Income Tax Severed Letters - 2011-06-10


2011 Ruling 2010-0380601R3 - Ontario Apprenticeship Tax Training Credit

Unedited CRA Tags
Taxation Act: 89, 161

Principal Issues: For purposes of the Ontario Apprenticeship Tax Training Credit, can a limited partnership allocate 100% of its credit to its general partner who is also a limited partner?

Position: Yes.

Reasons: A limited partnership may allocate 100% of its apprenticeship tax training credit to a dual partner as long as the allocation is done so in the partner's capacity as general partner, and all of the conditions of section 89 of the Ontario Taxation Act are met, all partners base their claim on subsection 89(17) if one partner is being allocated more than its pro-rata share, all partners agree to the disproportionate allocation where the claim is based on subsection 89(17), and not more than 100% of the apprenticeship tax training credit available to the limited partnership is claimed.

2011 Ruling 2010-0384571R3 - Employer Provided Grant Assistance

Unedited CRA Tags
5(1); 6(1)(a); 56(1)(u); 110(1)(f); ITR 233(1) and (2).

Principal Issues: Will a grant from a U.S. charity with the purpose of providing XXXXXXXXXX financial assistance to employees due to XXXXXXXXXX be considered a taxable employment benefit, or otherwise be included in income?

Position: Favourable ruling provided.

Reasons: Although it is a question of fact whether assistance provided is in respect of a taxpayer's employment, social assistance, etc., it is our administrative position not to include such payments in a taxpayer's income.

2011 Ruling 2011-0394671R3 - Charitable Donation of Publicly Listed Shares

Unedited CRA Tags

Principal Issues: Whether the donation of publicly listed shares can give rise to a deduction for gift under 110.1(1) of ITA?

Position: Yes.

Reasons: Previous position

2011 Ruling 2010-0367251R3 - Loss Consolidation

Unedited CRA Tags
55(3)(a), 20(1)(c)

Principal Issues: Standard Loss Consolidation. Shift of current year losses to affiliated corporation through interest expense on inter-corporate debt.

Position: Favourable Ruling Issued

Reasons: Legislative and administrative requirements met. Prior ruling issued to same taxpayer with respect to similar transactions.

2010 Ruling 2009-0338871R3 F - Don d'une servitude de conservation

Unedited CRA Tags
118.1(1), 118.1(12) 248(32)

Principales Questions: Le don d'une servitude de conservation en faveur d'un donataire reconnu peut-il donner lieu à un crédit d'impôt pour don?

Position Adoptée: Oui.

Raisons: Il s'agit d'une donation visée à la définition de "total des dons de biens écosensibles" au paragraphe 118.1(1)

Technical Interpretation - External

6 June 2011 External T.I. 2010-0376211E5 F - Avantage - frais pour droit d'usage

Unedited CRA Tags
6(2); 6(1)e); 6(1)k)

Principales Questions: Aux fins du calcul de l'avantage à titre de frais pour droit d'usage au paragraphe 6(2), comment doit-on tenir compte de crédits résiduels payables au locataire ou des frais résiduels que le locataire doit payer?

Position Adoptée: Selon l'une des deux méthodes suggérées dans le guide T4130.

Raisons: Dans le 1er scénario, si l'employeur choisit d'appliquer le crédit résiduel à l'encontre des loyers payés sur cette automobile en 2011, les frais pour droit d'usage pour l'automobile ne peuvent être négatifs. Conséquemment, dépendant de tous les faits et circonstances d'un cas précis, zéro peut être une valeur raisonnable pour frais pour droit d'usage. De plus, si toutes les conditions de l'alinéa 6(1)k) sont rencontrées, l'avantage relatif au fonctionnement de cette automobile peut être de zéro.
Dans le 2e scénario, l'employeur peut choisir d'ajouter les frais résiduels aux loyers payés en 2010 ou peut répartir au prorata le paiement des frais résiduels sur la durée de la location si les conditions mentionnées dans le guide T4130 sont satisfaites.

2 June 2011 External T.I. 2010-0381601E5 - child support

Unedited CRA Tags
56.1(4), 60(b), 56(1)(b)

Principal Issues: Are payments for certain expenses in respect of a child and arrears payments for child support payable as per a court order made after April 1997 included in the recipient's income?

