Income Tax Severed Letters - 2010-08-06


2010 Ruling 2010-0353911R3 - Loss Utilization

Unedited CRA Tags
20(1)(c); 55(3)(a); 88(1.1); and 112(1)

Principal Issues: Standard loss utilization transaction

Position: Ruling Issued

Reasons: Meets statutory and administrative requirements

XXXXXXXXXX 2010-035391

2010 Ruling 2010-0355031R3 - Loss Utilization

Unedited CRA Tags

Principal Issues: Is the loss utilization arrangement acceptable?

Position: YES

Reasons: meets established and published positions

Ministerial Correspondence

28 July 2010 Ministerial Correspondence 2010-0372161M4 - private health savings plans

Unedited CRA Tags
Taxation of premiums paid by an employer on behalf of an employee

Principal Issues: general comments provided

Position: N/A

Reasons: 6(1)(a)

6 July 2010 Ministerial Correspondence 2010-0370651M4 - medical devices coagulation meter

Unedited CRA Tags
118.2(2) Regulation 5700

Principal Issues: Whether coagulation meters qualify as medical devices for purposes of the medical expense tax credit?

Position: No.

Reasons: No provision in the ITA or Regulation 5700 for coagulation meters.

30 June 2010 Ministerial Correspondence 2010-0368231M4 - PHSP

Unedited CRA Tags
248(1), 118.2(2)

Principal Issues: Expenses that may be covered by a PHSP

Position: Hospital or medical expenses which normally would otherwise qualify for the medical expense tax credit.

Reasons: The law and previous interpretations of the CRA.

5 May 2010 Ministerial Correspondence 2010-0357351M4 - HRTC - Stratas

Unedited CRA Tags
Subsection 118.04(1) of the ITA

Principal Issues: 1. If the work was not completed prior to February 1, 2010, can the individual unit owners of a strata claim the HRTC on their portion of the fees charged by the strata council?
2. Is the payment to contractor required to be made before February 1, 2010?

Position: 1. Individual unit owners can claim the HRTC on their share of qualifying expenditures incurred by the strata council. Expenditures incurred for services received or goods acquired after January 31, 2010, do not qualify for the HRTC. However, if part of the work was performed during the eligible period, the cost of that work will qualify for the HRTC.
2. No.

Reasons: 1. Pursuant to subsection 118.04(1), services must be received or goods must be acquired during the eligible period that begins on January 28, 2009 and ends on January 31, 2010 to qualify for the HRTC.
2. Section 118.04 does not require the payment to be made before February 1, 2010.

4 May 2010 Ministerial Correspondence 2010-0357611M4 - HRTC-Who eligible to claim

Unedited CRA Tags

Principal Issues: Can children, who are older than 18 years, claim HRTC for parents' residence, where the children reside with the parents?

Position: No, the children do not meet the qualified relation definition. Also, the dwelling is not the eligible dwelling of the children.

Reasons: Legislation

1 April 2010 Ministerial Correspondence 2010-0357051M4 - HRTC - Eligible Expenditures

Unedited CRA Tags

Principal Issues: The federal government should consider the cost of built-in appliances as qualifying expenditures for purposes of the HRTC.

Position: Referred to the Department of Finance.

Reasons: The HRTC legislation specifically excludes the cost of household appliances, whether built-in or stand-alone.

Technical Interpretation - External

28 July 2010 External T.I. 2010-0374471E5 - Foreign exchange gains and losses on deposits

Unedited CRA Tags

Principal Issues: Is a taxpayer obligated to report a foreign currency gain or loss in respect of the conversion of funds on deposit for the purposes of the Income Tax Act?

Position: Yes.

Reasons: Pursuant to ITA 39(2), if an individual's net foreign exchange gain or loss in respect of capital property is in excess of $200, it is taxable as a capital gain or deductible as a capital loss.

