Income Tax Severed Letters - 2010-05-14

Ruling

2010 Ruling 2010-0356241R3 - Concurrent lease

Unedited CRA Tags
9(1)

Principal Issues: Minor Changes to Ruling 2009-032949

Position: Acceptable

Reasons: Maturity Dates

2009 Ruling 2008-0300051R3 - Reorg of REIT to eliminate Holdco

Unedited CRA Tags
132.2

Principal Issues: 1. Will the proposed transactions affect the status of the Fund as a mutual fund trust or the status of the Amalco as a mutual fund corporation? 2. Will the proposed revisions to the Declaration of Trust result in a resettling of the trust or a disposition of XXXXXXXXXX by the XXXXXXXXXX ? 3. Will the proposed transactions constitute a "qualifying exchange"? 4. Will GAAR apply to the proposed transaction?

Position: 1. No. 2. No. 3. Yes. 4. No

Reasons: 1. The transactions will not cause the requirements of 132(6) and 131(8) to cease to be met. 2. See Officer's analysis. 3. Requirements of 132.2 will be met. 4. The GAAR Committee has considered the issue in similar restructurings and determined that GAAR does not apply.

2009 Ruling 2009-0329491R3 - Concurrent lease

Unedited CRA Tags
9(1)

Principal Issues: 1. Is the concurrent lease acceptable? 2. Is the Trust allowed to prepay rent and deduct an amount over the term of the lease? 3. Are all the rental lease amounts that are prepaid considered income and can a yearly reserve be taken?

Position: 1. Acceptable 2. YES 3. YES

Reasons: 1. Financing method 2. Section 9 and acceptable business practices. 3. Wording of subsection 18(9) and subparagraph 20(1)(m)

2009 Ruling 2009-0351741R3 - Concurrent lease

Unedited CRA Tags
9(1)

Principal Issues: 1. Are the changes acceptable?

Position: 1. Acceptable

Reasons: 1. Errors and omissions corrected

Technical Interpretation - External

14 May 2010 External T.I. 2010-0356101E5 - Deductions for students' tools and supplies

Unedited CRA Tags
118.5(3); 8(1)(i)(iii); 8(1)(s); 118(10)

Principal Issues: Whether students may deduct the cost of tools and supplies.

Position: No deduction is available for items required by students. Supplies may qualify for the non-refundable tuition tax credit if the conditions are met.

Reasons: The cost of supplies may qualify as "ancillary fees" for a tuition tax credit but fees for property acquired are specifically excluded.

13 May 2010 External T.I. 2009-0343971E5 F - Société de services pour les professionnels

Unedited CRA Tags
9(1), 18(1)a), 67

Principales Questions: 1. Est-ce qu'une société de gestion peut facturer, à une société professionnelle ou à une entreprise professionnelle non constituée en société, des honoraires de gestion raisonnables relativement aux dépenses liées directement à la pratique d'une entreprise professionnelle lorsqu'il n'y a plus d'interdiction d'opérer l'entreprise professionnelle par le biais d'une société? 2. Est-ce que la réponse serait différente si un ordre professionnel exige que seuls les membres de l'ordre professionnel en question puissent être actionnaires de la société professionnelle?

Position Adoptée: Question de fait.

Raisons: Analyse législative et positions déjà prises par l'ARC.

12 May 2010 External T.I. 2009-0339761E5 - Abri fiscal

Unedited CRA Tags
237.1(1)

Principales Questions: Est-ce que la situation décrite constitue un abri fiscal au sens du paragraphe 237.1(1)?

Position Adoptée: Aucune

Raisons: Question de fait.

12 May 2010 External T.I. 2010-0358921E5 - Home Renovation Tax Credit - Central Vacuum

Unedited CRA Tags
118.04

Principal Issues: Is the installation of a central vacuum cleaner a qualifying expenditure for the purposes of the Home Renovation Tax Credit?

Position: No. However some of the costs associated with the installation might be eligible.

Reasons: A central vacuum cleaner is a household appliance and household appliances are specifically excluded from qualifying expenditures.

XXXXXXXXXX 2010-035892
Andrea Boyle, CGA
May 12, 2010

12 May 2010 External T.I. 2010-0360801E5 - Northern residents deductions

Unedited CRA Tags
110.7(1)

Principal Issues: Whether a person qualifies for the northern residents deductions where he lives in a prescribed zone but also maintains a family residence that is not in a prescribed zone.

