Income Tax Severed Letters - 2011-05-27


2011 Ruling 2009-0343531R3 F - Internal Reorganization

Unedited CRA Tags

Principales Questions: Internal Reorganization within a related group of corporations.

Position Adoptée: Favourable rulings or opinions provided.

Raisons: In compliance with the law and previous positions.

2011 Ruling 2010-0391551R3 - Related Foreign Entity Financing

Unedited CRA Tags
15(1), 15(2), 15(2.2), 15(9), 17(1), 17(2), 80.4(2), 91(1), 91(4), 212(2), 214(3) & 245

Principal Issues: Whether a loan from a controlled foreign affiliate to a related non-resident entity will trigger the application of subsection 15(2) and Part XIII.

Position: No.

Reasons: Subsection 15(2) does not apply to loans between non-residents.

2010 Ruling 2010-0375311R3 - Article IV(7)(b) Restructuring

Unedited CRA Tags
Canada-United States Tax Convention, Article IV(7)(b); s. 245

Principal Issues: Will Article IV(7)(b) apply to interest paid by Canadian-resident unlimited liability company ("ULC") on debt obligations previously assigned by partnership that is the sole shareholder of the ULC to a partnership that is the limited partner of the partnership?

Position: No.

Reasons: The United States tax treatment of the interest income on the assigned debt obligations will be the same whether or not the ULC is fiscally transparent for United States tax purposes.

2010 Ruling 2010-0374141R3 - Stock dividend from CFA & PUC

Unedited CRA Tags
15(1); 15(1.1); 52(3); 53(2)(b)(ii); 84(4.2); 89(1); 95(7); 245(2); 248(1); 258(3); 258(5)

Principal Issues: 1. Whether the distribution of a stock dividend payable from the share premium account of a controlled foreign affiliate ("CFA") governed by the Companies Law of XXXXXXXXXX will be a "stock dividend" within the meaning of subsection 248(1) of the Act? 2. Whether subsection 95(7) will deem the amount of the stock dividend to be nil for the purposes of subdivision i, Division B, Part I of the Act? Whether subsection 52(3) of the Act will apply such that the adjusted cost base ("ACB") of the new shares in the CFA received by the taxpayer will be nil?

Position: 1. Yes. 2. Yes. 3. Yes

Reasons: See below.

Technical Interpretation - External

20 May 2011 External T.I. 2011-0394391E5 F - Tuition Tax Credit

Unedited CRA Tags

Principales Questions: Whether fees paid by a student to buy a computer in a specific situation are eligible for the Tuition Tax Credit?

Position Adoptée: No.

Raisons: See paragraph 27 of IT-516R2

20 May 2011 External T.I. 2011-0398301E5 - Moving expenses

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

Principal Issues: 1. What moving expenses can be claimed on an eligible relocation? 2. Is mortgage interest on the old residence deductible while the old home is empty? 3. Can qualified expenses relating to the purchase of a new residence be deducted if the old residence has not sold?

Position: 1. See reasons 2. No. 3. No.

Reasons: 1. Eligible moving expenses are provided for in subsection 62(3). 2. Section 62 does not provide for mortgage interest as a moving expense deduction. 3. Qualified moving expenses on the new home provided for in paragraph 62(3)(f) are only deductible when the old residence has sold.

18 May 2011 External T.I. 2011-0392441E5 F - Outils - déduction pour amortissement

Unedited CRA Tags
20(1)a); CAT 12

Principales Questions: 1. Le coût des outils peut-il être déduit dans le calcul de votre revenu provenant d'une entreprise ou d'un bien à titre de dépense courante? Dans ce cas, le montant de la dépense qui est déductible doit-il refléter le fait qu'ils sont utilisés, en partie du moins, à des fins personnelles?
2. Dans le cas où les outils constitueraient des immobilisations, vous voulez savoir si vous pourriez réclamer une déduction pour amortissement aux termes de la catégorie 12 de l'Annexe II du Règlement de l'impôt sur le revenu (" RIR "). Le montant de la DPA devrait-elle tenir compte de l'utilisation personnelle que vous faites des outils?

Position Adoptée: Les outils sont des biens amortissables de la catégorie 12. Le montant de la DPA qui peut être réclamé doit refléter l'usage personnel qui est fait des outils.

Raisons: Loi de l'impôt sur le revenu.

17 May 2011 External T.I. 2011-0394351E5 - Overseas Employment Tax Credit

Unedited CRA Tags
ITA 122.3

Principal Issues: Whether activity in question is "engineering activity" within the meaning of section 122.3 of the Income Tax Act, such that the employees in question would qualify for the Overseas Employment Tax Credit.

Position: A question of fact. File transferred to Audit Division of XXXXXXXXXX Tax Services Office.

Reasons: Requires factual determination based on ongoing facts and circumstances.

3 May 2011 External T.I. 2010-0382801E5 - Canadian employees working in USA

Unedited CRA Tags
Cda-US Tax Convention, Article V(9); Article XV(2); section 2(1), 250(5), 153(1.1) of the ITA

Principal Issues: What are the tax implications (1) to the Canadian company providing services in the U.S. for a minimum of 180 days within a 12-month period and (2) to Canadian employees working under contract for the same period or longer.

Position: (1) The Treaty may deem the corporation to have a permanent establishment in the U.S. under Article V(9). The corporation is a resident of Canada and is taxable on its worldwide income; however, it may also be liable for tax in the U.S. on profits attributable to the deemed permanent establishment. (2) Under Article XV(2), if an employee performs services in the U.S. for a period greater than 183 days, he/she may be liable for tax in the U.S.

Reasons: Article V(9) and Article XV(2) of the Treaty.