27 July 2010 External T.I. 2010-0371881E5 - METC - Lacrisert

Unedited CRA Tags
118.2(2)(j), (n)

Principal Issues: 1- Whether Lacrisert qualifies for the METC as "other devices" pursuant to paragraph 118.2(2)(j) 2- Does it qualify as a drug etc under paragraph 118.2(2)(n)?

Position: 1- Generally, no. In special cases, may qualify under paragraph 118.2(2)(j) if for the treatment or correction of a defect of vision as prescribed by a medical practitioner or optometrist. 2- No. Does not qualify under subparagraph 118.2(2)(n)(i) as may be acquired without a prescription. Does not qualify under subparagraph 118.2(2)(n)(ii) and section 5701 of the Regulations as does not require intervention of a medical practitioner.

Reasons: 1- "Other devices" may include an ophthalmic insert. It may qualify in specific cases where it is used to treat or correct a defect in vision.

27 July 2010 External T.I. 2009-0352771E5 - Adoption in fact and extended meaning of child

Unedited CRA Tags
118.3(2), 118(1)(b)(ii), 251(6), 252(1)(b)

Principal Issues: 1- Whether a person has been adopted in fact and is "wholly dependent" under paragraph 118(1)(b). 2- Whether a person is a child under the extended meaning of "child".

Position: 1- Question of fact but likely not. 2- Question of fact but appears not.

Reasons: 1- Question of fact as to whether there has been a de facto adoption. Question of fact whether the person is "wholly dependent" under paragraph 118(1)(b) but likely not given that the person receives disability support payments from a government agency and pays rent for room and board. 2- Paragraph 252(1)(b) requires the person to be "wholly dependent on the taxpayer for support" and for the taxpayer to have "custody and control" of the person. Both requirements are questions of fact. However, the "wholly dependent on the taxpayer for support" requirement does not appear to be met given that the person receives disability support payments from a government agency and pays rent for room and board.

26 July 2010 External T.I. 2010-0368991E5 F - CIAPH - Société de personnes

Unedited CRA Tags
partner is not precluded from claiming HBTC for residence acquired by partnership

Principales Questions: Dans certaines situations données, est-ce qu'un associé d'une société de personnes pourrait réclamer le CIAPH?

Position Adoptée: Oui, dans la mesure où l'associé et le logement respectent toutes les conditions de l'article 118.05.

Raisons: En vertu d'une position administrative applicable aux fins du CIAPH, l'ARC accepte généralement qu'un associé d'une société de personnes puisse réclamer le CIAPH si l'associé et le logement respectent toutes les conditions de l'article 118.05. Positions similaires adoptées pour les fins de la résidence principale et le CIRD.

26 July 2010 External T.I. 2009-0349481E5 F - 212(1)d)(i)-Marque de commerce utilisée au Canada

Unedited CRA Tags
royalty for use outside Canada of trademark is subject to withholding

Principales Questions: Dans la situation soumise, est-ce que les redevances payées pour l'utilisation d'une marque de commerce par une société canadienne en faveur d'un concédant étranger attribuables à des marchandises vendues par l'entremise d'une filiale étrangère sont assujetties à l'alinéa 212(1)d) interprété à la lumière de l'article 4 de la Loi sur les marques de commerce ?

Position Adoptée: Oui.

Raisons: Libellé de la loi et interprétation.

21 July 2010 External T.I. 2010-0371261E5 - Farming income - FIT / microFIT Programs

Unedited CRA Tags
248(1) "farming", 1100(24)

Principal Issues: 1. Is the income earned by a farmer under a FIT / microFIT contract considered farming income? 2. Is the income earned by a farmer for the rental of farmland to a third party who enters into FIT / microFIT contract considered farming income? 3. Would the income earned by a farmer under items 1 & 2 be considered incidental to farming income?

Position: 1. No. 2. No. 3. Not likely.

Reasons: These activities in of themselves would not meet the definition of farming contained in subsection 248(1) of the Act. In addition, the arrangements appear to be long-term in nature and involve a significant capital investment.

