Income Tax Severed Letters - 2009-11-20

Ruling

2009 Ruling 2009-0330881R3 - Foreign Mergers

Unedited CRA Tags
87(8.1); 80.01(3); 95(2)(d); 95(2)(d.1);

Principal Issues: 1. Whether each of the mergers being undertaken qualifies as a "foreign merger" within the meaning thereof in subsection 87(8.1) of the Act. 2. Whether each of the foreign mergers is an "amalgamation" for purposes of subsection 80.01(3) of the Act. 3. Do paragraphs 95(2)(d) and/or 95(2)(d.1) apply to the foreign mergers.

Position: 1. Yes. 2. Yes. 3. Question of fact.

Reasons: 1. The foreign mergers meet all of the requirements of subsection 87(8.1). 2. The foreign mergers are amalgamations for purposes of subsection 80.01(3) of the Act. 3. See rulings given.

2008 Ruling 2008-0290091R3 - German Organschaft and 95(2)(a)

Unedited CRA Tags
95(2)(a); 56(2)

Principal Issues: Would subsection 56(2) apply to the situation where XXXXXXXXXX % of the income of a third-tier foreign affiliate of a taxpayer resident in Canada is transferred to a second-tier foreign affiliate of the taxpayer under a profit transfer agreement in a German Organschaft even though other related parties (including the taxpayer) also own directly or indirectly shares of the third-tier foreign affiliate?

Position: No.

Reasons: As a result of the other profit transfer agreements all the income of the second-tier or third-tier foreign affiliates would end up in the first-tier foreign affiliate of the taxpayer. In the case of the taxpayer's entitlement, the benefit conferred is immaterial.

Ministerial Correspondence

13 November 2009 Ministerial Correspondence 2009-0333211M4 F - Crédit d'impôt pour la rénovation domiciliaire

Unedited CRA Tags
projet de loi C-51; 118.04 proposé

Principales Questions:
Est-ce que les coûts d'achat de matériaux sont admissibles au CIRD dans les situations où le contribuable effectue lui-même les travaux de rénovation ou de modification?

Position Adoptée:
Sous réserve de respecter toutes les autres conditions, oui.

Raisons:
Analyse législative.

13 November 2009 Ministerial Correspondence 2009-0333691M4 F - Crédit d'impôt pour la rénovation domiciliaire

Unedited CRA Tags
Projet de loi C-51 (2009)/118.04 proposé

Principales Questions:
Suggestion d'harmonisation du CIRD avec le crédit d'impôt pour la rénovation et l'amélioration résidentielles du gouvernement du Québec.

Position Adoptée:
Transféré au ministère du Finances.

Technical Interpretation - External

16 November 2009 External T.I. 2009-0317591E5 - FX gains/losses when partners assume ptnshp debt

Unedited CRA Tags
39(2); 98(3)
Summary Under
Tax Topics - Income Tax Act - Section 98 - Subsection 98(3)
assumption of FX debt on s. 98(3) wind-up
Summary Under
Tax Topics - Income Tax Act - Section 39 - Subsection 39(2)
FX gain or loss recognized on FX debt assumption on s. 98(3) wind-up

Principal Issues: Whether a partnership is required to recognized foreign exchange gains or losses when foreign debt is assumed by the partners in conjunction with a rollover of partnership property to the partners pursuant to subsection 98(3) of the Act.

Position: Question of fact but generally yes.

Reasons: This position is consistent with our position regarding the assumption of debt by a transferee corporation where property has been transferred to the corporation under section 85 of the Act.

13 November 2009 External T.I. 2009-0310441E5 - Payments for in-home care of disabled persons

Unedited CRA Tags
81(1)(h) 56(1)(u)

Principal Issues: 1. Whether amounts paid under an agreement XXXXXXXXXX , to provide a support home for a disabled adult, are excluded from income under paragraph 81(1)(h) of the Act. 2. Whether such payments have any CPP or EI implications.

Position: 1. It does not appear that the requirements of 81(1)(h) are met. However, from the information provided, there appears to be no source of income upon which to tax the payments 2. CPP and EI implications depend on the contractual relationship, if any, with the caregivers.