Position: General comments only could be provided. It is a question of fact whether he has resided in the prescribed zone for six consecutive months.

Reasons: Where a taxpayer is residing in a prescribed zone but also has a place of residence that is not in a prescribed zone, the taxpayer's ability to claim the northern residents deductions will depend on the number and length of absences from the prescribed zone and the purpose of such absences.

2010-036080
XXXXXXXXXX Rita Ferguson
519-645-5261
May 12, 2010

7 May 2010 External T.I. 2010-0359301E5 - HRTC - Qualifying Expenditures

Unedited CRA Tags
Subsection 118.04(1) of the ITA

Principal Issues: If a strata entered into a rehabilitation project with a contractor prior to January 28, 2009, and the contractor entered into contracts with sub-trades after January 27, 2009, will the expenditures incurred on the strata's rehabilitation project qualify for the HRTC?

Position: It is a question of fact whether expenditures are incurred pursuant to a particular contract.

Reasons: The determination can only be made after a review of all the surrounding facts and circumstances in each particular case.

XXXXXXXXXX 2010-035930
A. Mahendran
May 7, 2010

7 May 2010 External T.I. 2009-0329441E5 - Lump sum to compensate employments benefits

Unedited CRA Tags
5; 6; 9;

Principal Issues:
Whether amounts paid to executive employees to compensate the employer's unilateral decision to reduce their non-taxable benefits program is taxable?

Position:
Any amount paid to employees to replace non-taxable benefits will be taxable as income from employment under section 5 or 6.

Reasons:
As stated in paragraph 10 of the interpretation bulletin IT-337R4-consolid, Retiring Allowances, it is our view that damages, such as those received for lost (unearned) wages or employee benefits, are taxable as employment income if the employee retains his or her employment.

XXXXXXXXXX 2009-032944
I. Landry, M. Fisc.
May 7, 2010

6 May 2010 External T.I. 2010-0365791E5 - Foreign Exchange Gain

Unedited CRA Tags
39(2); 53(1)

Principal Issues: Are monthly expenses (i.e. administrative fees or margin interest) additions to the cost base when calculating foreign exchange gains or losses which are capital in nature under subsection 39(2) of the Income Tax Act (the "Act")?

Position: No

Reasons: The provisions regarding additions to the cost base of property are located in subsection 53(1) of the Act. The monthly expenses are not additions to the cost base of foreign currency.

5 May 2010 External T.I. 2010-0359791E5 F - Significant increase - redemption of shares

Unedited CRA Tags
55(3)(a)

Principales Questions: Xco and Yco own respectively 60% and 40% of the common shares of the capital stock of Opco. A corporate freeze would be implemented. Xco and Yco, the corporate taxpayers, would receive preferred shares having a redemption amount equal to the value of the common shares they held. 60 common shares would be issued to the child of Xco's shareholder and 40 common shares would be issued to Yco. The safe income is lower than the redemption amount of the preferred shares.
1. Would the issuance of the common shares to the child of Xco's shareholder constitute a significant increase in the direct interests in Opco of that child?
2. Would 55(2) apply with respect to the redemption of the preferred shares held by Yco?
3. Would 55(2) apply with respect to the redemption of the preferred shares held by Xco where there is a proportionate number of preferred shares held by Yco and Xco that are redeemed at the same time?
4. Would 55(2) apply with respect to the redemption of the preferred shares held by Xco where there is a proportionate number of preferred shares held by Yco and Xco that are redeemed in the same day but where the redemption of Xco's shares occurs first?

Position Adoptée: 1. Yes.
2. Yes.
3. No.
4. Yes.

Raisons: 1. The son acquires 60% of the future value of Opco.
2. Yco and the child of Xco's shareholder are not related persons. Yco and Opco are not related persons. The exception provided for in subsection 55(3)(a) does not apply because the transactions will result in significant increase in interests described in paragraphs 55(3)(a)(ii) and (v) and in a disposition described in paragraphs 55(3)(a)(i) and (iii). According to the example provided, there is a significant reduction of the gain that would be realized on a disposition at fair market value of the redeemed shares and that could be attributable to anything other than the safe income.
3. There is no significant increase of the interests of Yco and the child of Xco's shareholder is related to Xco. Therefore, the exception provided for in subsection 55(3)(a) applies.
4. There may be a significant increase of the interest of an unrelated person, Yco, in Opco that would be described in paragraphs 55(3)(a)(ii) and (v). Therefore, the exception provided for in subsection 55(3)(a) may not apply. According to the example provided, there would be a significant reduction of the gain that would be realized on a disposition at fair market value of the redeemed shares and that could be attributable to anything other than the safe income.