12 July 2010 External T.I. 2009-0344721E5 - Interest Deductibility

Unedited CRA Tags
12.2; 20(1)(c)(iv); 87(7)

Principal Issues: 1. Is a subsidiary entitled to deduct reasonable interest incurred on borrowed money used to pay a dividend to its parent which used the proceeds to acquire an interest in an annuity contract in respect of which section 12.2 applies? 2. Where a subsidiary and its parent amalgamate, is Amalco entitled to deduct, without limitation, reasonable interest incurred on money previously borrowed by the subsidiary and used to pay a dividend to the parent, which used the proceeds to acquire an interest in an annuity contract in respect of which section 12.2 applies?

Position: 1. Dependent on the facts. GAAR could apply. 2. No, the allowable deduction would be limited by subparagraph 20(1)(c)(iv).

Reasons: 1. The exception to the direct use test regarding borrowed money used to pay a dividend may not be met. Dependent on the facts, the borrowing and the dividend payment could be within a series of transactions to which section 245 of the Act would apply. 2. Amalco's current use of the borrowed money would be to acquire an interest in an annuity contract in respect of which section 12.2 applies.

9 July 2010 External T.I. 2010-0370201E5 - Clergy residence Deduction

Unedited CRA Tags

Principal Issues: Is an individual who is the vice-principal and school chaplain in a Roman Catholic school eligible for a clergy residence deduction?

Position: No

Reasons: Does not satisfy the status test.

8 July 2010 External T.I. 2010-0367571E5 - Interest Income- Overseas Bank Account

Unedited CRA Tags

Principal Issues: Whether interest accrued in an overseas bank account held by Canadian resident taxpayer is to be reported for Canadian tax purposes, where the taxpayer may not have contributed to the funds in the account.

Position: It is a question of fact.

Reasons: General comments provided.

7 July 2010 External T.I. 2010-0366161E5 - PHSP - group assured access

Unedited CRA Tags

Principal Issues: Whether the addition of a rider in a plan that would otherwise qualify as a PHSP would affect the characterization of the plan as a PHSP. The additional rider would allow an employee to enter into an individual plan similar to the PHSP in the event that an employee terminates employment.

Position: No.

Reasons: Coverage under the plan would remain solely in respect of eligible medical expenses.

7 July 2010 External T.I. 2010-0370611E5 F - Purchase of Shares by Subsidiary - Sec. 245

Unedited CRA Tags
position that an individual potentially can realize a capital gain by selling shares to a Newco sub of the corporation for cash does not depend on there being a s. 87 or 88 merger of Newco and the corporation
realization by an individual of capital gain by selling shares to the corporation’s Newco sub requires inter alia that any basis created in Newco not be abused

Principales Questions: Following CRA's answer to question 6.3 of the 2005 APFF Federal Round Table, precisions as to whether, in order for a departing shareholder to avoid the application of GAAR, Opco must be merged with Subco after this latter corporation acquires the shares of the capital-stock of Opco from the departing shareholder.

Position Adoptée: No.

Raisons: Wording of the Act and previous positions.

6 July 2010 External T.I. 2009-0331651E5 - Interest deductibility

Unedited CRA Tags
20(1)(c); 20(1)(d)

Principal Issues: Where interest on a line credit is deductible, will interest on an increased borrowing against that line of credit be deductible when the increased borrowing is used to pay interest on the line of credit?

Position: It depends on the facts.

Reasons: It is a question of fact whether the original interest on the line of credit would be paid resulting in the interest on the increased borrowing being deductible when paid or payable pursuant to paragraph 20(1)(c) of the Act or, rather, if the original interest on the line of credit would be compounded resulting in the interest on the increased borrowing being deductible only when paid pursuant to paragraph 20(1)(d) of the Act.

29 June 2010 External T.I. 2010-0362941E5 - PHSP - OTC drugs

Unedited CRA Tags
248(1), 118.2(2), 118.2(2)(k), 118.2(2)(n), Reg 5701

Principal Issues: Whether over-the-counter drugs may be covered by a PHSP

Position: Generally, no.