Reasons: 1. Requirements of 81(1)(h). 2. If no employment and no business is carried on, the payments may have no source for income tax or CPP/EI purposes.

9 November 2009 External T.I. 2009-0337281E5 F - Paris sportifs sur Internet

Unedited CRA Tags
9(1) 248(1) 18(1)h)
Summary Under
Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) - Business Source/Reasonable Expectation of Profit
earning of $20,000 from sports betting indicated it was a business

Principales Questions: Le contribuable, qui s'adonne à des paris sportifs sur Internet, exploite-t-il une entreprise?

Position Adoptée: Question de fait. Nous avons référé le représentant aux critères énumérés au bulletin d'interprétation IT-334R2.

Raisons: Loi de l'impôt sur le revenu

5 November 2009 External T.I. 2009-0333031E5 F - Taxes foncières et scolaires

Unedited CRA Tags
18(2) 9 18(1)a)
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(2)
municipal taxes deductible against rental income but not gain from resale

Principales Questions: Deux scénarios nous sont présentés. Le contribuable veut savoir pourquoi le traitement des taxes foncières et scolaires diffère selon le scénario.

Position Adoptée: Question de fait. Commentaires généraux fournis.

Raisons: Loi de l'impôt sur le revenu.

2 November 2009 External T.I. 2009-0308741E5 F - Fonds de formation

Unedited CRA Tags
6(1)a) 6(3) 56(1)r) 6(1)g)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Employee Benefit Plan - Paragraph (d)
para. (d) exclusion did not apply where the training related to other work

Principales Questions: Quel est le traitement fiscal de sommes reçues par des travailleurs en mise à pied d'un fonds de formation entièrement financé par l'employeur?

Position Adoptée: Question de fait. À la lumière des faits soumis, nous croyons que le fonds de formation représente un Régime de prestations aux employés. Alternativement, les sommes reçues devraient être incluses dans le calcul du revenu des travailleurs conformément à l'alinéa 6(1)a).

Raisons: Loi de l'impôt sur le revenu.

XXXXXXXXXX 2009-030874

Technical Interpretation - Internal

13 November 2009 Internal T.I. 2009-0318491I7 - Article IV(6)/IV(7) 'Same Treatment'

Unedited CRA Tags
Canada-United States Income Tax Convention (1980)
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 4
interest paid by ULC to its U.S. corporate shareholders is not subject to IV(7)(b) if the ULC is a partnership for Code purposes

Principal Issues: Determination of whether the United States tax treatment of Canadian-source income, profits or gains will be considered the same for the purposes of applying Article IV(6) and Article IV(7) of the Canada-United States Income Tax Convention (1980).

Position: Guidelines provided

12 November 2009 Internal T.I. 2009-0315431I7 - Interaction of subsections 100(4) and 40(3.4)

Unedited CRA Tags
100(4); 40(3.4)
Summary Under
Tax Topics - Income Tax Act - Section 100 - Subsection 100(4)

Principal Issues: Whether a capital loss otherwise reduced under subsection 100(4) of the Act is to be calculated as if the disposition took place at the time specified in paragraph 40(3.4)(b) of the, if the conditions in subsection 40(3.3) are met. In other words, should the application of subsection 100(4) be deferred until the time specified in paragraph 40(3.4)(b) of the Act.

Position: The capital loss should be calculated by applying all of the relevant provisions of the Act, with the exception of paragraph 40(2)(g). It is this loss that is then deferred under paragraph 40(3.4)(b).

Reasons: Paragraph 40(3.4)(b) refers to the loss from the particular disposition "determined without reference to paragraph (2)(g) [i.e., 40(2)(g)] and this subsection [i.e., 40(3.4)]".

9 November 2009 Internal T.I. 2009-0326721I7 - Renovations for wheelchair access at parent's home

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

Principal Issues: Whether renovations carried out by the patient's parents out their home, where the patient has her own rented apartment in another city, would qualify under paragraph 118.2(2)(l.2) of the Act.

Position: It is a question of fact based on the determination of whether the patient is a "dependant" of the parents and whether the parent's home is a "dwelling of the patient".

