Income Tax Severed Letters - 2010-05-28

Ruling

2010 Ruling 2009-0329601R3 - Multi-wing Split-up Butterfly

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

Principal Issues: Split-up butterfly transaction.

Position: Favourable Rulings given.

Reasons: In compliance with the law and previous positions.

2010 Ruling 2008-0287901R3 F - Emphytéose

Unedited CRA Tags
248(1) disposition, 9

Principales Questions: Est-ce-que la conclusion d'une convention d'emphytéose avec une option d'achat à XXXXXXXXXX $ en faveur de l'emphytéote entraîne une disposition du bien sujet à l'emphytéose?

Position Adoptée: La relation juridique entre les parties entraîne la disposition du bien au moment où la convention entre en vigueur. Le produit de disposition du bien est constitué de la rente mensuelle en excluant les intérêts.

Raisons: Les faits et les documents examinés ne nous permettent pas de conclure à la constitution d'une emphytéose. Il ressort des documents qu'une des parties a l'intention de vendre le bien en faveur de l'autre partie qui a l'intention de l'acheter. Cette dernière s'est engagée à en payer le prix en XXXXXXXXXX versements mensuels portant intérêt.

2010 Ruling 2009-0347041R3 - Loss Consolidation

Unedited CRA Tags
20(1)(c); 9; 12(1)(c) 12(1)(x); 112(1); 88(1.1); 15(1); 56(2); 246(1); 245(2)

Principal Issues: Is the proposed loss consolidation acceptable?

Position: Yes

Reasons: Consistent with similar previous rulings and tax policy.

2009 Ruling 2009-0345901R3 - Canada-U.S. Tax Convention

Unedited CRA Tags
Article IV(7)(b)

Principal Issues: Whether Article IV(7)(b) of the Treaty applies to fees paid by a Canadian unlimited liability corporation ("ULC") to a U.S. limited partnership

Position: No

Reasons: The treatment of the fees under the income tax laws of the U.S. is the same as it would be if the ULC were not fiscally transparent

Technical Interpretation - External

20 May 2010 External T.I. 2009-0340221E5 - Payment of employee food expenses

Unedited CRA Tags
18(1)(p); 67, 67.1; 18(1)(h); 125(7)

Principal Issues:
1. Can a personal services business deduct the payment of an incorporated employee's personal food expenses?
2. If so, will the deduction available to the personal services business be restricted to 50% of the amount paid or payable pursuant to subsection 67.1(1) of the Act?

Position:
1. Question of fact, but in this case, likely yes (subject to the expenses being reasonable for purposes of section 67 and not considered to be received by the incorporated employee in his capacity as a shareholder of the personal services business).
2. Question of fact, but in this case, likely no.

Reasons:
1. Pursuant to subparagraph 18(1)(p)(ii) of the Act.
2. Pursuant to the application of paragraph 67.1(2)(d) or (e) of the Act.

20 May 2010 External T.I. 2009-0349581E5 - Financial Assistance to Employees' Extended Family

Unedited CRA Tags
6(1)(a); 56(2)

Principal Issues: Whether in the particular circumstances, financial assistance provided by an employer to its employees' extended families in the XXXXXXXXXX who were directly affected by the hurricanes and typhoons in XXXXXXXXXX , would be taxable to the employees.

Position: Probably not, as long as it is a one-time payment that is not remitted to the employees directly and will not result in the employees foregoing any present or future employment compensation as a result thereof.

Reasons: In these specific facts and circumstances, it is likely that the financial assistance is made in a personal capacity, for philanthropic reasons and not as a payment for services performed by, or conferred as a benefit to, the employees.

19 May 2010 External T.I. 2009-0352621E5 - Employee Recruitment payments

Unedited CRA Tags
5(1); 6(3)

Principal Issues: Whether a recruitment payment made to recent graduates is taxable.

Position: Yes

Reasons: Payments made as consideration for entering into a contract of employment are deemed to be remuneration for services.

19 May 2010 External T.I. 2009-0342651E5 F - Remboursement de dépenses et allocations

Unedited CRA Tags
6(1)a), 6(1)b), 6(1)b)(i) à (ix), 6(6), 6(23)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)
reimbursement for employment-related moving expenses, and reimbursement of accommodation and transportation where employee temporarily assigned away from normal home base, not taxable
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b)
first $650 of allowance to cover moving costs not taxable
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(23)
reimbursement of expenses to obtain a mortgage is included

Principales Questions: Est-ce que les versements suivants faits par un employeur constituent des avantages imposables à inclure dans le revenu de l'employé :
1. le remboursement des frais de certificat de localisation, d'évaluation ou d'inspection?
2. le remboursement des frais relatifs à l'obtention d'une nouvelle hypothèque?
3. une indemnité en remplacement du paiement des frais de déménageur ou d'agent immobilier ou une indemnité en compensation de dépenses de déplacement?
4. le remboursement du logement et des frais de transport lorsque les employés sont affectés temporairement à un territoire autre que son port d'attache habituel?
5. une allocation pour les frais de repas et frais connexes lorsque les employés sont affectés temporairement à un territoire autre que son port d'attache habituel?

