Income Tax Severed Letters - 2010-12-17

Ruling

2010 Ruling 2010-0363991R3 - Ptnsp contracting out pro services to ptner corp

Unedited CRA Tags
125(7); 56(2); 96(1)

Principal Issues: Whether the active business income earned by a professional corporation that carries out services for a partnership as an independent contractor, where the sole common shareholder of the professional corporation is a partner of the professional corporation, would qualify for the small business deduction and not be restricted under the rules for specified partnership income, personal services business or other anti-avoidance provisions.

Position: Yes, provided the facts are accurate and the proposed transactions are carried out as described in the ruling.

Reasons: The facts and the proposed transactions, as described, conform to the requirements established by ITRD for these types of reorganizations.

2010 Ruling 2010-0364281R3 F - Réorganisation d'une société de personnes

Unedited CRA Tags
125(7), 256(2.1)

Principales Questions: Dans le cas où un associé d'une société de personnes crée une société par actions par l'entremise de laquelle des services professionnels XXXXXXXXXX seront fournis à des XXXXXXXXXX , est-ce que cette société par actions serait admissible à la déduction accordée aux petites entreprises?

Position Adoptée: Question de fait. Généralement oui, si certaines conditions sont respectées.

Raisons: Selon la Loi de l'impôt sur le revenu actuelle. En accord avec des décisions anticipées précédentes.

Ministerial Correspondence

29 November 2010 Ministerial Correspondence 2010-0383531M4 - Sufficiency of the tradesperson's tool deduction

Unedited CRA Tags
8(1)(a)

Principal Issues: Should the tradesperson's tool deduction limit be increased?

Position: Referred to Department of Finance

Reasons: Question of tax policy

Technical Interpretation - External

14 December 2010 External T.I. 2010-0377971E5 - Capital Property of Deceased Taxpayer

Unedited CRA Tags
70(5), 248(1) definition of disposition

Principal Issues: Is a deceased taxpayer required to report a capital gain on homes that are in the deceased taxpayer's name but occupied by her children?

Position: Question of fact based on if the taxpayer had "beneficial ownership" of the properties.

Reasons: Paragraph (e) of the definition of "disposition" in subsection 248(1) provides that a disposition does not include any transfer of the property as a consequence of which there is no change in the beneficial ownership of the property.

14 December 2010 External T.I. 2010-0381401E5 - medical expenses - fertility treatments

Unedited CRA Tags
118.2(2)(a)

Principal Issues: Whether the cost of fertility treatments qualify as medical expenses for purposes of the medical expense tax credit?

Position: Yes as long as the requirements of paragraph 118.2(2)(a) are met.

Reasons: wording of paragraph 118.2(2)(a) of the OTA.

13 December 2010 External T.I. 2010-0379001E5 - Taxable benefits - Relocation Expenses

Unedited CRA Tags
6(1); 6(23); 62(3)

Principal Issues: Whether the payment of CMHC fees by an employer on an eligible relocation results in a taxable benefit to the employee.

Position: Yes.

Reasons: An amount paid by any person because of an individual's employment in respect of the cost of, the financing of, or the use of a residence is an employment benefit.

7 December 2010 External T.I. 2010-0360181E5 - Taxpayer Requested Adjustment

Unedited CRA Tags
s. 15(2), 111, 161(7),

Principal Issues: 1. What is the process for requesting an adjustment to a year that is not statute-barred?
2. When would interest be charged on the application of a loss carry-forward?

Position: 1. If the taxation year is not statute-barred, a letter requesting the adjustment would be sufficient.
2. The impact of the loss carry-forward will be ignored until 30 days after the request has been made for the adjustment; interest will be charged from the balance-due date until then.

Reasons: 1. IC 75-7R3
2. S. 161(7)(b)(iv)

2 December 2010 External T.I. 2010-0376451E5 F - Paragraphe 69(11) et transfert de biens agricoles

Unedited CRA Tags
110.6(1); 110.6(1.3); 69(11); 70(9); 70(9.01)
Summary Under
Tax Topics - Income Tax Act - Section 70 - Subsection 70(9)
s. 70(9.01) could apply to devise of farming property, that was farmed by father but not sons, to them
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1.3) - Paragraph 110.6(1.3)(a)
capital gains exemption could apply where farming property, that was farmed by father but not sons, is devised to sons who then sell
Summary Under
Tax Topics - Income Tax Act - Section 69 - Subsection 69(11)
s. 69(11) could apply where devisee sells qualified farm property shortly after receiving it under s. 70(9.01)

Principales Questions: Dans deux scénarios donnés, le paragraphe 70(9.01) s'appliquerait-il? Si oui, est-ce que les cessionnaires pourraient par la suite bénéficier de l'exonération pour gain en capital? Enfin, le paragraphe 69(11) trouverait-il application?

