. 2009-0337831E5 - HRTC - Residential group homes owned by a NPO

Unedited CRA Tags
January 27, 2009 federal budget documents

Principal Issues: Will renovations to residential group homes owned by a non-profit agency qualify for the HRTC?

Position: No.

Reasons: The HRTC is available only to individuals and residential group homes are not eligible dwellings for purposes of the HRTC.

XXXXXXXXXX 2009-033783
A. Mahendran
September 14, 2009

14 September 2009 External T.I. 2009-0311221E5 - Home Renovation Tax Credit- Standby Generators

Unedited CRA Tags
2009 Budget Documents HRTC Q&A's CRA Publications

Principal Issues: Is the cost of an automatic standby generator eligible for the home renovation tax credit (HRTC)?

Position: Since the automatic standby generator is permanently installed in the home, if all other requirements are met, the purchase and installation of a unit on an eligible dwelling will qualify as an eligible expenditure for the HRTC.

Reasons: 2009 Budget documents.

XXXXXXXXXX 2009-031122
Robert Dubis
September 14, 2009

11 September 2009 External T.I. 2009-0313861E5 - Home Renovation Tax Credit - Condominium

Unedited CRA Tags
January 27, 2009 federal budget

Principal Issues: What is the process for individual condominium owners to claim the HRTC?

Position: Generally, supporting documentation may be in the form of a letter from the corporation and signed by an authorized individual and can include copies of agreements, invoices or receipts. The individual condominium owners can claim eligible expenditures for their unit and their share of eligible common area expenses.

Reasons: 2009 Budget statements.

XXXXXXXXXX 2009-031386
George A. Robertson, CMA
September 11, 2009

8 September 2009 External T.I. 2009-0338101E5 - Eligible expenditures- HRTC-mobile homes/furnaces

Unedited CRA Tags
January 27, 2009 federal budget

Principal Issues: 1. Will renovations to a mobile home qualify for the home renovation tax credit (HRTC)?
2. Will heating the same mobile home with an outdoor wood furnace also qualify for the HRTC?

Position: 1. Renovations to a mobile home that is eligible to be an individual's principal residence will qualify for the HRTC provided all the other requirements are met.
2. Generally yes.

Reasons: 1. A mobile home is eligible to be an individual's principal residence if it is owned by the individual and ordinarily inhabited by the individual, his or her spouse or common-law partner, or his or her children.
2. Outdoor wood furnaces are a specific type of furnace [located outside of the dwelling, rather than in the dwelling.] Furnaces are listed as an eligible expenditure for the HRTC.

XXXXXXXXXX 2009-033810
George A. Robertson, CMA
September 8, 2009

8 September 2009 External T.I. 2009-0338231E5 - Home Renovation Tax Credit- Rental Property

Unedited CRA Tags
2009 Budget Documents

Principal Issues: Is the cost of repairs to a rental property eligible for the home renovation tax credit (HRTC)?

Position: 1. No. Renovations or alterations to a rental property will not qualify for the HRTC.
2. The cost of routine repairs and maintenance performed on an annual or more frequent basis will not qualify for the HRTC.

Reasons: Annex 5 2009 Federal Budget documents.

XXXXXXXXXX 2009-033823
Robert Dubis
September 8, 2009

13 August 2009 External T.I. 2009-0318031E5 - Indian Employment Income - Pilot

Unedited CRA Tags
81(1)(a)

Principal Issues: Is the employment income of an Indian, who works as a pilot in remote areas, considered tax exempt pursuant to paragraph 81(1)(a) of the Income Tax Act and section 87 of the Indian Act?

Position: Maybe. Whether employment income is taxable or exempt is a question of fact. Only general comments provided.

Reasons: Guideline 2 will likely apply if it is determined that the employer is in fact resident on a reserve. If not, Guideline 1 may apply to prorate the income. It is not likely that the Folster decision applies; specifically, the location of the employer has no historical connection to a reserve.

2009-031803
XXXXXXXXXX L. Merrigan
(613) 957-8979
August 13, 2009

Conference

16 September 2009 Roundtable, 2009-0336401C6 - Article XXIX A(3) of the Canada-U.S. Tax Treaty

Principal Issues: 1) Would income derived "in connection with" a U.S. trade or business include income derived from a "complementary business" as described in the 2006 U.S. Model Technical Explanation? 2) How does Article XXIX A(3) apply if a resident of the U.S. realizes a capital gain from the disposition of shares of a Canadian corporation and a portion of the value of the shares is not attributable to a connected business?