Position Adoptée:
1. Non, si le déménagement est nécessaire en raison de l'emploi.
2. Oui.
3. Sous réserve de notre position énoncée dans le Guide de l'employeur - Avantages et allocations imposables à l'effet que les premiers 650 $ ne sont pas imposable, ces indemnités compensatoires sont des allocations qui doivent être incluent dans le revenu des employés en vertu de l'alinéa 6(1)b).
4. et 5. Question de fait, commentaires généraux fournis.

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

XXXXXXXXXX 2009-034265
I. Landry, M. Fisc.
Le 19 mai 2010

19 May 2010 External T.I. 2009-0339901E5 - Foregone Life Insurance Benefit Retired Employees

Unedited CRA Tags
5(1)

Principal Issues: What is the tax treatment of amounts paid to retired employees in order to terminate their life insurance benefit?

Position: General comments provided

Reasons: Question of facts.

19 May 2010 External T.I. 2010-0357071E5 F - Crédit d'impôt pour l'achat d'une 1e habitation

Unedited CRA Tags
118.05
Summary Under
Tax Topics - Income Tax Act - Section 118.05 - Subsection 118.05(1) - Qualifying Home - Paragraph (a) - Subparagraph (a)(iii)
ownership by common-law partner of their home not relevant if they separated before individual’s acquisition of another principal residence
Summary Under
Tax Topics - Income Tax Act - Section 118.05 - Subsection 118.05(1) - Qualifying Home - Paragraph (a)
allocation of credit between 2 qualifying spouses
Summary Under
Tax Topics - Income Tax Act - Section 118.05 - Subsection 118.05(1) - Qualifying Home - Paragraph (a) - Subparagraph (a)(ii)
ownership of secondary residence does not disqualify for HBTC
Summary Under
Tax Topics - Income Tax Act - Section 118.05 - Subsection 118.05(1) - Qualifying Home - Paragraph (a) - Subparagraph (a)(i)
given future intention test, there can be a gap between purchase and home becoming principal residence

Principales Questions:
1. Dans des situations données, est-ce qu'un particulier séparé de son ex-conjoint de fait depuis un an peut réclamer le CIAPH relativement à l'achat d'une résidence en juillet 2009?
2. Dans une situation où un seul des époux ou des conjoints de fait respectent toutes les conditions d'application du CIAPH, est-ce que celui qui les respectent peut réclamer le CIAPH?
3. Est-ce qu'un particulier peut réclamer le CIAPH s'il est déjà propriétaire d'une résidence qui n'est pas son lieu principal de résidence?
4. Dans des situations données, à quel moment un particulier peut réclamer le CIAPH?

Position Adoptée:
1. Oui, si le particulier respecte par ailleurs toutes les conditions.
2. Oui.
3. Oui.
4. Au moment de l'acquisition.

Raisons:
1. Selon le sous-alinéa 118.05(1)a)(iii), on ne tient compte de l'époux ou du conjoint de fait d'un particulier qu'au moment de l'acquisition.
2. Analyse législative et position similaire à l'égard du RAP.
3. Analyse législative et position similaire à l'égard du RAP.
4. Analyse législative.

XXXXXXXXXX 2010-035707
I. Landry, M. Fisc.
Le 19 mai 2010

17 May 2010 External T.I. 2010-0366941E5 - Child care expenses

Unedited CRA Tags
Paragraph 63(3)(d)

Principal Issues: XXXXXXXXXX would like confirmation that the extended day fees that will be charged under the new early learning program will qualify as child care expenses.

Position: Yes, provided all of the other requirements in section 63 are met.

Reasons: The intent of the early day component of the new early learning program is to provide child care before and after regular school hours. It will be led by an ECE, not teachers as would be required under the Education Act in Ontario for a proper structured learning environment, and enrollment will be at the option of the parents

10 May 2010 External T.I. 2009-0321001E5 - RRSP Over-contribution

Unedited CRA Tags
146(8), 146(8.2), 146(8.3), 204.1(2.1), 204.2(1.1)

Principal Issues: What are the tax consequences arising from a withdrawal of an over-contribution to a spousal RRSP?

Position: Provided general comments.