Position: It is a question of fact. However, where a reimbursement is made if and when a child expense is incurred and neither constitutes an allowance nor is statutorily deemed to be one, the reimbursement would not itself qualify within the meaning of "support amount" and "child support amount" and the recipient would not be required to include these amounts in income and the payer would not be entitled to a deduction.
Where a court order is made before May 1997 and the court order is varied by a second court order made after April 1997 to change the child support amounts payable, there would be a commencement day on the day on which the first varied amount is required to be made. Where an order has a commencement day, child support amounts payable under the order on or after its commencement day are non-taxable to the recipient and non-deductible by the payer. However, this would not have any effect on payments that are set out in the second order that reflect support amounts payable under the initial order that had fallen into arrears. The arrears that are paid would still be deductible/taxable even if the arrears are paid late and as long as the payments related to periodic payments ordered by the court before May 1, 1997. On the other hand if a reduced sum is paid by the payer to obtain a release from a liability imposed by the first order in respect of arrears of maintenance payments (i.e., the reduced sum cannot be identified as amounts payable periodically under the first Order), it would not be required to be included in income of the recipient.

Reasons: The position is consistent with IT-530R.

1 June 2011 External T.I. 2011-0405881E5 - Qualified donee for receipting purposes

Unedited CRA Tags
118.1(1); 110.1(1)

Principal Issues: Whether a donation receipt can be issued by a public body performing a function of government in Canada where the donor directs the gift to a specific program of the public body?

Position: Yes, in this particular situation.

Reasons: In our view, in this particular situation the public body performing a function of government in Canada retains sufficient discretion over the gifts received.

30 May 2011 External T.I. 2011-0393731E5 F - Congrès

Unedited CRA Tags
taxpayer need not be a member of the convention-sponsoring organization
Words and Phrases

Principales Questions: Est-ce que l'assemblée annuelle des membres de la Corporation des maîtres mécaniciens en tuyauterie du Québec (CMMTQ) et le salon professionnel MCEE dont la CMMTQ est la coorganisatrice avec d'autres organismes ou associations de secteurs d'activités complémentaires peuvent être considérés comme des congrès aux fins du paragraphe 20(10) de la Loi de l'impôt sur le revenu?

Position Adoptée: Oui, dans les deux cas.

Raisons: Selon la jurisprudence, nos positions antérieures et les critères du Bulletin d'interprétation IT-131R2.

26 May 2011 External T.I. 2011-0394731E5 - The Effect of a Subsection 159(3) Assessment

Unedited CRA Tags

Principal Issues: Whether an assessment under subsection 159(3) would enable the Minister to reassess a statute-barred year?

Position: No.

Reasons: The purpose of an assessment under subsection 159(3) is to enable collection of an amount owed by an estate. Furthermore, the legal representative is a person separate from the estate and an assessment under subsection 159(3) is not tied to the normal reassessment for assessing an estate.

25 May 2011 External T.I. 2011-0396881E5 - Indian- Self-employment Income

Unedited CRA Tags

Principal Issues: 1. Is the business income earned by a self-employed Indian storyteller and presenter exempt from tax?

Position: 1. Likely not in this situation.

Reasons: 1. Income is not situated on a reserve as the income-earning activities are not carried out on a reserve and the customers are not on a reserve.

24 May 2011 External T.I. 2007-0246981E5 - Subsection 212(1)

Unedited CRA Tags

Principal Issues: Determination of the extent to which payments for rights to manufacture and sell trademarked product by Canadian resident to non-resident person will be subject to tax under paragraph 212(1)(d) where payments are calculated (subject to a minimum amount payable) as a percentage of sales of the product and sales are made to customers inside and outside of Canada.

Position: Full amount of payment is subject to tax under Part XIII of the Act.

Reasons: The amounts will constitute royalties within the meaning of paragraph 212(1)(d) and therefore it is not necessary to allocate usage of the rights in Canada for the purposes of subparagraph 212(1)(d)(i).

24 May 2011 External T.I. 2011-0404941E5 - Disposition - Interest in a Life Insurance Policy

Unedited CRA Tags
148(1); 56(1)(j); 308 of the Regs

Principal Issues: General comments on the tax consequences of the disposition of a life insurance policy with a "return of premium" benefit.

Position: Generally results in a taxable gain.

Reasons: The legislation.

24 May 2011 External T.I. 2011-0401231E5 - Qualified Farm Property

Unedited CRA Tags
110.6(2), 110.6(1.3)

Principal Issues: Whether a taxpayer is eligible to claim a capital gains deduction for qualified farm property.