Reasons: Coverage under a PHSP must be in respect of hospital care or expense or medical care or expense which normally would otherwise qualify as a medical expense under 118.2(2). Generally, over-the-counter drugs would not qualify as a medical expense under 118.2(2).

28 June 2010 External T.I. 2010-0362391E5 F - Revenus de récompenses

Unedited CRA Tags
56(1)n), 7700 Règlement
awards for winning music competitions might or might not be prescribed prizes

Principales Questions: Est-ce qu'un étudiant en musique doit inclure dans son revenu en vertu de l'alinéa 56(1)n) les récompenses qu'il aurait reçues lors de participations à divers concours de musique XXXXXXXXXX ?

Position Adoptée: Aucune

Raisons: Question de fait

28 June 2010 External T.I. 2010-0362181E5 - Overseas Employment Tax Credit

Unedited CRA Tags
ITA 122.3

Principal Issues: (1) Whether an individual who was employed for more than 6 consecutive months, worked 130 days during that period, and spent 120 of those working days outside Canada such that almost all of the duties of employment where performed during those 120 days, will qualify for the OETC if all other conditions of section 122.3 are met. (2) How to treat two separate qualifying periods of more than 6 consecutive months each, where one covers part of 2008 and 2009 and the other occurs in 2009.

Position: (1) Yes, provided that, in fact, the individual performed more than 90% of the employment duties outside Canada. (2) Provided that all of the requirements of section 122.3 are met in respect of each period, the individual could claim an OETC for the 2008 taxation year (in respect of the relevant days that fall within the 2008 calendar year) and for the 2009 taxation year (in respect of the relevant days that fall within the 2009 calendar year), subject to the limits set out in the section.

Reasons: Section 122.3 of the Act. Paragraph 3 of IT-497R4. Rooke v. The Queen (FCA) 2002 DTC 7442.

25 June 2010 External T.I. 2010-0361011E5 - METC - gym membership and weight-loss clinic

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

Principal Issues: 1- Whether a gym membership is an eligible medical expense. 2- Whether fees for a weight-loss clinic are an eligible medical expense.

Position: 1- No. 2- Maybe.

Reasons: 1- No provision qualifies a gym membership as an eligible medical expense. 2- May qualify under 118.2(2)(a).

24 June 2010 External T.I. 2010-0359101E5 - Principal Residence IT-120R6

Unedited CRA Tags
54, 40(2)(b)

Principal Issues: What are the tax issues at the time of a disposition when a principal residence is no longer "ordinarily inhabited" by its owner?

Position: The home will be subject to capital gains for the years from when it no longer qualifies as a "principal residence" to the date it is sold. Taxpayer may be able to claim principal residence exemption for the years that home qualifies as a "principal residence" provided that the necessary conditions are met in section 54 of the Act.

Reasons: Legislation.

18 June 2010 External T.I. 2010-0365801E5 - medical expenses - cosmetic procedures

Unedited CRA Tags
118.2(2) 248(1) PHSP

Principal Issues: Whether the cost of cosmetic procedures qualifies as a medical expense for purposes of the medical expense tax credit and should be covered as a medical expense under a private health services plan.

Position: Generally no. The 2010 Budget proposed that the cost of cosmetic procedures would generally not qualify as medical expenses unless the services are for medical or reconstructive purposes.

Reasons: The 2010 Budget proposals.

16 June 2010 External T.I. 2010-0361251E5 - Limitation on Benefits

Unedited CRA Tags
Article XXIX-A(2)(e) Canada-U.S. Tax Convention

Principal Issues: How should the base erosion test in subparagraph 2(e) of Article XXIX-A of the Canada-U.S. Tax Convention be applied to a qualified subchapter S subsidiary ("QSSS")?

