Income Tax Severed Letters - 2010-09-03

Ruling

2010 Ruling 2010-0358731R3 - SIFT

Unedited CRA Tags
S. 12(1)(x); 40(3.3); 40(3.4); 54; 56(2); 85.1(7); 85.1(8); 122.1(1); 197; 245(2) and 248(1)

Principal Issues: Whether partnership qualifies as a excluded subsidiary entity following reorganization

Position: Yes

Reasons: Meets statutory requirements

2010 Ruling 2010-0376231R3 F - Supplementary ruling

Unedited CRA Tags
85(1)(d)(i)

Principal Issues: Amendment to the ruling to allow proportionate transfer of CEC

Position: Accepted

Reasons: Historical administrative position

2010 Ruling 2010-0355671R3 - Loss consolidation

Unedited CRA Tags
20(1)(c), 112, 12(1)(c), 12(1)(x), 15(1), 56(2), 69(1), 69(11), 246(1), 245

Principal Issues: Is loss consolidation acceptable?

Position: Yes

Reasons: Within established parameters.

2010 Ruling 2009-0352121R3 - Status of 149(1)(l) entity created by a Charity

Unedited CRA Tags
149(1)(l), 149.1(2)(a), 188.1(1)(b)

Principal Issues: Two rulings: (1) Whether Newco will be considered to be organized and operated as a 149(1)(l) entity. (2) Whether the Charity will not be considered to be carrying on a business by virtue of the consignment sale arrangement.

Position: Rulings given: (1) Newco will be considered to be organized as a 149(1)(l) entity. (2) The Charity will not be considered to be carrying on a business solely by virtue of the consignment sale arrangement.

Reasons: We can rule that an organization is organized as a 149(1)(l) entity, however, it is a question of fact at a particular point in time whether the organization is operated as such. This must be determined by the TSO.

2010 Ruling 2010-0372181R3 - Canada-U.S. Tax Convention - Article IV(7)(b)

Unedited CRA Tags
84(1); 212(2); 212(1)(b); Articles IV(7), X; XI; XXIX-A of the Treaty

Principal Issues: 1) Whether Article IV(7)(b) of the Treaty applies to treat the deemed dividend and the interest paid by Canco (a fiscally transparent entity) as not being paid to a resident of the USA. 2) Whether the interest paid by Canco to the US resident will be subject to withholding under subsection 212(1)(b).

Position: 1) No. 2) No.

Reasons: 1) Article IV(7)(b) of the Treaty does not apply because the deemed dividend and the interest paid are subject to the same treatment under the taxation laws of the U.S.A. as it would be if Canco were not fiscally transparent. 2) Paragraph 1 of Article XI of the Treaty applies.

2010 Ruling 2010-0361101R3 F - Dommages-intérêts: RPA

Unedited CRA Tags
248(1)

Principales Questions: Est-ce les montants que l'Entité se propose de verser aux membres du Groupe à titre de dommages-intérêts conséquemment aux renseignements erronés fournis par l'Entité seront à inclure dans le calcul du revenu des bénéficiaires?

Position Adoptée: Non.

Raisons: Ces montants représentent des dommages-intérêts versés pour compenser les pertes financières qui résultent de la négligence de l'Entité.

Technical Interpretation - External

26 August 2010 External T.I. 2010-0367981E5 - Distribution of union assets on wind-up

Unedited CRA Tags
8(1)(i)(iv); 6(1)(j); 54; 38

Principal Issues: What income tax implications arise for union members in receipt of a distribution from a union on wind-up?

Position: Generally, the disposition of the right to be a member of the union will constitute a disposition of a capital property that has a cost base of nil such that the distribution, representing proceeds of disposition, will be included in the member's income as a capital gain.

Reasons: See above.

26 August 2010 External T.I. 2010-0368031E5 - Payroll Allowance Credit

Unedited CRA Tags
6(1)(b)

Principal Issues: Whether payments made to employees for providing notification that hotel rooms will not be required are taxable.

