Income Tax Severed Letters - 2011-02-25

Ruling

2010 Ruling 2009-0351351R3 - Post Butterfly Transactions

Unedited CRA Tags
55(3)(b), 55(3.1)(b), 55(3.1)(c), 55(3.1)(d)

Principal Issues: Whether the Proposed Transactions would, in and by themselves, operate to deny the exception in paragraph 55(3)(b) from applying to the dividends resulting from the 2008 Split-up Butterfly.

Position: The Proposed Transactions will not, in and by themselves, cause the exception in paragraph 55(3)(b) not to apply.

Reasons: Wording of the statute

2010 Ruling 2010-0360501R3 - Article IV(7)(b) and PUC Increase

Unedited CRA Tags
84(1), 212(2), Article IV(7)(b), 245

Principal Issues: Whether subparagraph 7(b) of Article IV of the Canada-U.S. Tax Convention will apply to deny treaty benefits where a corporation increases paid up capital and subsequently makes a payment that reduces paid up capital?

Position: No

Reasons: Previous rulings given. Subsections 84(1) and 212(2) of the Act will apply on the increase of paid-up capital.

2010 Ruling 2010-0389551R3 - Post-Mortem Planning - Withdrawal of Ruling

Unedited CRA Tags
84(2); 88(1)(d); 164(6)

Principal Issues: Whether, on the facts provided, the Directorate would confirm that the repatriation of the surpluses of Holdco by the Estate in the context of a post-mortem, pipeline strategy, would not give rise to dividend treatment to the Estate?

Position: No ruling provided. Ruling request withdrawn.

Reasons: Holdco is inactive and owns liquid assets (possibly only cash). Consequently, Holdco's surpluses should be subject to dividend treatment in the hands of the Estate. Subsection 164(6) could then apply, in order to carry back the Estate's capital loss resulting from the winding-up or redemption of the shares of the capital stock of Holdco, to offset the deemed capital gain realized by the deceased.

Technical Interpretation - External

8 February 2011 External T.I. 2010-0364811E5 - Option

Unedited CRA Tags
Reg 4900(1)(e); 146.2(2)(f), 146.2(6), definition "qualified investment" in 204

Principal Issues: Information requested with respect to option investing in a registered account

Position: General comments provided

Reasons: Application of the provisions of the Act

8 February 2011 External T.I. 2011-0392401E5 F - Crédit d'impôt pour frais médicaux

Unedited CRA Tags
118.2(2); 118.2(2)a); 118.4(2)
Summary Under
Tax Topics - Income Tax Act - Section 118.4 - Subsection 118.4(2)
expenses of Quebec massage therapists were ineligible

Principales Questions: Est-ce que les frais payés à un massothérapeute donnent droit au crédit d'impôt pour frais médicaux?

Position Adoptée: Question de fait.

Raisons: Au Québec, aux termes de la Loi médicale, il ne semble pas que les massothérapeutes soient assimilés à des médecins.

2 February 2011 External T.I. 2010-0385881E5 - Taxable Benefits - Shuttle home to work

Unedited CRA Tags
6(1)(a)

Principal Issues: On what basis should an employment taxable benefit be calculated?

Position: Question of fact, but generally Fair Market Value

Reasons: Subject to certain listed exceptions, paragraph 6(1)(a) of the Income Tax Act requires that the value of any benefits received or enjoyed by a taxpayer in the year in respect of, in the course of, or by virtue of an office or employment be included in the taxpayer's income from employment.

2 February 2011 External T.I. 2010-0388601E5 - Moving Expenses

Unedited CRA Tags
56(n), 56(3), 56(1)(r), 62(1)

Principal Issues: Whether a student receiving a "taxable training allowance" to attend college on a full-time basis can deduct moving expenses provided that the other criteria for eligibility are met.

Position: Probably not.

Reasons: Section 62 does not provide for moving expenses to be deductible against this source of income.

1 February 2011 External T.I. 2010-0386621E5 F - Prélèvement et conservation de cellules souches

Unedited CRA Tags
118.2(2); 118.2(2)a); 118.2(2)o)
Summary Under
Tax Topics - Income Tax Act - Section 118.2 - Subsection 118.2(2) - Paragraph 118.2(2)(a)
stem cell harvesting and storage costs ineligible as not relating to an existing medical condition
Summary Under
Tax Topics - Income Tax Act - Section 118.2 - Subsection 118.2(2) - Paragraph 118.2(2)(o)
stem cell harvesting and storage costs ineligible as do not assist in diagnosis etc.

Principales Questions: Est-ce que les frais associés au prélèvement et à la conservation de cellules souches sont des frais qui peuvent donner droit au crédit d'impôt pour frais médicaux prévu à l'article 118.2 de la Loi de l'impôt sur le revenu?

