Income Tax Severed Letters - 2009-11-13


2009 Ruling 2008-0294231R3 - Paragraph 149(1)(c); Limited Partnership

Unedited CRA Tags
149(1)(c); 149(1)(d.5); 149(1)(1.2)(a); 149(1)(11)

Principal Issues: Whether paragraph 149(1)(c) of the Act will apply to certain First Nations to exempt the partnership income allocated to these First Nations by a limited partnership. Whether proposed paragraph 149(1)(d.5) of the Act will apply to exempt business income earned by a corporation owned by a First Nation. Whether paragraph 149(1)(c) of the Act will apply to the First Nation to exempt income received from its wholly-owned corporation.

Position: Yes, paragraph 149(1)(c) of the Act will apply to all four First Nations to exempt income received from the limited partnerships and the corporation. As paragraph 149(1)(d.5) of the Act is proposed, we cannot provide a ruling but we can comment that if the paragraph is enacted as proposed the current structure of the corporation and the proposed transaction are such that income earned by the corporation from a limited partnership will be exempt from tax.

Reasons: All four First Nations represent their members and provide to their members services similar to those provided by a municipality. The corporation will be wholly owned by the First Nation. The corporation will be earning income through a limited partnership from activities carried on in a province under a written agreement with a provincial crown corporation.

Technical Interpretation - External

10 November 2009 External T.I. 2009-0341601E5 - Massage Chair as Medical Expense

Unedited CRA Tags
118.2(2) 118.2(2)(i)

Principal Issues: Whether a massage chair qualifies as a medical expense

Position: No

Reasons: The items is not listed under subsection 118.2(2) or under Regulation 5700

6 November 2009 External T.I. 2009-0323571E5 - Electric bicycle as medical expense

Unedited CRA Tags

Principal Issues: Whether a battery powered two-wheeled bicycle qualifies as a medical expense under subsection 118.2(2)..

Position: No

Reasons: It cannot be considered a wheelchair (i.e, the type of "scooter" contemplated in paragraph 37 of IT-519R2(consolidated). It is also not a device or equipment that is prescribed in Part 5700 of the Regulations.

5 November 2009 External T.I. 2009-0322451E5 - Reimbursement of an employee's PHSP premiums

Unedited CRA Tags

Principal Issues: Whether the reimbursement of an employee's PHSP premiums by an employer would result in taxable employment benefits.

Position: Question of fact.

Reasons: If the employer reimburses an employee's PHSP premiums and shows the reimbursement as a payroll adjustment, the reimbursement will be exempt from inclusion as taxable employment benefits pursuant to subparagraph 6(1)(a)(i).

5 November 2009 External T.I. 2009-0337311E5 - 149(1)(l) Organizations

Unedited CRA Tags

Principal Issues: (i) Can a 149(1)(l) organization earn a profit? (ii) If the profit is intentional but used to fund the activities of the organization will the organization qualify for the 149(1)(l) exemption from tax? (iii) Can a 149(1)(l) organization engage in commercial activities? (iv) Does the CRA maintain a list of organizations that qualify for the exemption provided by 149(1)(l)?

Position: (i) Yes, but only if incidental and generally unanticipated. (ii) No (iii) Yes (iv) No

Reasons: (i) To qualify for the exemption an organization cannot be organized or operated with a purpose of earning a profit. (ii) It does not matter what the profit is used for, a 149(1)(l) organization cannot have any profit earning purpose. (iii) Paragraph 149(1)(l) does not restrict an organization to any particular activities, other than requiring activities not to be undertaken for profit. (iv) The CRA does not maintain a list of 149(1)(l) organizations as these organizations are not required to register with CRA.

4 November 2009 External T.I. 2009-0311311E5 - Withholding Tax on Rental Income

Unedited CRA Tags
ITA 212; 215; 216

Principal Issues: Is a rental agency required to withhold and remit tax on rental income from Canadian real estate received on behalf of a non-resident?

Position: Provided general comments on the tax implications to a non-resident earning rental income from Canadian real estate. Also generally discussed the withholding obligations of a non-resident's agent who receives the rental income on behalf of the non-resident.

Reasons: If the rental income is property income, the non-resident's agent is required to withhold and remit tax on the rental income pursuant to subsection 215(3).