Position: No.

Reasons: The farmland would not meet the first farming-use test as the taxpayer did not have at least 2 years during the ownership period where gross revenue from the farming business exceeded income from all other sources for the year. In addition, the second farming-use test would not be met as the property was acquired after 1987.

19 May 2011 External T.I. 2011-0402501E5 - Capital Cost Allowance

Unedited CRA Tags
Sch II of the Regulations

Principal Issues: What is the CCA class for a self-propelled sprayer?

Position: Class 10.

Reasons: The phrase "automotive equipment" is interpreted broadly. Given the ordinary meaning of the word "automotive", it is reasonable to conclude that a self-propelled sprayer is "automotive equipment" that is described in paragraph (a) of class 10 of Schedule II of the Regulations.

18 May 2011 External T.I. 2011-0392191E5 - SR&ED - Approved Association

Unedited CRA Tags
37(1), 37(7)

Principal Issues: XXXXXXXXXX has submitted a request to be considered an "approved association" described in Clause 37(1)(a)(ii)(A) of the Act. Does it meet the requirements described in Application Policy SRED 96-10, Third Party Payments - Approval Process?

Position: Recommendation is for approval.

Reasons: It appears based on the information submitted and or otherwise made available to us, including from XXXXXXXXXX 's website, that it meets the conditions for approval.

2 May 2011 External T.I. 2011-0394081E5 - Capital Gains Reserve

Unedited CRA Tags
40(1)(a); 248(1) "joint spousal or common-law partner trust" and "alter ego trust"; 40(1.1)

Principal Issues: Whether a taxpayer may claim a capital gains reserve pursuant to subparagraph 40(1)(a)(iii) when part of the consideration received as proceeds of disposition in the form of a mortgage is transferred to a trust.

Position: No.

Reasons: The mortgage would not be considered payable to the taxpayer after the transfer.

29 April 2011 External T.I. 2011-0400731E5 - Milk Quotas - Qualified farm Property

Unedited CRA Tags
14(1), 14(5), 54, 110.6(1)

Principal Issues: Are Milk Quotas considered Qualified Farm Property

Position: Yes if the milk quota otherwise meets the conditions provided in the definition of Qualified farm Property in subsection 110.6(1) of the Act.

26 April 2011 External T.I. 2011-0400251E5 - Capital Loss on Personal Use Property

Unedited CRA Tags
54, 40(2)(g)(iii)

Principal Issues: Whether a capital loss incurred on the disposition of personal use property can be carried forward to be used to reduce any capital gains on personal use properties.

Position: No.

Reasons: Any loss realized on the disposition of a "personal-use property" will be deemed to be nil under subparagraph 40(2)(g)(iii) of the Act and thus can not be carried forward to reduce any future capital gains on personal use properties.

2 June 2010 External T.I. 2010-0378831E5 - Apprenticeship Training Tax Credit

Unedited CRA Tags
s. 38 and 96 TA, s. 127 ITA, s.s. 127(18) ITA

Principal Issues: 1. Whether the ATTC is government assistance for the purposes of calculating Ontario SR&ED tax credit.

Position: 1. Where the ATTC is received in respect of SR&ED activities, the ATTC is considered government assistance.

Reasons: 1. Subsection 127(18) of the ITA.

Technical Interpretation - Internal

2 June 2011 Internal T.I. 2010-0389351I7 - Ontario 2008 Refundable Tax Credits

Unedited CRA Tags
CTA 44.1(5); ITA 12(1)(x)

Principal Issues: Possible double taxation of Ontario refundable tax credits claimed by a corporation in its 2008 taxation year and reported in its Ontario income in 2008 and federal income in 2009.

Position: If a corporation did not report its Ontario refundable tax credits in its corporate income in the same taxation year for Ontario CT23 and federal T2 returns and it had been subjected to Ontario corporate tax on the same income in both 2008 and 2009, the corporation should contact the Ontario Ministry of Revenue for relief from the double taxation.

Reasons: As explained in the memo.

30 May 2011 Internal T.I. 2011-0401131I7 - Par. 15(1) LIR, Benefit conferred to a shareholder

Unedited CRA Tags
15(1); 9(1); 18(1)(a); 67

Principal Issues: Whether 15(1) applies to confer a benefit on a parent corporation when wholly-owned subsidiary pays an expense incurred by the parent corporation.

Position: Yes.

Reasons: Application of the provisions of the Act.

