Income Tax Severed Letters - 2010-08-27


2010 Ruling 2009-0332571R3 - Loss consolidation - related or affiliated

loss shift between related but unaffiliated corporations
loss shift between related but unaffiliated corporations

Principal Issues: Should GAAR be applied to a proposed loss consolidation arrangement between related (but not affiliated) corporations?

Position: No.

Reasons: The transfer of losses between related, but not affiliated, corporations should not result "in an abuse having regard to [the provisions of the Act] as a whole", for the purposes of subsection 245(4), because specific provisions such as subsections 111(4) to (5.5), 256(7), 191.3(1), 112(2.4), paragraph 55(3.1)(c), section 80.04 etc. allow loss utilization transactions between related corporations, while only subsection 69(11) does not allow rollover where property is transferred to a person other than a person that is affiliated with the transferor.

2010 Ruling 2010-0370331R3 F - Post butterfly transaction

Unedited CRA Tags

Principales Questions: Whether paragraphs 55(3.1)(b), (c) and (d) will apply as a result of the proposed transactions, which are to be undertaken subsequent to a butterfly that was implemented in XXXXXXXXXX .

Position Adoptée: No.

Raisons: Based on the interpretation of the law.

2010 Ruling 2009-0343271R3 - Irish Common Contractual Fund

Unedited CRA Tags

Principal Issues: What is the characterization of an Irish Common Contractual Fund for purposes of the Act?

Position: The Irish Common Contractual Fund itself is an unincorporated body and each investor in the fund is a co-owner in the assets of the fund.

Reasons: The fund is being established such that each investor has an undivided co-ownership interest in the assets of the fund.

Technical Interpretation - External

19 August 2010 External T.I. 2010-0371151E5 - Grants and Awards

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

Principal Issues: Tax treatment and reporting requirements of payments under the XXXXXXXXXX

Position: Given the requirements of the program, the amounts are likely scholarship

Reasons: Amounts appear to be awarded to undergraduate students to assist them in proceeding towards a university degree.

13 August 2010 External T.I. 2010-0359571E5 F - Crédit d'impôt étranger

Unedited CRA Tags

Principales Questions: Qui d'une société canadienne qui détient des droits d'exploitation d'émissions télévisuelles ou d'une autre société canadienne qui agit comme agent négociateur pour l'autre société lors de la vente de ces droits à l'étranger peut réclamer le crédit d'impôt étranger?

Position Adoptée: La société canadienne qui détient les droits d'exploitation d'émission télévisuelles

Raisons: C'est la société qui détient les droits d'exploitation qui est la partie venderesse. L'autre société canadienne n'agit qu'à titre d'agent négociateur et est rémunérée par la société détentrice des droits et non pas par le tiers acquéreur étranger. L'impôt ne peut donc appartenir à la société négociatrice mais à la société détentrice des droits.

10 August 2010 External T.I. 2010-0375241E5 - Canadian Forces personnel and police deduction

Unedited CRA Tags

Principal Issues: Would police officers working overseas in partnership with the RCMP qualify for the Canadian Forces personal and police deduction under 110(1)(f)(v)?

Position: A question of fact.

Reasons: To qualify for the Canadian Forces personnel and police deduction, a police officer must be serving on a qualifying mission. An employee of the Government of Canada or a provincial or municipal government would not qualify for the overseas employment tax credit.

6 August 2010 External T.I. 2010-0370681E5 - Tuition and Education credits -Indian

Unedited CRA Tags
81(1)(a), 56(1)(n), 56(3), 118.5, 118.6, 152(4.2), 152(4)

Principal Issues: 1. Can the tuition, education and textbook tax credits be claimed if the student receives tax-exempt education assistance?
2. Can the tuition, education and textbook tax credits be claimed if the student's employer paid for the employee's tuition and the amount is not included in the student's income?
3. For how many previous years can tax returns be adjusted for the tuition and education amounts?

Position: 1. Possibly.
2. It depends on the nature of the assistance received.
3. A request for an adjustment will be considered for up to the previous 10 years depending on the facts.

Reasons: 1. Receipt of a scholarship or bursary will not preclude a student from claiming the tuition, education and textbook tax credits, providing all other criteria for the tax credits are met.
2. See the document.
3. Subsection 152(4.2) allows for a reassessment for up to the previous 10 years.

23 June 2010 External T.I. 2010-0366441E5 - Taxation of Medical Residents - Grants

Unedited CRA Tags
56(1)(n), 56(1)(r), 12(1)(x), 56(3), 5(1), 6(3), 6(1)

Principal Issues: Is an amount received by a medical resident for an agreement to practice (return of service) in an underserviced area taxable?

Position: Yes.

Reasons: The amount, while linked to tuition, appears to be an inducement to practice in an underserviced area and is not a scholarship or bursary. The amount appears to be taxable, likely as employment income or as a government incentive.

Technical Interpretation - Internal

30 July 2010 Internal T.I. 2010-0369701I7 - Unincorporated Associations & paragraph 149(1)(l)

Unedited CRA Tags

Principal Issues: If an unincorporated association that has claimed a tax exemption under paragraph 149(1)(l) is found not to qualify for this exemption who is taxable on the income earned by the unincorporated association?

Position: Likely the members of the unincorporated association

Reasons: The unincorporated association is not a "person" for purposes of the Act; thus the income would be attributable to its members.

21 July 2010 Internal T.I. 2009-0311861I7 - Issues par. 149(1)(c) and proposed par.149(1)(d.5)

Unedited CRA Tags
149(1)(c); 149(1)(d.5); 149(1.2)

Principal Issues: 1. Is the Indian band a public body performing a function of government as that term is used in paragraph 149(1)(c)? 2. What are our views on the payment of management fees by a corporation owned by the band to the band such that the corporations income is reduced to nil. 3. Does the corporation qualify for the tax exemption provided by proposed paragraph 149(1)(d.5)?

Position: 1. Yes for years after XXXXXXXXXX ; likely yes for years before this time. 2. The payment of fees should be reviewed to determine if the amounts paid were reasonable. 3. Likely not, but should consider application of proposed subsection 149(1.2)

Reasons: 1. Passed section 81 and 83 by-laws (83 by-law accepted by INAC in XXXXXXXXXX). Before this time offered many municipal and provincial type services to members. 2. Management fees do not qualify under the policy for owner/shareholders of CCPC's'; section 67 would apply. 3. Corporation earns over 95% of income from activities carried on off the reserve. Consider whether proposed subsection149(1.2) could apply.

21 July 2010 Internal T.I. 2010-0369991I7 - Taxation of Post-Doctoral Fellowships

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

Principal Issues: Whether a post-doctoral fellowship is exempt from tax (scholarship exemption subsection 56(3)).

Position: Generally, no.

Reasons: See discussion in document and attachments.