4 November 2009 External T.I. 2009-0337451E5 F - Fractionnement de revenu de pension

Unedited CRA Tags
60.03 118(7)

Principales Questions: Un pensionné, âgé de moins de 65 ans, peut-il fractionner son revenu provenant de son RPA et de son REER dans l'année du décès du cessionnaire?

Position Adoptée: Il peut fractionner le revenu provenant de son RPA mais pas celui de son REER.

Raisons: Le revenu provenant du RPA est un "revenu de pension admissible" selon la définition de l'alinéa 118(7)a). Le revenu du REER du pensionné n'est pas reçu par suite du décès de son époux ou conjoint de fait tel que l'exige l'alinéa 118(7)b) de la définition de "revenu de pension admissible"

2 November 2009 External T.I. 2009-0345491E5 F - Crédit d'impôt pour frais médicaux

Unedited CRA Tags
118.2(2) 118.2(2)l.2)

Principales Questions: Est-ce que certaines rénovations apportées à la résidence de la contribuable peuvent donner droit au crédit d'impôt pour frais médicaux.

Position Adoptée: Question de fait. Nous avons fourni des commentaires généraux portant sur l'alinéa 118.2(2)l.2) de la Loi.

Raisons: Loi de l'impôt sur le revenu.

2 November 2009 External T.I. 2009-0317541E5 F - Transfer to Corporations Owned by Brothers

Unedited CRA Tags
20(1)(c) 55(3)(a) 55(4) 84.1(1)

Principales Questions: 1. Would paragraph 55(3)(a) of the Act apply to the hypothetical situation described in the letter to exclude, from the application of subsection 55(2) of the Act, the deemed dividend resulting from the cross-redemptions of shares between Corporation A and Newco?
2. Would the CRA apply subsection 55(4) of the Act in the hypothetical situation?
3. Would the interests, payable on another person's indebtedness assumed by the taxpayer to acquire the preferred shares and the common shares of the capital stock of an operating corporation, be deductible?
4. Would the interests, payable on a debt assumed by the taxpayer to acquire the shares of an operating corporation, be deductible by the amalgamated corporation after the amalgamation of the taxpayer and the operating corporation?
5. Would subsection 84.1(1) of the Act apply on the transfer by the children of the shares of the capital stock of their operating corporation to their holding corporation?

Position Adoptée: 1. It would depend on whether we would apply subsection 55(4) of the Act and on the identity of the beneficiaries of the trust holding the common shares of a dividend recipient at a particular time.
2. General comments provided. It would depend on the facts of the particular situation.
3. The answer is subject to the legislation that may be proposed by the Department of Finance and the date of enactment. Without such a proposed legislation, the answer would depend on whether the preferred shares carries a stated dividend rate and on whether there is a reasonable expectation, at the time the common shares are acquired, that the common shareholder will receive dividends.
4. The position taken in paragraph 21 of IT-533 in relation to a deduction under subparagraph 20(1)(c)(i) of the Act would also be applicable in relation to a deduction under subparagraph 20(1)(c)(ii) of the Act. After the amalgamation, we would consider that the debt has been assumed for the acquisition of the assets of the acquired corporation that has been amalgamated and that are now held by the continuing corporation after the amalgamation. These assets would have to be acquired for purpose of gaining or producing income from the property or from a business.
5. It would depend on the consideration received for each class of shares.

Raisons: 1. Provisions of the Act.
2. The question of determining whether it is reasonable to consider that one of the main purposes for the issuance of the voting shares of the capital stock of the dividend recipients to A would be to cause 2 or more persons to be related to each other, is a question of fact.
3. Paragraphs 10 and 31 of IT-533. Statement of the Department of Finance which was published on February 23, 2005, as part of the presentation of the Federal Budget.
4. Previous positions. Paragraph 21 of IT-533.
5. Provisions of the Act.

Technical Interpretation - Internal

5 November 2009 Internal T.I. 2009-0315901I7 - stop-loss rules - financial institutions

Unedited CRA Tags
112(5.1) 112(5.2)

Principal Issues: Does 112(5.2) apply to reduce a loss in the amount of a dividend declared but not received at the time of disposition of shares by a financial institution?

Position: Yes

Reasons: Subsection 112(5.2) applies to a disposition of a share by a taxpayer at any time.