Position: They may be non-taxable.

Reasons: If the allowances are paid to compensate the employees for travel-related expenses as a result of using private accommodations they may be exempt pursuant to subparagraph 6(1)(b)(vii).

26 August 2010 External T.I. 2004-0078321E5 - Computation of branch profits

Unedited CRA Tags
115(1)(a)(ii); 18(1)(v); 20.2; Canada-UK Income Tax Convention; s. 4 of the Income Tax Conventions Interpretation Act

Principal Issues: Whether certain transactions between the Canadian branch of a non-resident bank and another branch of such bank situated in a third jurisdiction would be recognized in computing the Canadian branch profits of the bank

Position: Transactions will be recognized to the extent that they are relevant in computing the bank's income earned in Canada under the Act

Reasons: An authorized foreign bank's income earned in Canada is its profit, subject to Part I modifications, reported to the Supt of Financial Institutions

13 August 2010 External T.I. 2010-0367971E5 - Taxable Income of Tour Hosts

Unedited CRA Tags
9(1) 18(1)(a) & (h), 67, 67.1

Principal Issues: What are the tax consequences relating to travel costs paid on behalf of, and other amounts paid to, tour hosts?

Position: A question of fact. Likely taxable business income in this situation.

Reasons: Whether tour hosts are considered employees or self-employed individuals is a question of fact. Where they are not employees and there is sufficient activity and commerciality in their activities, it would be appropriate to treat amounts received as business income. The tour host would be entitled to business deductions subject to the limitations in the Act such as the 50% limitation in subsection 67.1(1) of the Act.

11 August 2010 External T.I. 2010-0368681E5 - Ownership of a Principal Residence

Unedited CRA Tags
40(2), 54, 248

Principal Issues: Is there a change in beneficial ownership when a taxpayer that holds legal title transfers a property that is a housing unit to her daughter and the daughter's spouse?

Position: General answer.

Reasons: Question of fact. The transaction is already completed.

11 August 2010 External T.I. 2009-0346641E5 - Interest Income

Unedited CRA Tags
6(1)(a); 12(1)(c)

Principal Issues: Who should report the interest income earned from a fund owned by a group of contractors to cover their insurance deductible in the event of a major accident?

Position: Generally, the individual contractors.

Reasons: Based on the scenario presented.

Technical Interpretation - Internal

10 August 2010 Internal T.I. 2010-0376711I7 - Interest deductibility

Unedited CRA Tags
20(1)(c)

Principal Issues: Will interest paid on borrowed money, used for the purpose of investing in common shares, be deductible where no income has been earned from the common shares.

Position: Taxpayer's request was forwarded to the appropriate Tax Centre.

Reasons: Question relates to an actual situation in prior taxation years.

3 August 2010 Internal T.I. 2010-0369281I7 - Clergy residence deduction

Unedited CRA Tags
8(1)(c)

Principal Issues: Is the Entity a religious order for the purpose of claiming the clergy residence deduction pursuant to paragraph 8(1)(c) of the Act?
2) If the response to 1) is yes, then do certain individuals employed in the above-mentioned organization satisfy the function test by virtue of being exclusively in full-time administrative service by appointment of a religious order?

Position: 1) No.
2) General comments provided.

Reasons: 1) The organization does not satisfy all the six conditions necessary for the purpose of qualifying as a religious order.
August 3, 2010

9 June 2010 Internal T.I. 2010-0367591I7 - Indian--Business Income

Unedited CRA Tags
81(1)(a)

Principal Issues: Is the business income earned by a self-employed Indian XXXXXXXXXX exempt from tax?

Position: The Indian may be able to claim a partial exemption.

Reasons: The CRA will allow a claim for a partial exemption on business income if the Indian can clearly identify the income earned from work completed on a reserve. Expenses to earn income must be allocated on a reasonable basis.