Reasons: Based on the ordinary interpretation of the particular provision.

19 October 2009 Internal T.I. 2009-0332731I7 - Law Costs/Non-Arm's Length Transfer of Property

Unedited CRA Tags
ITA 160 and 223(4) ETA 325 and 316(3)

Principal Issues: Whether law costs are recoverable in a non-arm's length transfer of property assessment.

Position: It depends on the situation.

Reasons: 1. The costs of registering a certificate are recoverable in the same way as they could have been, had they been included in the amount certified. Under the ITA, if the amount in subparagraph 160(1)(e)(ii) is less than the amount in subparagraph 160(1)(e)(i), such costs are recoverable. Under the ETA, if the amount in paragraph 325(1)(e) is less than the amount in paragraph 325(1)(d), such costs are recoverable.

16 October 2009 Internal T.I. 2009-0328701I7 - Tax Recovery When Corporate Charter Cancelled

Unedited CRA Tags
s. 224 ITA s. 240(1) Business Corporations Act of Ontario

Principal Issues: Whether the bank account of the sole proprietor (who was the sole shareholder) can be garnished to collect the debt of the corporation.

Position: No.

Reasons: Shareholders are generally not liable for the debts of the corporation.

15 October 2009 Internal T.I. 2009-0314641I7 - Tax Considerations in an International Insolvency

Unedited CRA Tags
s. 20(1)(c ), 111(1), 128(1)(d) ITA s. 150(1)(a), 152(4), 152(7) ITA s. 4.1, 121(1) BIA s. 11, 12, 18.6 CCAA

Principal Issues: 1. Whether the stay of proceedings bars the CRA from adjusting XXXXXXXXXX 's tax returns for the periods prior to the filing under the CCAA.
2. Whether the CRA can disallow the losses reported by XXXXXXXXXX in the 2003 and 2004 taxation years.
3. Whether the proposed reassessment of the 2005 taxation year must be prorated between the pre-filing period and the post-filing period.
4. Whether XXXXXXXXXX can deduct interest expense on inter company loans and advances owing at the date of the filing under the CCAA.
5. Whether unused tax losses, declared in the Chapter 11 Proceedings as an asset of the bankrupt estate, can be disallowed in Canada in a proceeding under the CCAA.

Position: 1. No.
2. Yes.
3. There is no proration.
4. No, unless ordered by the Court.
5. Yes.

Reasons: 1. The stay of proceedings is only effective against the Crown if the Crown is a creditor.
2. The losses can be disallowed as they do not result in the Crown having a provable claim against XXXXXXXXXX .
3. The Income Tax Act splits a taxation year where the taxpayer is bankrupt; it does not split the taxation year where the taxpayer is insolvent.
4. Unless ordered by the Court, an insolvent person is not legally obliged to pay pre-filing amounts after the imposition of the stay of proceedings.
5. Local law applies, notwithstanding permission granted to continue an international insolvency in Canada.

21 September 2009 Internal T.I. 2009-0331481I7 - Corp Enterprise Continues to Operate After Dissol.

Unedited CRA Tags
152(4)

Principal Issues: Who is liable for taxes on income generated after a corporation's charter has been surrendered or revoked?

Position: Where a corporate enterprise continues to operate after the charter has been cancelled, the individual or individuals running and controlling the business become personally liable for tax debts subsequently incurred by the business.

Reasons: The outcome of continuing to carry on business operations after the cancellation of the corporate charter results in the formation of a proprietorship, partnership, or a joint venture.

21 September 2009 Internal T.I. 2009-0331521I7 - Corp. Enterprise Continues to Operate After Diss.

Unedited CRA Tags
152(4)

Principal Issues: Who is liable for taxes on income generated after a corporation's charter has been surrendered or revoked

Position: Where a corporate enterprise continues to operate after the charter has been cancelled, the individual or individuals running and controlling the business become personally liable for the income taxes and source deductions of the business.

Reasons: The outcome of continuing to carry on business operations after the cancellation of the corporate charter results in the formation of a proprietorship, partnership, or a joint venture.