Position: The base erosion test is to be applied as if the QSSS was not fiscally transparent and was required to compute its gross income and expenses in its own right

Reasons: Consistent with the purpose of Article XXIX-A(2)

15 June 2010 External T.I. 2010-0365461E5 - LSVCC

Unedited CRA Tags
127.4, 204.81(1)

Principal Issues: 1) Will the federal labour sponsored funds tax credit be available to a labour sponsored venture capital corporation ("LSVCC"), that is provincially, but not federally registered in the province of Ontario during the years 2009-2011, when the provincial credit is being phased out?
2) If the federal credit is available for the period referred in 1) above, to the provincially registered corporation, will the amount of the federal credit be prorated for those years to match the provincial credit?

Position: 1) Yes
2) No

Reasons: 1) There is no consequential amendment issued in respect of the phasing out of the Ontario LSVCC tax credit.
2) Based on the definition of "approved shares" in paragraph (b) of subsection 127.4(1)

14 June 2010 External T.I. 2010-0368661E5 - Canada - Sultanate of Oman Income Tax Convention

Principal Issues: What will be the tax treatment of the different forms of revenue received as part of a franchise agreement with an Omani company under the Canada-Sultanate of Oman Income Tax Convention (the "Treaty")?

Position: See analysis.

14 June 2010 External T.I. 2010-0365202E5 - Child care expense - holding a place

Unedited CRA Tags

Principal Issues: Are day care expenses paid to hold a child's position during a parent's temporary leave of absence deductible as a child care expense?

Position: An individual would generally be allowed a child care expense deduction if there is a sufficient nexus between the making of the payment and the eventual resumption of activity carried on before the leave of absence. In the case of employment, the taxpayer would have to remain employed during the period of absence and eventually return to work with the same employer.

Reasons: The purpose test in section 63 of the ITA would not require that the child care expense be incurred at the same time as the resumption of the activity carried on before the leave of absence.

14 June 2010 External T.I. 2010-0365151E5 - Moving expenses deduction

Unedited CRA Tags
62, 248(1)

Principal Issues: Whether a taxpayer would be allowed to claim as moving expenses various selling costs and legal fees incurred as a result of: (1) the sale of an original home resulting from a move to another city because of a change in employment and (2) the purchase of a subsequent home located 0.7 kilometres from the original home due to a move back to the original city resulting from another change in employment.

Position: 1. No. The original home was not sold as a result of the move and therefore the expenses do not meet the requirements of paragraph 62(3)(f). 2. Yes. As long as the legal expenses in connection with the purchase of the subsequent home meet the requirements of subsection 62(1), they should be deductible since they are on account of moving expenses incurred in respect of an eligible relocation.

Reasons: The taxpayer decided to rent the original home and made no effort to sell the original home as a result of the move.

7 June 2010 External T.I. 2010-0361971E5 - Tax status of LTD Plan

Principal Issues: Is the tax status of a Long Term Disability Plan altered if payments are returned?

Position: The tax status of a LTD Plan would not be altered by a return of payments as long as the terms of the LTD Plan did not alter the legal obligation of the employees to pay the premiums and the facts show that only the employees continue to fund its future contributions.

Reasons: The taxation of benefits derived from a LTD plan depends upon whether or not a particular plan is funded entirely by employee contributions. Benefits received by employees from an employee-pay-all-plan are not taxable employment income since it is the employees, not the employer, who are funding the plan from their taxed earnings. Generally, an employee-pay-all-plan is one under which the employees have the legal obligation to pay the premiums and in fact do so from their taxed earnings. The tax status of the LTD Plan is not altered by a return of the payments as long as the terms of the LTD Plan did not alter the legal obligation of the employees to pay the premiums and the facts show that only the employees continue to fund its future contributions.

19 May 2010 External T.I. 2009-0307091E5 - Ontario Apprentice Training Tax Credit

Unedited CRA Tags
CTA 44.1(5), CTA 43.13(17), TA 84(1)

Principal Issues: How is an Ontario Apprenticeship Training Tax Credit (ATTC) earned in a corporation's 2008 taxation year and received in its 2009 taxation year adjusted for in determining the corporation's 2009 Ontario tax liability in order to avoid double taxation of the ATTC?