5 May 2010 External T.I. 2010-0359241E5 - Practitioner of traditional Chinese medicine

Unedited CRA Tags
118.2(2)(a), 118.4(2)

Principal Issues: Whether services provided in Ontario by a practitioner of traditional Chinese medicine are eligible medical expenses for the purposes of the medical expense tax credit.

Position: No

Reasons: Subsection 118.4(2) states that where the reference to a medical practitioner is used in respect of a service rendered to a taxpayer, that reference is to a person authorized to practice as such pursuant to the laws of the jurisdiction in which the service is rendered. A practitioner of traditional Chinese medicine is not currently authorized in the province of Ontario.

4 May 2010 External T.I. 2009-0329391E5 F - Provision pour retour de marchandises

Unedited CRA Tags
9(1); 12(1)a); 18(1)e); 20(1)m)

Principales Questions: (1) Une provision pour retour de marchandises telle que décrite dans les faits serait-elle disponible en vertu de la Loi de l'impôt sur le revenu?
(2) Le contenu du bulletin d'interprétation IT-215R représente-t-il toujours la position actuelle de l'ARC?
(3) Dans l'affirmative, est-ce qu'une provision pour retour de marchandise pourrait être disponible tel que mentionné au paragraphe 13 du IT-215R?
(4) Dans l'éventualité où une provision pour retour de marchandise soit admissible, quelles sont les conditions à respecter pour se prévaloir d'une telle provision?

Position Adoptée: (1) Non.
(2) Même si le bulletin d'interprétation IT-215R est archivé, les commentaires exposés au paragraphe 13 de ce dernier reflètent toujours la position actuelle de l'ARC.
(3) Oui, si tous les critères sont respectés.
(4) Les marchandises doivent être en consignation ou vendues selon une " vraie " clause prévoyant le renvoi des marchandises non vendues, en vertu de laquelle la propriété des marchandises ne passe pas à l'acheteur et qu'il n'y ai aucune obligation de payer pour les marchandises jusqu'à ce que les marchandises soient vendues ou jusqu'à ce qu'un certain laps de temps se soit écoulé.

Raisons: Interprétation de la Loi, positions précédentes de la DDI ainsi que la jurisprudence pertinente.

3 May 2010 External T.I. 2010-0360831E5 - HRTC-Eligibility Period

Unedited CRA Tags
118.04

Principal Issues: Would home renovations contracted before January 28, 2009, yet the renovations started and were completed after January 27, 2009, qualify for the HRTC.

Position: No

Reasons: Legislation

XXXXXXXXXX 2010-036083
George A. Robertson, CMA
May 3, 2010

26 April 2010 External T.I. 2010-0358091E5 - ACB of Partnership Interest

Unedited CRA Tags
80(15), 20(1)(uu), 96

Principal Issues: What is the effect of a paragraph 80(15)(a) deduction on the acb of the partnership interest?

Position: No effect on the acb of the partnership interest.

Reasons: Wording of the Act and the explanatory notes.

Technical Interpretation - Internal

3 May 2010 Internal T.I. 2010-0359631I7 F - Dépenses liées à une résidence non habitée

Unedited CRA Tags
18(1)a), 18(1)h), 18(2), 18(3),40(2), 53(1)h), 248(1).

Principales Questions: L'alinéa 53(1)h) de la Loi de l'impôt sur le revenu ( la "Loi") s'applique-t-il afin d'augmenter le prix de base rajusté d'une propriété inhabitée du montant des dépenses encourues entre le décès de sa propriétaire et la vente à un tiers au titre de l'entretien, des impôts fonciers et des assurances?

Position Adoptée: Non.

Raisons: Le paragraphe 18(2) ne s'applique pas parce que la propriété, qui n'est pas un fonds de terre, n'a pas été une source de revenu tiré d'une entreprise ou d'un bien. Par conséquent, l'alinéa 53(1)h) ne s'applique pas pour augmenter le prix de base rajusté de la propriété des impôts fonciers payés. Les autres dépenses ne sont pas engagées en vue de réaliser la disposition de la propriété et sont de nature personnelle.