Le 30 mai 2011

27 May 2011 Internal T.I. 2011-0399451I7 - Operation of the Normal Reassessment Period

Unedited CRA Tags
s. 152(3.1) & (4)

Principal Issues: Whether an assessment under subsection 152(7) for the 1996 to 1998 taxation years is statute-barred?

Position: No, if the taxpayer had never filed the return for those years.

Reasons: In the absence of the initial assessment for a particular taxation year, the time limitation for assessing a taxation year does not start to run. In this case, returns for the 1996 to 1998 taxation years were never assessed; consequently, the taxation years were open for assessment.

26 May 2011 Internal T.I. 2011-0403891I7 - Child Tax Credit in yr of birth-death

Unedited CRA Tags
118(1)(b.1)(i); 118(4); 118(9.1)

Principal Issues: Can the parents claim the child tax credit where the child is born or adopted in the same year as the child's death?

Position: Yes

Reasons: Legislation and a question of fact

25 May 2011 Internal T.I. 2011-0403981I7 - Northern Residents Deduction Reg 7305(1)(c)

Principal Issues: What is meant by "the lowest return airfare ordinarily available" used in paragraph 7304(2)(c) of the Regulations for the purposes of claiming the northern residents deduction for travel benefits under paragraph 110.7(1)(a) of the Act?

Position: Question of fact but would be the lowest return airfare ordinarily available for regularly scheduled commercial flights on the date that the trip was made, excluding promotions or discounts that were not ordinarily available that day, including any GST/PST/HST and airport taxes but excluding additional charges, such as flight cancellation insurance, meals, and baggage surcharges. This fare is not reduced by any early booking or other possible promotions or discounts that might have been available unless they were available on the day the trip was made.

Reasons: Consistent with the applicable legislation and the wording of the applicable provision.

24 May 2011 Internal T.I. 2011-0403851I7 - Reassessing Under Subsections 162(7.010 and (7.02)

Unedited CRA Tags
152(3.1) & (4); 162(7.01) & (7.02).

Principal Issues: Whether a penalty could be reassessed when the initial assessment was raised more than three years prior?

Position: No.

Reasons: Subsection 152(4) applies whereby the reassessment has to be issued within three years (four years for a public corporation and a mutual fund trust company) of the initial assessment.

24 May 2011 Internal T.I. 2011-0397361I7 - Limitation period to assess a partnership return

Unedited CRA Tags
s. 152(1.2), (1.4), (1.7), (4), and 16

Principal Issues: When the statutory limitation period begins for purposes of assessing a partnership under subsections 162(7) and (7.1).

Position: The statutory limitation period begins at the earlier of the determination of the partnership information return under subsection 152(1.4) and the assessment of an initial penalty under subsections 162(7) or (7.1).

Reasons: The purpose and wording of the relevant provisions of the Act.

16 May 2011 Internal T.I. 2011-0399521I7 - Replacement property

Unedited CRA Tags
13(4), 13(4.1), 13(21), 44(1), 44(5), 54

Principal Issues: 1. Were the land and buildings owned by the taxpayer disposed of as a result of a voluntary disposition or an involuntary disposition for the purposes of the replacement property rules? 2. Does a particular property acquired as a replacement property need to be acquired and used by the taxpayer or a related person on or before the expiry of the applicable replacement property time limit?

Position: 1. The disposition was voluntary. 2. The property needs to be acquired and used on or before the expiry of the applicable time limit in order to be a replacement property.

Reasons: 1. The proceeds of disposition (POD) did not fall within one of paragraphs (b), (c) or (d) of the respective definitions of POD in section 54 and subsection 13(21) of the Act. 2. The property was not used as required before the applicable time limit.

12 May 2011 Internal T.I. 2011-0400121I7 - The Ambit of an Employer's Establishment

Unedited CRA Tags
s. 153(1)(a); Reg. 100(4) & 102(1); s. 35(1) Interpretation Act.

Principal Issues: What constitutes an employer's establishment?

Position: An employer's establishment is the place where an employee reports for work whether or not the employer has an establishment there.

Reasons: Regulation 100(4) & 102(1).

7 April 2011 Internal T.I. 2011-0394251I7 - Paragraph 149(1)(l)

Unedited CRA Tags

Principal Issues: In our view, does the Association qualify for the tax exemption contained in paragraph 149(1)(l) of the Act?

Position: No.

Reasons: The Association is operating a retail operation with the intention of earning a profit.