Position Adoptée: Question de fait. Nous croyons que les cessionnaires pourraient bénéficier de l'exonération pour gains en capital lors d'une vente subséquente mais que le paragraphe 69(11) pourrait aussi s'appliquer. Dans un tel cas, le transfert initial - qui aurait eu lieu pour un montant inférieur à la juste valeur marchande - serait réputé se faire à la JVM.

Raisons: Loi de l'impôt sur le revenu

30 November 2010 External T.I. 2010-0355101E5 - Disposition of property to a non-resident

Unedited CRA Tags
69; 3; 2(1)

Principal Issues: What are the tax consequences when a resident of Canada gifts property situated in XXXXXXXXXX to his daughter resident of XXXXXXXXXX ?

Position: Capital gain or loss, assuming the property is capital property.

Reasons: The property is deemed to be disposed of, and acquired, at fair market value. However, we do question why the daughter sold the property very shortly after the taxpayer gifted it to her.

26 November 2010 External T.I. 2008-0299301E5 F - Sommes reçues par des médecins résidents

Unedited CRA Tags
5; 56(1)n); 56(3)
Summary Under
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)
medical residents were employees notwithstanding trainee role, so that fellowships were employment income
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(3)
fellowships received by medical residents were not exempted under s. 56(3)

Principales Questions: Est-ce que les médecins résidents peuvent réclamer l'exemption pour bourse d'études ou de perfectionnement relativement aux sommes reçues de la part de l'établissement de santé où ils travaillent?

Position Adoptée: Question de fait. En l'espèce, probablement que non.

Raisons: Les médecins résidents semblent être des employés de l'établissement de santé où ils travaillent.

22 November 2010 External T.I. 2010-0369261E5 - alter ego trust and charity

Unedited CRA Tags
118.1(13), 118.1(18)

Principal Issues: If, as a consequence of a gift, a charity holds a beneficial interest in an alter ego trust, will the restriction in subsection 118.1(13) apply in respect of the gift?

Position: Question of fact. It depends on whether the property held by the donor was a non-qualifying security of the donor within the meaning of subsection 118.1(18).

Reasons: The restriction in subsection 118.1(13) applies in respect of a gift of a non-qualifying security of the donor.

5 November 2010 External T.I. 2010-0383871E5 F - Crédit d'impôt pour emploi à l'étranger

Unedited CRA Tags
122.3
Summary Under
Tax Topics - Income Tax Act - Section 122.3 - Subsection 122.3(1) - Paragraph 122.3(1)(b)
could perform “substantially all” employment duties abroad if less than 10% of the time spent in Canada on preparatory work
Words and Phrases
substantially all

Principales Questions: Est-ce que les salaires versés lors des tâches préparatoires effectuées en sol canadien telles que la préparation et l'expédition des équipements nécessaires aux travaux se déroulant éventuellement à l'étranger sont des salaires admissibles au CIEE?

Position Adoptée: Question de faits. Mais il est fort probable que oui si les conditions énoncées sont respectées et que les activités s'étant déroulées en sol canadien représentent moins de 10% des activités totales afin de satisfaire la règle de "la totalité ou presque".

Raisons: LIR

29 October 2010 External T.I. 2010-0377091E5 - Liability for interest & penalties of late estate

Unedited CRA Tags
150(1)(b)

Principal Issues: Who, if anyone, is liable for interest and penalties of the estate of a deceased individual? Legal Representative?

Reasons: The wording of paragraph 150(1)(b)

29 October 2010 External T.I. 2007-0244171E5 - SIFT Trust SIFT Partnership

Unedited CRA Tags
122.1
Summary Under
Tax Topics - Income Tax Act - Section 122.1 - Subsection 122.1(1) - Real Estate Investment Trust
allocation of partnership revenue
Summary Under
Tax Topics - Income Tax Act - Section 122.1 - Subsection 122.1(1) - Rent from Real or Immovable Properties
qualifying non-participating rent under hotel lease

Principal Issues: 1) (a)Whether the income earned by a trust could qualify as "rent from real or immovable properties" as defined under paragraph 122.1(1) of the Act if the trust enters into a "master lease" on a net-net-net basis pursuant to which it would lease the entire premises (which would qualify as "real or immovable property" as defined under paragraph 122.1(1)) to a third party who would operate the property as a hotel or a residential care facility?
b) Whether rent based on the percentage of the gross rents received, as opposed to rent based on profits, would qualify as "rent from real or immovable properties" pursuant to subsection 122.1(1)?
c) Whether the reference to "revenu" of the French version of the Act in paragraphs (b) and (c) of the definition "real estate investment trust' in subsection 122.1(1) refers to gross sales or rentals, as opposed to the notion of "profit" described in subsection 9(1) of the Act?
2) Whether the portion of the income of a limited partnership (of which a trust is one of the limited partners) which would constitute "rent from real or immovable properties" pursuant to subsection 122.1(1) would retain its character as "rent from real or immovable properties" when allocated to the trust assuming the said limited partnership would satisfy the conditions set out as defined in subparagraph 122.1(1)(a)(i) of the definition of "real or immovable property"?
3) Whether a trust that invests solely in mortgages relating to immovable properties situated in Canada would qualify as a REIT pursuant to subsection 122.1(1)?
4) Whether that as of October 31, 2006 a trust-on-trust structure would qualify as a REIT pursuant to subsection 122.1(1) in circumstances where the investments of the subsidiary trust would satisfy the conditions of the definition of REIT?