Reasons: Discussed the income inclusion under subsection 146(8), the attribution rules in subsection 146(8.3), the deduction available under subsection 146(8.2), and the penalty tax under subsection 204.2(1.1).

XXXXXXXXXX 2009-032100
S. Bernards
May 10, 2010

3 May 2010 External T.I. 2010-0361631E5 - Calculation of Indian exempt income

Unedited CRA Tags
81(1)(a)

Principal Issues: Are vacation days, sick days, statutory holidays, family related leave days and personal leave days included as days on a reserve in the calculation of exempt income that is prorated pursuant to Guideline 1 when the Indian employee lives on reserve and spends these days on reserve?

Position: No.

Reasons: Consistent with previous opinions. When employment income is exempt according to Guideline 1 or 3, the location at which employment duties are performed is key to obtaining the exemption. Days where the employee is sick or on vacation or on other similar leave either on or off reserve are not considered days where the employee is performing employment duties.

28 April 2010 External T.I. 2009-0308561E5 - Taxation of Postdoctoral Fellowships

Unedited CRA Tags
56(1)(n), 56(1)(o), 56(3), 118.6

Principal Issues: (1) Whether a postdoctoral fellowship is exempt from tax under s.56(3) (the scholarship exemption). (2) Application of CPP/EI rulings process to Income Tax Act determinations for postdoctoral fellows.

Position: (1) Generally, no. (2) CPP/EI determinations are not determinative for application of scholarship exemption under the Income Tax Act.

Reasons: See discussion in letter.

Technical Interpretation - Internal

15 April 2010 Internal T.I. 2009-0345921I7 - Derivatives - Income or Capital

Unedited CRA Tags
9

Principal Issues: Are CTA Hedges and Net Asset Balance Sheet Hedges to be reported on account of income or capital?

Position: Income

Reasons: No underlying transaction

15 April 2010 Internal T.I. 2009-0348961I7 - Foreign Exchange/Gains & Losses

Unedited CRA Tags
9

Principal Issues: Are forward contracts on foreign exchange designed to hedge foreign subsidiaries on account of income or capital?

Position: Income since there is no underlying transaction.

Reasons: Salada (74 DTC 6171)

30 March 2010 Internal T.I. 2010-0354391I7 F - P.VI.1:Rachat à l'enchère hollandaise modifiée

Unedited CRA Tags
191.1(1)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Short-Term Preferred Share - Paragraph (a) - Subparagraph (a)(i)
deemed dividends on redemption of common shares tendered under modified Dutch auction came within (a)(i) and (e)(i) FMV exception
Summary Under
Tax Topics - General Concepts - Fair Market Value - Shares
purchase price established under modified Dutch auction represented the tendered shares’ FMV

Principales Questions: Est-ce que le fait que la Société ait déposé une offre publique de rachat de ses actions ordinaires à l'enchère hollandaise modifiée et que des conventions y découlant aient été conclues avec certains actionnaires ayant déposé leurs actions en réponse à l'offre a eu pour conséquence de faire en sorte que les actions ordinaires de la Société deviennent des APCT ou des API.

Position Adoptée: Non.

Raisons: Exceptions prévues aux sous-alinéa a)(i) et e(i) de la définition d'APCT et de l'alinéa f) de la définition d'API prévue au paragraphe 248(1). Le prix de rachat des actions ne dépassait pas la JVM des actions ordinaires de la Société au moment de la conclusion des conventions ou au moment de l'acquisition des actions.

25 March 2010 Internal T.I. 2010-0353081I7 - Part VI - Preferred Shares Liabilities

Unedited CRA Tags
181(1); 181.1(3); 181(3)

Principal Issues: Whether preferred shares that are not retractable within the five years of the date of issue that are classified as a liability on the financial institution's balance sheet are included in capital for Part VI purposes.

Position: Yes.

Reasons: The shares are long-term debt within the meaning of subsection 181(1).

23 March 2010 Internal T.I. 2009-0348551I7 - Accumulated Profits

Unedited CRA Tags
20(1)(c)

Principal Issues: Can the corporation, when determining whether interest is deductible on money borrowed to pay a dividend, ignore, that is reverse, a reduction to retained earnings caused by the application of paragraphs .08 and .09 of Section 3840 of the CICA Handbook to a taxable related party transaction?

Position: Yes

Reasons: Under the circumstances, the corporation's accumulated profits should not be affected by the related party transaction.

12 March 2010 Internal T.I. 2009-0352061I7 - Foreign Exchange Gains/Losses on Hedges

Unedited CRA Tags
9

Principal Issues: Is the hedge used to offset the effects of foreign exchange movements in the value of the shares of the foreign subsidiaries on account of income or capital?

Position: Income account

Reasons: No underlying transaction (as supported by case law