Position: Currently, neither the Corporations Tax Act nor the Taxation Act, 2007 has any adjustments to account for the ATTC being included twice in Ontario taxable income. The Ontario Ministry of Finance is working to resolve the issue.

Reasons: The issue relates to Ontario tax policy which is the responsibility of the Ontario Ministry of Finance.

5 May 2010 External T.I. 2009-0350791E5 - Salary Continuance Payments

Unedited CRA Tags
5(1), 56(1)(a)(ii), 248(1)

Principal Issues: Are salary continuance payments considered employment income or a retiring allowance?

Position: Payments are considered employment income.

Reasons: Pension benefits continue to accrue to the employees. Therefore, an employment relationship exists and payments are considered to be employment income.

4 May 2010 External T.I. 2009-0342951E5 - UK War Widows Pension

Unedited CRA Tags
81(1)(e), 81(1)(d)

Principal Issues: Whether a war widow's pension from the UK received by a resident of Canada is exempt from tax in Canada.

Position: Not enough information to give a definitive answer.

Reasons: The payment must meet the requirements under paragraph 81(1)(e).

XXXXXXXXXX 2009-034295
Andrea Boyle
May 4, 2010

27 April 2010 External T.I. 2010-0358221E5 - Home Renovation Tax Credit

Unedited CRA Tags
ITA 118.04

Principal Issues: Does a seniors' residence governed by a housing society qualify as an eligible dwelling under the HRTC?

Position: No

Reasons: Individual members do not own a housing unit nor do they have share of capital stock of a co-operative housing corporation.

XXXXXXXXXX 2010-035822

April 27, 2010

21 April 2010 External T.I. 2009-0352171E5 - Interest deductibility

Unedited CRA Tags

Principal Issues: Is mortgage interest deductible pursuant to paragraph 20(1)(c) of the Act in a restructured borrowing arrangement ?

Position: Appears so.

Reasons: Direct use of borrowed money for income producing purpose can be identified. The arrangement is very similar to the one proposed by Hershfield J. in Sherle v The Queen.

12 April 2010 External T.I. 2009-0317941E5 - Canada-US Tax Convention - Article XXIX A

Unedited CRA Tags
Canada- US Tax Convention Articles XXIX A(2)(e), (3) and (4)(b)
meaning of "paid or payable...directly or indirectly" in Art. XXIX A of Cda-US Treaty

Principal Issues: (1) In applying the "base erosion" test in Article XXIX A(2)(e) or (4)(b), how will the CRA interpret the reference to payments made "indirectly" to persons other than qualifying persons? (2) In applying the "active trade or business" test in Article XXIX A(3), will the CRA treat the business activities of a U.S. LLC that is treated as a partnership for U.S. tax purposes as the business activities of its members?

Position: (1) The CRA will interpret the words "paid or payable...directly or indirectly" contained in Article XXIX A(2)(e) and (4)(b) of the Convention consistent with the approach we have taken in interpreting those words under subparagraph 95(2)(a)(ii) of the Income Tax Act; (2) No

Reasons: (1) Consistent with a textual, contextual, purposive approach to interpreting the meaning of the words; (2) The LLC is an entity separate from its shareholders.

30 March 2010 External T.I. 2010-0357491E5 - True owner of property

Principal Issues: True owner of property: a corporation or its sole shareholder.

Position: Question of fact. See response.

Reasons: See response.

26 March 2010 External T.I. 2009-0349461E5 - AJCTC - Aggregate Claim Limitation

Unedited CRA Tags
127(5); 127(9)

Principal Issues: Is there an aggregate or cumulative limit in respect of the AJCTC a taxpayer might claim in respect of an eligible apprentice?

Position: No. Only an annual limitation.

Reasons: The legislation.

24 March 2010 External T.I. 2010-0360061E5 - Residency Status - OHIP usage

Unedited CRA Tags

Principal Issues: On behalf of his client, XXXXXXXXXX has brought two issues to light for our consideration:
1. Is their any way Client can voluntarily repay OHIP for the medical expenses that they covered in error; and
2. Does the fact that the OHIP card was used deem Client to be a Canadian resident (regardless of their wishes)?

