Income Tax Severed Letters - 2009-10-30

Ruling

2009 Ruling 2008-0284591R3 - Split-up Butterfly

Unedited CRA Tags
55(2); 55(3)(b); 55(3.1)

Principal Issues: Whether pre-butterfly acquisition of property results in application of s. 55(3.1)(a).

Position: No.

Reasons: Acquisition of property by distributing corporation not in contemplation of butterfly distribution.

Ministerial Correspondence

7 October 2009 Ministerial Correspondence 2009-0315391M4 - Home Renovation Tax Credit - Custom Drapery

Unedited CRA Tags
Bill C-51 (2009)/Draft section 118.04 of the ITA

Principal Issues:
Eligibility of custom draperies for the HRTC.

Position:
Custom draperies may qualify in some circumstances.

Reasons:
In some circumstances, custom draperies may not keep their value or usefulness if installed in another dwelling.

14 August 2009 Ministerial Correspondence 2009-0325161M4 - HRTC-Clergy Residence

Unedited CRA Tags
2009 Budget Documents

Principal Issues: Are renovations to a clergy home owned by a church but inhabited by a minister eligible for the HRTC?

Position: No. The clergy home is not an eligible dwelling.

Reasons: The HRTC is only available for renovations and alterations to an eligible dwelling. The clergy residence is not owned by an individual.

Technical Interpretation - External

23 October 2009 External T.I. 2009-0309861E5 F - Tax-free Savings Accounts

Unedited CRA Tags
146.2 74.1(1) 74.5(12)(c)
Summary Under
Tax Topics - Income Tax Act - Section 143.2 - Subsection 143.2(2) - Paragraph 146.2(2)(c)
contribution by spouse causes cessation as TFSA
Summary Under
Tax Topics - Income Tax Act - Section 74.5 - Subsection 74.5(12) - Paragraph 74.5(12)(c)
s. 74.5(12)(c) inapplicable to contribution of property to TFSA of contributor’s spouse followed by spouse’s withdrawal of property and investment of proceeds

Principal Issues: 1. Whether the arrangement would qualify as a tax-free savings account? 2. Whether the attribution rules would apply in the situations described in the letter?

Position: 1. No. 2. Possibly.

Reasons: 1. 146.2(2)(c) - contribution to the trust by a person other than the holder. 2. 74.5(12)(c) not applicable.

XXXXXXXXXX 2009-030986
R. Gagnon
Le 23 octobre 2009

22 October 2009 External T.I. 2009-0314331E5 - Communal Organizations - Business Agencies

Unedited CRA Tags
143(1); 143(4); 149(1)(d); 149(1)(d.2)

Principal Issues: 1. Can a corporation be a business agency of an incorporated congregation? 2. Can a wholly-owned subsidiary of a business agency be a business agency of the congregation? 3. Does the transfer of an asset to a congregation paid as a dividend in kind constitute a non-event for tax purposes? 4. What are the tax implications of transferring the legal title of a business asset from a congregation to a business agency or the wholly-owned subsidiary of a business agency?

Position: 1. Yes 2. Likely no. Depends on the facts; who actually owns all the shares of the corporation. 3. Would likely not constitute a taxable event. 4. If the corporation is a business agency of the congregation then likely no tax implications of transferring title, but if not transferred to a business agency then result would be same as transfer between regular corporations.

Reasons: 1. Definition of congregation says it may be incorporated. 2.The legislation does not refer to indirect ownership; definition of business agency was amended, reference to "control" deleted. 3. It is a transfer within the same inter vivos trust. 4. If a business agency, then transfer within the same deemed inter vivos trust; if not, regular transfer of assets.

21 October 2009 External T.I. 2008-0298021E5 - Taxable benefit arising from ferry passes

Unedited CRA Tags
6(1)(a)

Principal Issues: Will employees of a ferry company be taxable on free ferry passage provided by the employer?

Position: No taxable benefit insofar as the passes provide for transportation of passengers only. Where passes entitle an employee to free or discounted transport of a vehicle of any kind, the value of the benefit must be included in the employee's income as required by paragraph 6(1)(a) of the Act.

Reasons: For the purposes of determining under what conditions an employee of a ferry company may use a transit pass without incurring a taxable benefit, we consider ferry passes for the transportation of individuals to be equivalent to bus or rail passes. This administrative policy does not extend to passes that allow for the transport of a vehicle. The value of any benefit received by an employee or a retired employee in regards to the transport of a vehicle by ferry will give rise to a taxable benefit as required by paragraph 6(1)(a).

21 October 2009 External T.I. 2009-0315531E5 - Cash gifts from a corporation

Unedited CRA Tags
15(1); 56(2); 246(1)

Principal Issues: Will cash gifts from a corporation give rise to a tax liability?

