Income Tax Severed Letters - 2011-05-20

Ruling

2011 Ruling 2011-0394031R3 - Related Foreign Entity Financing - Supplemental

Principal Issues: Clarification of facts in ruling 2010-037639

2011 Ruling 2008-0293011R3 - Exploration Program - CEE

Unedited CRA Tags
66.1(6)

Principal Issues: Whether the expenses relating to a proposed exploration program will qualify as Canadian exploration expenses under paragraph (f) of the CEE definition, and will not be considered to be related to a mine that has come into production in reasonable commercial quantities or to a potential or actual extension thereof.

Position: Yes.

Reasons: Based on the facts presented and a written opinion received from Natural Resources Canada dated January 19, 2011.

Ministerial Correspondence

7 April 2011 Ministerial Correspondence 2010-0353251M4 - medical expenses - travel

Unedited CRA Tags
118.2(2)(h)

Principal Issues: What medical expenses can be claimed with respect to travel for purposes of paragraph 118.2(2)(h)?

Position: Paragraph 118.2(2)(h) provides that reasonable travel expenses can be claimed if a patient must travel at least 80 km from the locality where the patient dwells to a place where medical services are provided if substantially equivalent medical services are not available in that locality; the route travelled by the patient is a reasonable direct route, having regard to the circumstances; and the patient travels to that place to obtain medical services for himself or herself and it is reasonable under the circumstances to travel to that place to obtain those services. Reasonable travel expenses include accommodation, meals, and parking while en route to the medical facility and also once the patient arrives and is receiving treatment at the medical facility such as a hospital. In addition, if a patient is an outpatient at a medical facility and is staying at a hotel, the patient can claim the cost of meals, accommodation, and parking. If the patient's medical practitioner certifies that the patient is incapable of travelling alone, the patient can also claim the cost of meals, accommodation and parking of a accompanying individual.

Reasons: Clarification of policy with respect to medical expenses - travel. See 2010 CTF Q&A on medical travel.

5 April 2011 Ministerial Correspondence 2010-0377291M4 - medical expenses - travel

Unedited CRA Tags
118.2(2)(h)

Principal Issues: What medical expenses can be claimed with respect to travel for purposes of paragraph 118.2(2)(h)?

Position: Paragraph 118.2(2)(h) provides that reasonable travel expenses can be claimed if a patient must travel at least 80 km from the locality where the patient dwells to a place where medical services are provided if substantially equivalent medical services are not available in that locality; the route travelled by the patient is a reasonable direct route, having regard to the circumstances; and the patient travels to that place to obtain medical services for himself or herself and it is reasonable under the circumstances to travel to that place to obtain those services. Reasonable travel expenses include accommodation, meals, and parking while en route to the medical facility and also once the patient arrives and is receiving treatment at the medical facility such as a hospital. In addition, if a patient is an outpatient at a medical facility and is staying at a hotel, the patient can claim the cost of meals, accommodation, and parking. If the patient's medical practitioner certifies that the patient is incapable of travelling alone, the patient can also claim the cost of meals, accommodation and parking of a accompanying individual.

Reasons: Clarification of policy with respect to medical expenses - travel. See 2010 CTF Q&A on medical travel.

1 April 2011 Ministerial Correspondence 2010-0391871M4 - medical expenses - travel

Unedited CRA Tags
118.2(2)(h)

Principal Issues: What medical expenses can be claimed with respect to travel for purposes of paragraph 118.2(2)(h)?

Position: Paragraph 118.2(2)(h) provides that reasonable travel expenses can be claimed if a patient must travel at least 80 km from the locality where the patient dwells to a place where medical services are provided if substantially equivalent medical services are not available in that locality; the route travelled by the patient is a reasonable direct route, having regard to the circumstances; and the patient travels to that place to obtain medical services for himself or herself and it is reasonable under the circumstances to travel to that place to obtain those services. Reasonable travel expenses include accommodation, meals, and parking while en route to the medical facility and also once the patient arrives and is receiving treatment at the medical facility such as a hospital. In addition, if a patient is an outpatient at a medical facility and is staying at a hotel, the patient can claim the cost of meals, accommodation, and parking. If the patient's medical practitioner certifies that the patient is incapable of travelling alone, the patient can also claim the cost of meals, accommodation and parking of a accompanying individual.

Reasons: Clarification of policy with respect to medical expenses - travel. See 2010 CTF Q&A on medical travel.

Technical Interpretation - External

17 May 2011 External T.I. 2010-0391651E5 - Royalty payment in IP

Unedited CRA Tags
5(1); 12(1)(g)
Summary Under
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)
payment to employee of royalties, generated from IP developed by the employee in the course of employment and assigned to the employer, was employment income

Principal Issues: Is a royalty payment received by an employee from an employer taxable as employment income or property income when the rights to the invention may or may not vest with the employer?

Position: Question of fact.

Reasons: In accordance with subsection 5(1) of the Act, where the rights to an invention belong to the employer and the employer flows part of the royalty to an employee, the royalty payment will be considered employment income since the invention was developed in the course of the employment and the ownership of the invention belongs to the employer. Where the rights to the invention do not fully vest to the employer, the treatment of the royalty payment will depend on the facts of each case. However, where the rights to the invention remain with the employee and the employer is solely acting as a conduit to flow the royalty payment to the employee, the royalty payment will be considered royalty income to the individual.