Position: 1) Yes. 2) Unknown.

Reasons: 1) The client may contact Ontario's Ministry of Health and Long-Term Care either by phone or email. 2) Adequate information was not provided.
NOTE: View original document in Word.

16 March 2010 External T.I. 2009-0344001E5 - Principal residence - change in use

Unedited CRA Tags
12(1), 40(2), 45(2), 45(3), 45(4), 54

Principal Issues: The taxpayer built a new home and moved into it and decided to rent out the old home. 1) What is the tax implication on the capital gains arising at the time of the old home's eventual sale. 2) How should the taxpayer report the annual rental income on the personal income tax returns.

Position: 1) There is a deemed disposition and a reacquisition immediately thereafter of the old home at FMV at the time of conversion. The taxpayer may defer the gains by electing under subsection 45(2). 2) The rental income can be business income or property income (question of fact based on additional services provided) but generally is reported as property income on T776.

Reasons: Wording of the Income Tax Act

23 February 2010 External T.I. 2009-0332581E5 - Capital cost allowance - Non-residential buildings

Unedited CRA Tags
ITR 1100(1)(a.1), (a.2); 1101(5b.1); 1102(14); 1102(25); 1104(1); class 1

Principal Issues: 1. What documentation would the CRA require to support the taxpayer's assertion that the building was not used or acquired for use by any person or partnership prior to March 19, 2007? 2. Where an eligible non-residential building in respect of which an election has been filed by the transferor under subsection 1101(5b.1) is transferred by the transferor to a non-arm's length party, will that building automatically remain eligible in the hands of the transferee for the additional CCA rate in paragraph 1100(1)(a.1) or (a.2) due to the operation of subsection 1102(14)? 3. In the event the transferor did not file an election under subsection 1101(5b.1) in respect of a property that was first acquired on or after March 18, 2007, does the CRA accept that the non-arm's length transferee that acquired the property in circumstances in which subsection 1102(14) is applicable may file the election, making the property eligible for the additional CCA rate in paragraph 1100(1)(a.1) or (a.2)?

Position: 1. See response. 2. The transferee would not have to make the election, but would still have to meet the requirements in paragraph 1100(1)(a.1) or (a.2), as applicable, concerning the use test for at least 90% of the floor space at the end of the particular year. 3. The transferee may still file the election, but must also meet the requirements in paragraphs 1100(1)(a.1) or (a.2), as applicable, concerning the use test for at least 90% of the floor space.

Reasons: Legislation.

18 February 2010 External T.I. 2009-0344851E5 - Qualified Farm Property

Unedited CRA Tags
110.6, 73(3), 69(11)

Principal Issues: 1. Whether farm property that was purchased by the taxpayer and his spouse from a mother and was farmed by the father would be eligible for the capital gains exemption in respect of qualified farm property. 2. Whether adding the taxpayer's mother and two minor children to the property's legal title would result in the splitting of any capital gain from the sale of the property amongst five people.

Position: 1) Maybe 2) No.

Reasons: 1) The ownership test in s. 110.6 would be met by the taxpayer (ownership passed from the father to the mother and then to the taxpayer) and the farming use test would also be met if the taxpayer's father in at least two years while he owned the farm property had gross revenue from the farming business that exceeded his income from all other sources. 2) The "used principally" test in s. 73(3)(c) is not met to permit a rollover to a child under s.73(3.1); if a rollover were possible, s. 69(11) may apply to deny the benefits of the rollover. The transfer to the mother would occur at fair market value.

1 February 2010 External T.I. 2009-0338911E5 - Debt forgiveness

Unedited CRA Tags
80(2), 80(13), 80.01(6), 80.01(7), 80.01(8)

Principal Issues: 1. Where creditor-shareholders of a CCPC consent to dissolve it, will section 80 of the Income Tax Act (the "Act") be applicable?
2. If the creditor-shareholders elect under subsection 50(1) of the Act, will it cause section 80 to be applicable?

