Income Tax Severed Letters - 2010-01-22

Principal Issues: 1. Can non-capital losses incurred in the 2001 taxation year be carried forward and utilized in the 2009 taxation year?
2. Is the beneficiary of a RRIF subject to tax on receipt of the proceeds of the RRIF following the death of the annuitant?

Position: 1. No.
2. Generally no, subject to certain exceptions.

Reasons: 1. Paragraph 111(1)(b) of the Act. Non-capital losses arising in a taxation year ending before March 23, 2004 may only be carried forward for seven taxation years (i.e., in this case, to the 2008 taxation year).
2. Very general information provided by taxpayer so only general advice may be provided. Refer to RC-4178.

2009-031858
XXXXXXXXXX Renee Sigouin
(613) 957-2128
January 15, 2010

Principal Issues: Whether a nominal lease charge is a reasonable amount to use as a lease cost in determining the Standby Charge.

Position: Question of fact, but possibly yes

Reasons: Where the lease contract is between arm's length parties and there is no barter transaction, it is acceptable for the monthly nominal administrative fee paid to the lessor to be used as a lease cost where that is the amount that is actually payable to the lessor.

Principales Questions: 1. Est-ce qu'une résidence détenue par une société ou une société de personnes peut se qualifier de " logement admissible " pour les fins du CIRD?

2. Est-ce que les actionnaires ou les associés doivent aussi être les habitants de la résidence afin d'être admissibles au CIRD?

Position Adoptée: 1. Non, relativement aux sociétés. Oui, relativement aux sociétés de personnes si toutes les conditions donnant droit au CIRD sont respectées.
2. Oui, un logement devra être normalement occupé par l'associé ayant engagé les dépenses admissibles, par son époux ou ex-époux, son conjoint de fait ou son ancien conjoint de fait ou par un de ses enfants.

Raisons: Position semblable pour les sociétés de personnes relativement à l'exemption pour résidence principale.

Principal Issues: tax consequences of the sale of a "Replaceable Interior BC Timber Harvesting Contract"

Position: proceeds to class 33...income inclusion of excess

Reasons: timber resource properties are included in Class 33, which has a CCA rate of 15%. The half-rate rule applies in the year of acquisition. When a taxpayer disposes of a timber resource property, subsection 13(21), the definition of "timber resource property", requires that the undepreciated capital cost of the class to which the property belongs be reduced by the full amount of the proceeds of disposition.

2009-034331
XXXXXXXXXX Lena Holloway, CA
613-946-3553
January 7th, 2010

Principal Issues: 1. What are the general requirements for claiming the HRTC for common area expenses for strata corporations?
2. What forms must be completed to claim the credit?

Position: 1. For renovations to common areas of the strata, the strata board should provide supporting documentation to strata owners.
2. The HRTC will be claimed on the 2009 personal tax return.

Reasons: Annex 5 2009 Federal Budget Documents; Bill C51.

Principal Issues: Taxability of employer-paid non-group life insurance or non-group accidental death and disability insurance where the employees are required to work in a high-risk zone.

Position: Question of fact, but in these types of circumstances the premiums are not likely taxable.

Reasons: Employer would appear to be the primary beneficiary.

Principal Issues: Whether transit passes provided by an employer in respect of employees who are required to travel via public transit in performance of their duties of employment would be taxable employment benefits.

Position: It is a question of fact whether a particular benefit is a taxable employment benefit. If the employer is the primary beneficiary of a particular benefit, it is not considered to be a taxable benefit in the hands of the employee.

Reasons: The law.

Principal Issues: 1) Whether U.S.-resident non-profit organizations are exempt from Canadian taxation with respect to Canadian-source income and gains derived through a chain of fiscally transparent entities that are not residents of Canada. 2) Whether exemptions will apply to dividend and interest income paid by a taxable Canadian corporation to a partnership that holds the majority of its voting shares if the organizations indirectly hold a minority interest in that partnership through a chain of entities that are fiscally transparent for United States tax purposes (other than Canadian-resident entities). 3) If exemption applies to an income amount the non-profit organizations are considered to derive under Article IV(6), can the exemption be taken into account in determining the amount of required Part XIII withholdings. 4) Which information slip should be issued in such circumstances and to whom.

Position: 1) Generally yes. 2) Generally yes. 3) Exemption can be taken into account in determining Part XIII withholdings, but payor should exercise caution in this regard given prospect of liability for Part XIII taxes and the associated penalty if withholdings are insufficient. 4) The NR4 should be issued to the partnership.

Reasons: 1) Wording of provision, but provided income is exempt from tax in the United States, is not from carrying on a business and is not from a related person (other than related persons referred to in Articles XXI(1),(2) or (3). 2) The partnership's majority interest in the taxable Canadian corporation will not be attributed to the non-profit organizations.