12 May 2011 External T.I. 2011-0394741E5 - Moving expenses - expanded sales territory

Unedited CRA Tags
62(1); 62(3); 248(1)

Principal Issues: 1. Does an expanded territory qualify as a new work location for purposes of the definition of eligible relocation? 2. In the fact situation provided, can the taxpayer claim moving expenses when there is a delay between starting a new position and the subsequent move?

Position: 1. 2. In this case, yes to both questions.

Reasons: 1. The significant expansion in size of the sales territory required the taxpayer to move to carry out the additional responsibilities on a permanent basis such that there was a new work location for purposes of the definition. 2. The relocation qualifies as an eligible relocation since the move occurred to enable the taxpayer to carry on employment at the new work location. It is reasonable that the move would not occur until it became clear that the taxpayer would be permanently responsible for the expanded sales territory and carrying out the duties of employment associated with that responsibility.

11 May 2011 External T.I. 2011-0394231E5 F - Subsections 14(1.01) and 85(1) - Quotas

Unedited CRA Tags
14(1.01), 85(1), 85(2)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1.3)
milk quotas could be segregated between those eligible for capital gains deduction and those transferred on rollover basis
Summary Under
Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) - Paragraph 85(1)(a)
otherwise-fungible milk quotas could be segregated on the basis of their tax characteristics

Principales Questions: Where a partnership disposes of all its milk quotas in the same day, some of them being eligible for the capital gains exemption and some not, whether the partnership may, in a first transaction, dispose for fair market value proceeds of all its "eligible" quotas using the election under subsection 14(1.01) and, in a second transaction, dispose of its "uneligible" quotas on a rollover basis under subsection 85(2)?

Position Adoptée: Yes.

Raisons: Wording of the Act and previous positions.

11 May 2011 External T.I. 2010-0390451E5 - Legal costs for Support Payments

Unedited CRA Tags
18(1)(a)

Principal Issues: Fairness of the legislation as it allows the deduction of legal costs by the party seeking support while the defendant is not allowed to deduct legal costs.

Position: CRA's position is that legal costs to obtain support are deductible. Legal costs incurred to defend a claim for support are non-deductible.

Reasons: Legal costs incurred to obtain spousal or child support are incurred to enforce a pre-existing legal right and are therefore deductible. However, legal costs incurred to defend a claim for support are non-deductible as they are considered personal or living expenses.

11 May 2011 External T.I. 2011-0397561E5 - Wage loss replacement plan - sick leave payments

Unedited CRA Tags
6(1)(a); 6(1)(f)

Principal Issues: 1. Is the short term sick leave plan based on insurance principles? 2. Are payments under the short term sick leave plan pensionable earnings for CPP purposes?

Position: 1. No 2. Referred to CPP/EI Rulings Division to respond directly to the taxpayer.

Reasons: 1. The sick leave plan is an unfunded plan financed from the company's operating funds. 2. The issue is being referred to CPP/EI Rulings Division.

9 May 2011 External T.I. 2011-0397871E5 - Motor Vehicle Expenses

Unedited CRA Tags
8(1)(h.1)

Principal Issues: Whether certain motor vehicles expenses are deductible.

Position: General information provided

9 May 2011 External T.I. 2010-0384711E5 F - Avantages imposables

Unedited CRA Tags
5(1), 6(1)b), 8(1)(iii), 8(1)h.1), 248(1)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(vii)
ATV allowance for foreman’s supervisory use was taxable
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b)
allowance for gasoline expenses of forestry tree trimmers were taxable – limited exception for non-receipted reimbursement of safety equipment

Principales Questions: Est-ce que les différents montants reçus par les employés énumérés doivent être inclus dans le revenu. Advenant le cas, où certaines sommes sont imposables, est-ce que l'employé aurait droit à une déduction à l'encontre de son revenu d'emploi. Finalement, quelles sont les implications fiscales de l'étalement de revenu sur une saison.

Position Adoptée: Question de faits; Position appliquée à tous les employés en général

Raisons: Afin de déterminer si les conditions d'application des dispositions pouvant exclure le montant des allocations du calcul du revenu sont rencontrées, il est nécessaire d'examiner les faits propres à chaque situation donnée.

Technical Interpretation - Internal

13 May 2011 Internal T.I. 2011-0391921I7 - Residential Condominium Corporations--149(1)(l)

Unedited CRA Tags
149(1)(l)

Principal Issues: If a residential condominium corporation does not qualify as a tax-exempt 149(1)(l) organization, will it be taxable on amounts paid by unit owners that are in excess of its current expenses for the year?

Position: In most cases, no

Reasons: The amounts received by a residential condominium corporation from its members are not usually treated as income for purposes of the ITA.

9 May 2011 Internal T.I. 2011-0399531I7 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)
non-capital loss that resulted from immediate recognition of expenses but deferral of WIP on construction contracts effected an immediate SIOH reduction

Principales Questions: Whether the CRA's long-standing position that losses should be reflected in a corporation's safe income on hand when incurred and not when deducted for tax purposes should be applicable in a context where a corporation is carrying on a construction business and computing its income following the position stated in Interpretation Bulletin IT-92R2.

Position Adoptée: Yes, we are of the opinion that the long-standing position is reasonable in the circumstances.

Raisons: Wording of the Act and previous positions.