Income Tax Severed Letters - 2011-05-13

Ruling

2011 Ruling 2011-0395771R3 - 39(2) - Conversion of P/S to C/S

Unedited CRA Tags
ITA: 39(2)
Summary Under
Tax Topics - Income Tax Act - Section 39 - Subsection 39(2)
no s. 39(2) gain on conversion of US-dollar prefs

Principal Issues: Will the conversion from preferred shares into common shares result in a foreign exchange gain or loss pursuant to 39(2) of the Act?

Position: No

Reasons: There is no change in the patrimony of the company as a result of the conversion.

2011 Ruling 2010-0375111R3 - XXXXXXXXXX - ATR

Unedited CRA Tags
95(2)(a)(ii)(B); 258(3)

Principal Issues: (i) Whether the interest earned by Finco on the Core Receivable and the Opco Note would be treated as income of Finco from carrying on an active business by virtue of subparagraph 95(2)(a)(ii)(B) of the Income Tax Act? (ii) Whether subsection 258(3) would apply to any dividends paid from the shares of Finco?

Position: (i) Yes. (ii) No.

Reasons: (i) Subparagraph 95(2)(a)(ii)(B) applies. (ii) The exception contained in subsection 258(4) would apply.

2011 Ruling 2010-0379631R3 - Loss Consolidation

Unedited CRA Tags
9, 12, 15(1), 20(1)(c), 56(2), 69, 112, 187.1, 191(1), 246(1), 245(2)

Principal Issues: Is the proposed loss consolidation acceptable?

Position: Yes

Reasons: Within established parameters.

2011 Ruling 2011-0403371R3 F - Supplemental Ruling - 2010-037096

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

Principal Issues: Additional facts and modifications to the proposed transactions brought to our attention.

Position: Confirmation that, subject to the conditions, limitations, qualifications and comments set out therein, the original Ruling no. F 2010-0370961R3 will continue to be binding on the CRA.

2010 Ruling 2010-0361771R3 - Variation of trust indenture

Unedited CRA Tags
248(1), 245
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(7.1)
addition of preferred units with proportionate allocation of taxable income to distributions

Principal Issues: Whether the variation of a trust indenture to create and issue a new class of preferred units of a mutual fund trust would result in (1) a disposition by the trust of its assets or in a resettlement of the trust, (2) a disposition by the existing unitholders of their units, (3) the application of 104(7.1).

Position: (1) no (2) no (3) no

Reasons: (1) The changes are not so extensive so as to result in a resettlement of the trust and it is submitted that there will be no resettlement as a matter of provincial law. (2) No cash consideration or other proceeds of disposition will be received by the unitholders in respect of the diminishment of their rights as a consequence of the amendments. Moreover, the changes to the trust deed in this case, as a whole are not viewed as sufficiently material to take the position that the amended units would be proceeds of disposition. (3) Consistent with previous rulings on this similar issue.

2009 Ruling 2009-0337801R3 - Foreign affiliates - hedging indebtedness

Unedited CRA Tags
95(2)(i)(iii)

Principal Issues: Whether forward foreign exchange contracts between two foreign affiliates could "reasonably be considered to have been made" by both affiliates "to reduce risk with respect to a debt referred to in" subparagraph 95(2)(i)(i) "of fluctuations in the value of the currency in which the debt was denominated".

Position: Yes

Reasons: Each affiliate had indebtedness denominated in the currency that it had contracted to purchase under the forward contract. The amount of the indebtedness of each affiliate equalled or exceeded the aggregate amounts receivable by it under forward contracts. The indebtedness of each affiliate was indebtedness described in subparagraph 95(2)(i)(i). The amounts received on the settlement of each contract would generally be used by the parties to repay a portion of their indebtedness. The words "reasonably be considered" and "with respect to" in subparagraph 95(2)(i)(iii) are very broad.

Ministerial Correspondence

10 May 2011 Ministerial Correspondence 2011-0400281M4 F - Pension de la sécurité de la vieillesse

Principales Questions: Comment doit-on rapporter la retenue d'impôt effectuée en raison d'un trop-payé de la pension de la sécurité de la vieilesse?

Position Adoptée: À la case 18 du relevé T4 (OAS), il est nécessaire d'indiquer le montant de la pension de la sécurité de la vieillesse auquel un contribuable a droit pour une année donnée. Toute retenue d'impôt - effectuée car le revenu du contribuable dépasse le plafond prévu - est indiquée à la case 22 dudit relevé.