Position: Yes, the amounts will be added to the shareholder's income.

Reasons: Benefits conferred on a shareholder will be included in income per subsection 15(1). Benefits conferred on others may be included in the shareholder's income per subsection 56(2).

20 October 2009 External T.I. 2009-0332901E5 - Remote Work Location

Unedited CRA Tags
6(6)

Principal Issues: Whether certain employees qualify under subsection 6(6)(a)(ii) of the Act on the basis that the particular work location is remote from an established community.

Position: Question of fact but probably not a remote work location. Some general comments on special work site have also been provided.

Reasons: Must be determined on a case-by-case basis. We don't have all the facts.

20 October 2009 External T.I. 2009-0327911E5 F - Fiducie non-résidente Contribuant résidant

Unedited CRA Tags
94(1)
Summary Under
Tax Topics - Income Tax Act - Section 94 - Subsection 94(1) - Resident Contributor
any period of residence in Canada even if prior to a period when the person was non-resident in Canada is included in computing the 60-month period

Principales Questions: Aux fins de la définition de "contribuant résidant" au paragraphe 94(1), tel que proposé dans le Projet de Loi C-10, est-ce qu'une période de résidence au Canada qui survient avant une période de non-résidence suivie du retour au Canada fait partie des périodes comptées pour déterminer si le nombre de mois excède 60?

Position Adoptée: Oui

Raisons: Libellé du texte des modifications proposées

20 October 2009 External T.I. 2009-0328441E5 F - Fiducie testamentaire

Unedited CRA Tags
108(1) 122(1)
Summary Under
Tax Topics - Income Tax Act - Section 75 - Subsection 75(2)
s. 75(2) would apply if heirs form a trust to provide for their sister out of the residue, with the remainder to them on her death
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(8) - Paragraph 248(8)(a)
unlikely to have been a distribution as a consequence of death where mooted testamentary trust formed by beneficiaries by their own agreement

Principales Questions: 1) La convention de fiducie signée par les héritiers de la personne décédée se qualifie-t-elle à titre de fiducie testamentaire aux fins de la Loi? Si oui, la fiducie peut-elle s'imposer sur les revenus?
2) Si aucune fiducie n'existe en droit civil, les trois administrateurs doivent-ils ajouter à leur revenu personnel les revenus provenant du compte détenu en fiducie?

Position Adoptée: 1) La validité d'une fiducie est une question de droit; de plus, il n'est pas clair si la "fiducie" est établie en vertu du testament de la personne décédée. 2 ) Si aucune fiducie n'existe en droit civil, il faut déterminer, en fait et en droit, à qui appartient l'actif net. Si la propriété du bien n'a pas été transférée lors du dépôt dans le " compte en fiducie " en faveur de la personne bénéficiaire, le revenu découlant du compte en fiducie sera celui de la personne qui a déposé le bien dans le compte.

8 October 2009 External T.I. 2008-0298641E5 - Conversion from Georgia corp. to Delaware LLC

Unedited CRA Tags
248(1); 18-214 of the Delaware Limited Liability Company Act ("DLLCA"); s.14-2-1109.3 of Georgia Code

Principal Issues: (1) Is a Georgian corporation (Georgia Co.) who holds shares of a Canadian corporation (Canco) deemed to have disposed of the shares of Canco when it converts to a Delaware LLC? (2) If not, would the Delaware LLC inherit Georgia Co.'s cost in the Canco shares?

Position: (1) Question of Fact.(2) Yes.

Reasons: (1)Relevant foreign law needs to be analyzed. (2)With no disposition there is no taxable event on the conversion.

6 October 2009 External T.I. 2009-0341331E5 - Confirmation of 149(1)(c) determination

Unedited CRA Tags
149(1)(c), 118.1

Principal Issues: First Nation wanted written confirmation that they were a public body performing a function of government as described in 149(1)(c) of the Act.

Position: We gave directions on how to obtain written confirmation from Charities Directorate.

Reasons: Charities Directorate is giving written confirmation directly to First Nations that have already been determined to be public bodies performing a function of government when they request it.

2009-034133
XXXXXXXXXX P. Burnley
(613) 957-2100
October 6, 2009

Conference

28 September 2009 Roundtable, 2009-0315151C6 - Canada- US Treaty XXIX A(3) "customers"

Unedited CRA Tags
XXIX A (3) Canada-US Treaty

Principal Issues: Can CRA confirm that, consistent with its interpretation of Article V(9)(b) of the Canada-US Treaty, activities carried on in the residence state by a bank, an insurance company, etc., with its affiliates in the ordinary course of business meets the requirements in Article XXIX A (3) that such activities be carried on with "customers"?

Reasons: See below