Income Tax Severed Letters - 2010-12-31

Ruling

2010 Ruling 2010-0353101R3 - Article IV(7)(b) Restructuring

Unedited CRA Tags
Article IV(7)(b), Canada-United States Income Tax Convention, 1980; 20(1)(c).
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 4
ULC PUC increase through stock dividend

Principal Issues: 1. Application of Article IV(7)(b) to interest and dividend payments by Canadian-resident entity that is fiscally transparent for United States income tax purposes. 2. Deductibility of interest.

Position: 1. Article IV(7)(b) does not apply to the payments in question. 2. Interest is deductible.

Reasons: 1. For the purposes of Article IV(7)(b), the dividends and interest will receive the same United States income tax treatment if the Canadian-resident entity were not fiscally transparent for United States income tax purposes. 2. Meets the requirements of s. 20(1)(c)(ii).

2010 Ruling 2008-0279961R3 - Butterfly reorganization

Unedited CRA Tags
55(3.1)(b)(ii); 55(3.2)(d), 256(7)(a)(i)(A)

Principal Issues: (1) Whether the distribution of DC's cash & near cash and investment property to holding companies to be incorporated by each beneficiary of a family Trust qualifies for the butterfly exemption stated in paragraph 55(3)(b) of the Act;

Position: (1) Yes

Reasons: (1) The various transactions completed prior to the distribution of DC's property will not be subject the butterfly exemption denial rule stated in subparagraphs 55(3.1)(b)(ii) of the Act.

2010 Ruling 2008-0281481R3 - Butterfly

Principal Issues: (1) Whether the distribution of DC's cash & near cash and investment property to holding companies to be respectively incorporated by each sibling for the benefit of their respective family qualifies for the butterfly exemption stated in paragraph 55(3)(b) of the Act;

Position: (1) Yes

Reasons: (1) The various transactions completed prior to the distribution of DC's property meets the requirements listed in paragraph 55(3)(b), and will not be subject the butterfly exemption denial rule stated in subparagraphs 55(3.1)(b)(ii) of the Act.

2010 Ruling 2009-0306341R3 - Trusts as Shareholders on a Butterfly

Unedited CRA Tags
55(3)(b); 55(3.1)(b); 55(3.2)(d); 55(5)(e)

Principal Issues: Whether 55(3.1)(b) applies to a distribution of transferee corporation shares by a trust to its beneficiary following the butterfly distribution so as to taint the butterfly?

Position: Not in these circumstances.

Reasons: In these circumstances, even if a distribution of transferee corporation shares is part of the butterfly series of transactions the distribution is to a beneficiary that is related to the vendor.

2010 Ruling 2010-0385671R3 - Supplemental Ruling

Unedited CRA Tags
39(2); 55(3)(a); 89(1); 245(2)

Principal Issues: Modification to the facts brought to our attention.

Position: Confirmation that, subject to the conditions, limitations, qualifications and comments set out therein, the original Ruling will continue to be binding on the CRA and that the modification will not affect the opinion provided.

Reasons: In compliance with the law.

Technical Interpretation - External

9 December 2010 External T.I. 2010-0364001E5 F - Ristourne de consommation, feuillet T4A

Unedited CRA Tags
135(3); 135(4) ; 135(7) ; 218 Règlement
Summary Under
Tax Topics - Income Tax Act - Section 135 - Subsection 135(7)
no income inclusion re consumer goods or services
Summary Under
Tax Topics - Income Tax Regulations - Regulation 218
T4A required where annual payments in proportion to patronage exceed $500

Principal Issues: 1) Est-ce qu'un montant reçu en vertu d'une répartition relative à des " marchandises de consommation ou services " tel que le défini le paragraphe 135(4) est un montant qui doit être inclus dans le calcul du revenu du contribuable?
2) Est-ce qu'une coopérative doit émettre un feuillet T4A à tous les membres lorsqu'elle procède à une "répartition proportionnelle à l'apport commerciale"?

Position: 1) Non, ce type de ristourne n'est pas imposable.
2) Oui, elle doit émettre un feuillet T4A s'il y a eu des retenus à la source ou si le total de tous les paiements de l'année fait au contribuable dépasse 500$

Reasons: 1) 135(7)
2) 218 Règlement et Guide de l'employeur RC4157