Raisons: Loi de l'mipôt sur le revenu

Technical Interpretation - External

9 May 2011 External T.I. 2010-0385211E5 F - Entreprise habituelle de prêt d'argent

Unedited CRA Tags
15(2); 15(2.3)
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.3)
loans to shareholders at prescribed rate could be part of regular money-lending business

Principales Questions: Une société dispose de toutes les actions qu'elle détient dans des sociétés privées et publiques. Avec ces liquidités, elle désire effectuer des prêts hypothécaires à ses actionnaires au taux d'intérêt prescrit ainsi qu'à des tiers au taux d'intérêt du marché. Ces prêts peuvent-ils tomber sous l'exception prévue au paragraphe 15(2.3)?

Position Adoptée: Question de fait. Informations insuffisantes.

Raisons: Il est nécessaire de déterminer si la société exploite, de façon habituelle, une entreprise de prêt d'argent. Il est également nécessaire de déterminer si les prêts effectués en faveur des actionnaires, le sont alors que l'entreprise exploite de façon habituelle une entreprise de prêt d'argent.

9 May 2011 External T.I. 2011-0396281E5 - Canadian-Controlled Private Corporation

Unedited CRA Tags
89(11), 125(7), 249(3.1)

Principal Issues: In document No. 2010-037725, we concluded that, in the particular situation, in order to avoid a May 31, 20-A year-end, Company B had to file the election not to be a CCPC under subsection 89(11) at the latest on November 30, 20-A. Whether the election under subsection 89(11) should be filed at the latest on November 15, 20-A.

Position: In the particular situation, the election not to be a CCPC under subsection 89(11) must be filed at the latest on November 30, 20-A in order to avoid a May 31, 20-A year-end.

Reasons: Application of the Act.

6 May 2011 External T.I. 2011-0399491E5 F - Withholding - stock option benefits

Unedited CRA Tags
153(1)a); 153(1.01); 153(1.1); 153(1.31);
Summary Under
Tax Topics - Income Tax Act - Section 153 - Subsection 153(1.1)
CRA may consider source deductions issue in rulings context

Principales Questions: Whether the Minister is entitled to waive the withholding requirement in respect of a stock option benefit (non cash remuneration) where it is the only remuneration paid to an employee for the taxation year?

Position Adoptée: No.

Raisons: New subsection 153(1.31) provides that the Minister does not have the discretion to waive a withholding requirement in respect of a stock option benefit solely because it is received as a non-cash remuneration.

2 May 2011 External T.I. 2011-0392661E5 F - T2 Sched. 3 Reporting of Dividend Paid to a Trust

Unedited CRA Tags
104(1), 104(19)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(19)
dividend paid to trust which then is flowed through to corporate beneficiary is reported as paid to person other than connected corporation

Principales Questions: In a situation where 1) CorpB is beneficially interested in a personal trust (Trust) 2) Trust has de jure control of CorpA 3) CorpA is connected to CorpB 4) CorpA pays a taxable dividend to Trust and 5) Trust makes the designation under subsection 104(19) in respect of CorpB; when CorpA completes part 3 of schedule 3, should the dividend CorpA paid to Trust be reported in column D "Taxable dividends paid to connected corporations" or in the total on line 450 for total taxable dividends paid in the taxation year to other than connected corporations?

Position Adoptée: The dividend CorpA paid to Trust should be reported on line 450 for total taxable dividends paid in the taxation year to other than connected corporations, even if Trust designates the dividend in respect of its beneficiary (CorpB), pursuant to subsection 104(19).

Raisons: The law and part 3 of schedule 3

15 April 2011 External T.I. 2010-0367391E5 - Support Payments

Principal Issues: Whether a lump-sum support payment and arrears interest are included in income.

Position: Question of fact.

14 April 2011 External T.I. 2010-0380171E5 - Principal Residence Exemption

Unedited CRA Tags
40(2)(b), 54

Principal Issues: 1. If two individuals each inhabiting two separate residences decide to marry, must they sell one of the residences prior to the marriage to obtain the principal residence exemption on both properties? 2. Is there a reasonable time limit following the marriage, to allow for the sale of the one residence and still receive the principal residence exemption?

Position: 1. Question of fact but generally no. 2. Generally, the individual has until the end of the taxation year subsequent to the year of marriage to dispose of property and still receive full exemption status.

Reasons: 1 & 2. The mechanics of the formula contained in 40(2)(b), specifically the "one-plus" portion, allows for one full taxation year not to be designated as the principal residence and still receive the full exemption.

14 April 2011 External T.I. 2010-0382921E5 - Individual Performing Services Outside of Canada

Unedited CRA Tags
Regulation 102, 104, 105, section 153, 212(1), 215(1)

Principal Issues: What are the tax implications to a Canadian University that pays a non-resident lecturer to teach a course outside of Canada.