Position Adoptée: Non.

Raisons: Ces frais ne sont pas des frais reliés à une condition médicale ou une blessure existante ni ne sont pas relatifs à un acte qui est effectué en vue de maintenir la santé, de prévenir les maladies et de diagnostiquer ou traiter une blessure.

5 January 2011 External T.I. 2009-0318671E5 - TFSA - Foreign Exchange Trading

Unedited CRA Tags
204, 207.1(1), 146.2(6), 146.2(8)

Principal Issues: Whether foreign currency trading is permitted in a trust governed by a tax-free savings account

Position: General comments provided.

Reasons: Application of the provisions of the Act.

Conference

8 October 2010 Roundtable, 2010-0373161C6 F - Paragraphs 256(3) and 256(6) ITA

Unedited CRA Tags
256(3), 256(6)
Summary Under
Tax Topics - Income Tax Act - Section 256 - Subsection 256(6)
application could prevent acquisition of control or preclude loss of CCPC status

Principales Questions: a) Whether there is a difference between the scope of paragraphs 256(3) and 256(6). Since paragraph 256(3) applies for the purposes of association rules and paragraph 256(6) for the purposes of the Act, whether paragraph 256(3) is relevant; b)(i) Whether the acquisition of control rules would not apply by reason of subsection 256(6) where the controller owns more than 50% of the voting rights of the issued and outstanding shares of the capital stock of a corporation; and b)(ii) Whether the controlled corporation would lose its CCPC status where the controller is a public corporation or a Crown corporation.

Position Adoptée: See response below.

Raisons: See response below.

8 October 2010 Roundtable, 2010-0373191C6 F - Computation of safe income

Unedited CRA Tags
55(2)
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(c)
where interest in partnership holding Subco with safe income is rolled into Holdco for prefs, dividends from Subco do not change consolidated SIOH of prefs – or increase commons’ SIOH

Principales Questions: A partnership is the sole shareholder of a corporation ("Subco"). An individual has transferred his partnership interest to a holding corporation ("Holdco") in consideration for preferred shares of the capital stock of Holdco. Subsection 85(1) applied with respect to the transfer. The agreed amount was the adjusted cost base of the partnership interest and the fair market value of such interest was higher than the ACB. Before the transfer to Holdco, safe income could be attributed to the shares of the capital stock of Subco. Should the safe income attributable to the shares of the capital stock of Subco (at the time of the transfer of the interest of the partnership by the individual) be considered in computing the safe income attributable to the preferred shares of the capital stock of Holdco held by the individual?

Position Adoptée: Based on the wording of subsection 55(2), the CRA applies a certain "consolidation approach" in the computation of safe income in situations similar to the one described above. In such a case, depending on the circumstances, the capital gain that would result from a disposition of the preferred shares of the capital stock of Holdco could reasonably be considered to be attributable in part to the safe income generated by Subco during the holding period by the individual of his partnership interest, provided that the income earned or realized by Subco was not received by the partnership before the transfer of the interest and that the fair market value of the interest at the time of the transfer is higher than its ACB. Therefore, it is possible that part of the safe income generated by Subco immediately before the time of the transfer of the interest in the partnership could be reasonably attributable to the preferred shares of the capital stock of Holdco received by the individual as consideration for the transfer of the partnership interest. Depending on the circumstances and the relevant facts occurring after the transfer of the interest in the partnership, that part of the safe income generated by Subco attributable to the preferred shares of the capital stock of Holdco could change overtime and be replaced by safe income generated at Holdco's level. Double counting issues are also briefly mentioned.

Raisons: Wording of the Act and previous positions.

8 October 2010 Roundtable, 2010-0373141C6 F - Related corporations

Unedited CRA Tags
251(2)(c); 251(5)(c)
Summary Under
Tax Topics - Income Tax Act - Section 251 - Subsection 251(2) - Paragraph 251(2)(c) - Subparagraph 251(2)(c)(i)
CRA would require demonstration that 4 individuals owning Opco A and B in the same proportions did not act in concert

Principales Questions: The shares of the capital stock of Opco1 and of the capital stock of Opco2 would be held by the same individuals and in the same proportion. The individuals would not be related to each other. The author of the question claims that the individuals would not be considered a group of persons in the absence of sufficient common connection between them, and that the individuals would not act in concert to control the corporations. Are Opco1 and Opco2 related?

Position Adoptée: General comments. In this type of situation, the CRA would question the validity of the assumption that the individuals would not have sufficient connection between them and would not act in concert to control the corporations.

Raisons: Question of fact.