Position: 1 a) General comments b) generally, yes, if the gross amount would also be rent from real or immovable property to the lessee c) revenue 2) We are inclined to consider that the trust derives its revenues from the same eligible sources as the limited partnership (such as rent from real or immovable properties).3) Question of fact-general comments 4) As a result of a modification to the definition of "rent from real or immovable properties" in subsection 122.1(1), where a trust that is a beneficiary of another trust, receives a payment from the other trust's income which is derived from rent from real or immovable properties, that payment could qualify for the purposes of the REIT revenue tests in subparagraph (b) and (c) of that definition.

Reasons: 1) and 2) Interpretation of the Act. 3) Very unlikely that the requirements of paragraphs (a) and (d) of the REIT definition be met 4) Change to the definition of "rent from real or immovable properties" (2009, c. 2, s. 50(1); royal assent of Bill C-10 received on March 12, 2009).

Conference

4 May 2010 Roundtable, 2010-0359461C6 - CALU question 7

Unedited CRA Tags
73(1), 104(4)

Principal Issues: Whether an alter ego trust could effectively be used to transfer property to the trust on a tax deferred basis, where any residual interest gifted to a charity would be valued at fair market value.

Position: The use of an alter ego trust may be effective, but certain conditions must be satisfied

Reasons: The wording of the legislation, however also note the impact of the deemed disposition rules in subsection 104(4) for purposes of valuing the residual interest to the charity

Technical Interpretation - Internal

14 December 2010 Internal T.I. 2010-0383831I7 - medical expense - cosmetic procedure

Unedited CRA Tags
118.2(2)(a)

Principal Issues: Whether photodynamic therapy to treat a medical condition called Rosacea qualifies as medical expense or would it be excluded as an eligible medical expense because it is cosmetic in nature?

Position: The cost of the photodynamic therapy qualifies as a medical expense in this case as it is incurred to treat a medical condition. In this case, a letter from the taxpayer's physician indicates that the taxpayer has severe Rosacea with symptoms such as lesions, scaly patches, facial redness, frequent flushing, bleeding, blemishes and highly sensitive skin. The physician's letter also indicates that it is a recommended procedure for the treatment and prevention of non-pigmented pre-cancers of the skin.

Reasons: Based on information provided, in this case, the therapy is not cosmetic in nature but is to treat a skin condition.

9 December 2010 Internal T.I. 2010-0377641I7 - Reassessment Period of a Public Corporation

Unedited CRA Tags
s. 152(4), (4.3), (4.4)

Principal Issues: Whether the Minister has appropriately reassessed a public corporation.

Position: Yes.

Reasons: S. 152(4)(b)(i) provides an additional three years to reassess a public corporation in respect of a loss carry-back under paragraph 152(6). When combined with s. 152(3.1), seven years are available for such a reassessment. Accordingly, the reassessment was raised within the specified time.

7 December 2010 Internal T.I. 2010-0385131I7 - Offsetting a Loss Carry Back

Unedited CRA Tags
s. 111, 128(1)(g), 164(2).

Principal Issues: Whether a request by a bankrupt corporation to carry back a loss to generate a refund should be denied where the refund would approximate a current-period liability to the fisc.

Position: No.

Reasons: Notwithstanding the non-payment, the Act recognises accrual accounting and allows the expense under paragraph 18(1)(a). In addition, paragraph 128(1)(g) of the Act permits a bankrupt corporation to deduct section 111 losses. Moreover, the refund generated as a result of the loss carry back could be offset under subsection 164(2).

23 November 2010 Internal T.I. 2010-0379901I7 - Limited Partnership Losses

Unedited CRA Tags
111(1)(e); 96(2.1)(e)

Principal Issues: Whether unclaimed limited partnership losses can be claimed after the particular limited partnership winds up?

Position: No.

Reasons: Limted partnership losses can only be claimed to the extent that the at-risk amounts exceeds certain amount, as provided in paragraph 111(1)(e). Once the limited partnership winds up, the taxpayer will not be able to increase his or her at-risk amount in respect of the partnership.