Income Tax Severed Letters - 2010-12-10


2010 Ruling 2010-0376391R3 - Related Foreign Entity Financing

Principal Issues: Whether a loan from a controlled foreign affiliate to a related non-resident entity will trigger the application of subsection 15(2) and Part XIII.

Position: No

Reasons: Subsection 15(2) does not apply to loans between non-residents.

2010 Ruling 2010-0370961R3 F - Split-up butterfly

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

Principal Issues: Split-up butterfly transaction.

Position: Favourable rulings given.

Reasons: In compliance with the law and previous positions.

Technical Interpretation - External

7 December 2010 External T.I. 2010-0384891E5 - Principal Residence - Specified Beneficiary

Principal Issues: Whether a trust must file Form T1079 and T1079-WS annually with the Trust T3 Return. Whether a T3 should be filed annually when there is no income earned in the trust.

Position: Form T1079 and T1079-WS should be filed with the T3 in the year in which the disposition or deemed disposition of the principal residence occurs. A T3 return must be file under certain circumstance (as listed below).

Reasons: As per T3 Trust Guide T4013

2 December 2010 External T.I. 2010-0384501E5 - Settlement

Unedited CRA Tags

Principal Issues: 1. Is an award for loss of income due to a personal injury claim taxable in the hands of the recipient?
2. Is there a difference to the tax status of the award if the award is a result of either a Court judgement, or an out-of-court settlement?

Position: No. Whether the award is a result of a Court judgement or settlement is not relevant in determining its taxable status.

Reasons: IT-365R- damages received for personal injury are excluded from income.

2 December 2010 External T.I. 2010-0386581E5 F - CIFM - Traitement pour problème de peau

Unedited CRA Tags
118.2(2); 118.2(2)a); 118.2(2)n)

Principales Questions: Est-ce que les frais engagés pour l'achat d'un médicament pour traiter une forme rare d'un problème de peau peuvent être admissibles aux fins du crédit d'impôt pour frais médicaux?

Position Adoptée: Question de fait. Probablement que oui.

Raisons: Les conditions prévues à l'alinéa 118.2(2)n) semblent être respectées.

2 December 2010 External T.I. 2010-0384102E5 - Withholding on Wrongful Dismissal Settlement

Unedited CRA Tags
56(1)(a)(ii), 153(1), 248(1),

Principal Issues: What is the required withholding on a lump-sum amount received as a wrongful dismissal settlement?

Position: For payments made in Ontario, 10% should be withheld on any lump-sum settlement amount up to $5,000, 20% on the entire settlement if the amount is between $5,000 and $15,000 and 30% on the entire amount if the lump-sum payment is in excess of $15,000.

Reasons: The lump-sum settlement is generally considered a retiring allowance and the amount to be withheld can be found in subsection 103(4) of the Regulations.

1 December 2010 External T.I. 2010-0382041E5 - Capital or Current Expenditure

Unedited CRA Tags
18(1)(b), 20(1)(a), Schedule II of the Regulations

Principal Issues: Whether expenditures incurred by a taxpayer to put a new roof on a Heritage building would be a capital or current expense.

Position: General comments were provided.

Reasons: The determination of the issue involves a question of fact.

30 November 2010 External T.I. 2010-0370671E5 - Functional Currency Reporting

Unedited CRA Tags
Subsections 261(1), (3), (4), (16), (17), (18) and (19) of the Act

Principal Issues: Effect of amalgamation on the reporting currency of predecessor corporations

Position: See letter

Reasons: See letter

25 November 2010 External T.I. 2010-0382261E5 - Provision of T2202A's

Unedited CRA Tags
56(1)(n), 56(3), 81(1)(a), 118.6

Principal Issues: Should a designated educational institution issue T2202As to students who are fully funded through various funding sources to attend the institution? Should T2202As be issued to students who only have tax exempt income?

Position: T2202As should be issued to all students who are in qualifying education programs or specified educational programs at the designated educational institution.

Reasons: It is the students' responsibility to determine if they can claim the education and post-secondary textbook credits.

15 September 2010 External T.I. 2009-0336001E5 - Transitional tax debit of a bankrupt

Unedited CRA Tags
TA 28, TA 46(1), TA 46(2), TA 48(1), TA 111; 128(1), Reg. 400(2)(e.1)

Principal Issues: 1. At what point in time does a bankrupt corporation cease to have a permanent establishment (PE) in Ontario? 2. When is such a corporation liable to pay its remaining transitional tax debit balance?

Position: 1. Question of fact. 2. Depends on whether corporation has a PE in Ontario.

Reasons: The existence of a PE is a question of fact. If the corporation has become a bankrupt, its amortization period ends in the tax year in which, based on the facts, it ceases to have a PE in Ontario. The balance of the corporation's transitional tax debit is due in the tax year in which its amortization period ends.

Technical Interpretation - Internal

26 November 2010 Internal T.I. 2010-0386421I7 - Loan Corporation

Unedited CRA Tags
regulation 405

Principal Issues: Whether document 2001-0066667 continues to reflect the current position of the CRA

Position: Yes

Reasons: wording of the legislation

5 November 2010 Internal T.I. 2010-0364411I7 - Effect of election under subsection 14(1.01)

Unedited CRA Tags
14(1)(b); 14(1.01); 83(2); 89(1); 184(2)

Principal Issues: Whether the capital dividend election filed under subsection 83(2) of the Income Tax Act should continue to be considered excessive despite the election under subsection 14(1.01) of the Income Tax Act filed with the tax return deeming the disposition of eligible capital property to be a disposition of capital property.

Position: Yes.

Reasons: Extent of a deeming provision.