Position: 1) Yes - in determining whether Canadian-source income is derived in connection with an active U.S. trade or business the CRA will be guided by the Technical Explanation to Article XXIX A(3) of the Canada-U.S. Treaty and by the 2006 U.S. Model Technical Explanation to Article 22 of the U.S. Model Income Tax Convention; 2) A portion of the gain would be considered not to be derived in connection with the U.S. trade or business.

Technical Interpretation - Internal

18 September 2009 Internal T.I. 2009-0318451I7 - Language Training - Tuition & Education Tax Credit

Unedited CRA Tags
118.5; 118.6

Principal Issues: Is second language training (French or English) at HRSDC certified educational institutions eligible for the tuition tax credit?

Position: Generally yes, as long as training is taken for the purpose of gaining employment or improving prospects in current employment.

Reasons: French or English language is a requirement for many occupations in Canada. One of the languages is needed in almost every occupation while both are needed in many occupations. The definition of "occupation" can include a person's employment, not just a profession, trade or vocation.

15 September 2009 Internal T.I. 2009-0310851I7 - Business income earned by First Nation

Unedited CRA Tags
149(1)(c), 149(1)(d.5), 149(11)

Principal Issues: 1. Is the First Nation a public body performing a function of government pursuant to 149(1)(c)? 2. Is income from the limited partnership exempt from the geographical restrictions of 149(1)(d.5)?

Position: 1. Yes. The First Nation appears to be a public body performing a function of government and is therefore exempt from tax per 149(1)(c). 2. Yes. The geographical restriction on income applies to corporations owned by the public body performing a function of government, but does not apply to partnerships.

Reasons: 1. The FN has negotiated settlements with the government of Canada and provides extensive public works and other services to its members. 2. The geographical restriction on income applies to corporations, commissions or associations owned by a public body performing a function of government per 149(1)(d.5) as proposed, and effective May 8, 2000. Partnerships are not specified as an entity in the provision and are therefore not subject to the restriction. Income earned by partnerships flows to the partners.

15 September 2009 Internal T.I. 2009-0327281I7 - Taxation of Indians

Unedited CRA Tags
81(1)(a)

Principal Issues: How would employment income earned by an Indian employed with a Government of Canada mission in the United States be taxed?

Position: Question of Fact.

Reasons: If the Indian is resident in Canada for tax purposes, it is likely that the employment income will be taxable, as it is unlikely that this income would be situated on a reserve in Canada.

2 September 2009 Internal T.I. 2009-0329251I7 F - Application du paragraphe 80(16)

Unedited CRA Tags
80(16) 80(12)
Summary Under
Tax Topics - Income Tax Act - Section 80 - Subsection 80(16)
s. 80(16) designation under s. 80(11) increased s. 80(13) income inclusion
Summary Under
Tax Topics - Income Tax Act - Section 111 - Subsection 111(8) - Non-Capital Loss - A
s. 61.3 deduction reduced non-capital loss
Summary Under
Tax Topics - Income Tax Act - Section 80 - Subsection 80(13)
s. 80(13) income was from the debtor's business

Principales Questions: Dans une situation particulière donnée, est-ce que le ministre peut indiquer des montants en application des paragraphes 80(5) à 80(11)?

Position Adoptée: Oui.

Raisons: Loi.

25 August 2009 Internal T.I. 2009-0310861I7 - 149(1)(l)--Distribution to Members on Winding-Up

Unedited CRA Tags
149(1)(l); 54; 248

Principal Issues: How are amounts distributed to members of a 149(1)(l) entity upon the winding-up of the entity treated for income tax purposes?

Position: The receipt of funds will be in exchange for the cancellation of the membership and will result in a disposition to the taxpayer. The amount received from the 149(1)(l) entity will be proceeds of disposition. The member will incur either a capital gain or capital loss depending on the adjusted cost base.

Reasons: The definition of "disposition" and "property" in subsection 248(1) of the Act. The definition of "proceeds of disposition" and "adjusted cost base" in section 54 of the Act.