Position: Question of fact.

Reasons: The nature of the relationship between the Canadian university and the non-resident lecturer is not known as no contract was provided. No withholding tax requirement applies to payment made to non residents in respect of services rendered outside of Canada.

5 April 2011 External T.I. 2010-0375551E5 - Definition of an Eligible Research Institute (ERI)

Unedited CRA Tags
Ss 97(27) of TA; Ss 38((7) & (8) of TA Reg. 37/09

Principal Issues: Does the definition of an ERI in clause 97(27)(b) of TA - "Network of Centres of Excellence" (NCE) include the "Centres of Excellence for Commercialization and Research" (CECR)?

Position: No

Reasons: Legislation and a previous file

4 May 2010 External T.I. 2011-0394901E5 - Long Service Awards

Unedited CRA Tags
5(1), 6(1)(a)

Principal Issues: Whether “Companybucks" given to employees qualify for the $500 exemption as long service awards?

Position: No

Reasons: They are essentially gift certificates and are considered to be a near-cash gift or award.

20 April 2010 External T.I. 2011-0396271E5 - Ontario co-operative education tax credit

Unedited CRA Tags
88 Taxation Act, 2007

Principal Issues: 1.If the University adds the work component on to the Program to make it a new co-op Program does the Credit apply if there is only one work term?
2.Does the Credit apply to the work term if the Program is to obtain a certificate rather than a degree?
3.What does the phrase "time spent in required academic study" in the definition of qualifying co-operative education program in paragraph 2 of subsection 88(5) of the Taxation Act, 2007 (TA) mean? Is it only the academic terms or it is the entire length of the program including the mandatory work terms that are included in the phrase?
4.If the University decides that the work component of the Program will be an internship rather than a co-op work term does it have to be 8 months in length to qualify for the Credit? If the answer is yes are there requirements/restrictions for "time spent in work component" that need to be considered in the University's program design? Does the Credit apply to a 4 month work term that meets the co-op parameters outlined by Canadian Association for Co-operative Education (CAFCE), even if it is not actually being called co-op?

Position: 1. It should qualify, if it otherwise meets the criteria of the Credit. 2. Yes, if otherwise meets the criteria of the Credit. 3.The phrase "total time spent in required academic study" in the definition of qualifying co-operative education program includes only the academic terms. 4. Yes. The program would be offside since the work placement would be 100% of the time spent in academic study. The parameters for one 4 month work term would be that of an educational program other than an internship program as outlined in the Ontario Bulletin 4014, Co-operative Education Tax Credit.

Reasons: The definitions of qualifying work placement and qualifying co-operative education program.

Technical Interpretation - Internal

5 May 2011 Internal T.I. 2011-0399461I7 - Taxable Income of Secularized Nun

Unedited CRA Tags
56(1)(a)(ii)

Principal Issues: Whether the amount received by the taxpayer should be categorized as income from employment, a taxable retiring allowance, or as a non-taxable gift.

Position: Question of fact, but in this case, the amount is a non-taxable gift.

Reasons: The payment does not have the character of remuneration for services and there was no obligation that such a payment be made. The payment was a gift, given freely with no consideration, to help the taxpayer who was XXXXXXXXXX .

29 April 2011 Internal T.I. 2011-0395131I7 - Receivers' Requirement to File Outstanding Returns

Unedited CRA Tags
s. 150(3) ITA; s. 243(2)(b) BIA

Principal Issues: Whether receivers are required to file outstanding returns?

Position: It depends on the facts; each case would need to be evaluated on its own set of circumstances.

Reasons: The application of subsection 150(3) could be triggered if a receiver is appointed to administer, manage, wind up, or control the property or business of the taxpayer; or if the property in the receiver's possession consists of all or substantially all of the property of the taxpayer or that of his or her business.

28 April 2011 Internal T.I. 2011-0394301I7 F - Obligation de l'employeur - feuillet T4 modifié

Unedited CRA Tags
152(4.2)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 200 - Subsection 200(1)
procedure for correcting T4 slips
Summary Under
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.2)
procedure for employee to request correction of incorrectly reported T4 benefit

Principales Questions: Quelle est l'obligation de l'employeur lorsque ce dernier a inscrit un montant d'avantage imposable relativement à l'utilisation d'un automobile de l'employeur sur un feuillet T4 alors qu'il n'aurait pas dû y être inscrit?

Position Adoptée: L'employeur peut produire des feuillets T4 modifiés pour les employés visés pour les 10 années civiles antérieures.

Raisons: Analyse législative.