Position: 1. Yes
2. Yes

Reasons: 1. Because the creditor-shareholders are considered to have forgiven the debt.
2. The election triggers a disposition of debt and the application of the debt parking rules.

12 November 2009 External T.I. 2009-0335711E5 - Requirement to Provide Receipts

Unedited CRA Tags
152(7), 230(1), 231.1(1)(a)

Principal Issues: Whether the Canada Revenue Agency has the right to ask for a receipt to support a claim as a tax expense.

Position: Yes.

Reasons: By s.230(1), a taxpayer is required to maintain records and books of account, which may be inspected, audited, or examined, pursuant to s. 231(1)(a) of the Act.

Technical Interpretation - Internal

13 July 2010 Internal T.I. 2009-0325971I7 - Ontario Current Cost Adjustment (OCCA)-Gov Assist

Unedited CRA Tags
12(1)(x), 13(7.1)

Principal Issues: Should CRA change its long standing position and apply subparagraph 12(1)(x)(vi) or subsection 13(7.1) to the OCCA

Position: No

Reasons: The jurisprudence does not support a change of position.

10 June 2010 Internal T.I. 2009-0323061I7 - Section 11.2 of the CTA

Unedited CRA Tags
11.2 CTA

Principal Issues: Is a corporation entitled to increase its SR & ED expenditures in the 2001 taxation year by the amount of the ITCs that relate to a prior year's qualified expenditures when the same expenditures qualified for the Ontario Super Allowance.

Position: Yes

Reasons: Subsection 12(2.1) of the CTA prevents a corporation from deducting the Super Allowance and the section 11.2 incentive in the same taxation year. The CTA does not contain a provision that prevents both incentives from being calculated on the same qualified expenditures.

22 March 2010 Internal T.I. 2010-0352971I7 - Gold - maintenance costs and interest expenses

Unedited CRA Tags
9(1), 9(3), 40(1), 53(1), 53(2), 54

Principal Issues: Whether or not paragraph 13 of IT 346R is correct in stating that interest expense incurred to finance the purchase of commodities (and although not commented on the bulletin, maintenance costs to store the commodities) is not added to the ACB of the commodities or deductible in computing the taxpayer's income.

Position: yes

Reasons: IT 346R is still applicable. A speculator may either choose to report the transaction on account of income and deduct reasonable interest and maintenance costs, or report the transaction on account of capital but not be allowed to deduct in computing income or add to the ACB the interest and maintenance costs.

26 February 2010 Internal T.I. 2009-0339731I7 - Clergy residence deduction

Unedited CRA Tags

Principal Issues: Is XXXXXXXXXX a religious organization for the purpose of paragraph 8(1)(c) deduction

Position: No.

Reasons: It does not meet all the six conditions in determining whether an organization is a religious order

25 February 2010 Internal T.I. 2009-0343601I7 - Debt Forgiveness

Unedited CRA Tags
56.3; 61.4; 80; 152(4)(a)(i); 152(4.3); 165(1)

Principal Issues: 1. What tax pools are required to be reduced prior to a subsection 80(13) income inclusion? 2. Under the particular circumstances of this scenario, can the Minister designate the allocation of the forgiven amount to various tax attributes under subsection 80(16) or any other section of the Act? 3. Under the particular circumstances of this scenario, if the year is reassessed pursuant to paragraph 152(4)(a) and an amount is included as income pursuant to subsection 80(13), can the taxpayer then request full designations under subsection 80(5) through (11) pursuant to subsection 220(3.21)? 4. Could they claim a reserve pursuant to section 61.4?

Position: 1. A forgiven amount is to be applied in the following order: 80(3), 80(4), 80(5) then 80(7), 80(8), 80(9), 80(10), 80(11), 80(12) and finally 80(13). 2. No. 3. No. 4. Yes.

Reasons: Application of the Act to the facts of the situation.