Income Tax Severed Letters - 2011-07-08

Ministerial Correspondence

27 June 2011 Ministerial Correspondence 2011-0404751M4 - Post-doctoral Fellowship

Unedited CRA Tags
118.6, 56(1)(n), 56(3)

Principal Issues: Whether a post-doctoral fellowship is exempt from tax under 56(3).

Position: Generally, no.

Reasons: See discussion in letter.

Technical Interpretation - External

29 June 2011 External T.I. 2011-0394491E5 - research grant

Unedited CRA Tags
56(1)(o), 5(1) 6(3), 56(1)(n)

Principal Issues: Is a postdoctoral grant received from the federal government to conduct research at a University in the United States taxable?

Position: It depends on the facts, but they are generally taxable.

Reasons: The CRA has consistently viewed post-doctoral fellows as being similar to other individuals who are required to undertake a period of paid training after completing their studies but prior to pursuing an independent professional career. As with the compensation received by these other professionals (for example, doctors, lawyers, and accountants), the compensation received by post-doctoral fellows is generally taxable.

28 June 2011 External T.I. 2011-0404371E5 - Employer paid Reimbursement for ON Health Premium

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

Principal Issues: Is a reimbursement paid to an employee for a portion of the cost of the Ontario Health Premium a taxable benefit?

Position: Yes.

Reasons: Generally, the value of all benefits received or enjoyed by virtue of an office or employment must be included in an employee's income pursuant to paragraph 6(1)(a) of the Act. This includes a reimbursement received for health care premiums that the employee would normally have to bear.

28 June 2011 External T.I. 2011-0405361E5 - Employee Gifts and Rewards

Unedited CRA Tags
5(1); 6(1)

Principal Issues: 1. Whether gifts selected from a catalogue by employees based on a points system for various employment and performance-related activities are taxable. 2. Whether gifts selected from a catalogue by employees based on a points system for milestones every five years based on their hire date are taxable.

Position: 1. Yes. 2. Question of fact.

Reasons: 1. CRA's administrative policy as outlined in ITTN#40 does not exempt gifts or awards for employment or performance-related activities and are therefore subject to tax under paragraph 6(1)(a) of the ITA. 2. In accordance with CRA's administrative policy outlined in ITTN #40, gifts awarded for milestones every five years are tax exempt

28 June 2011 External T.I. 2011-0404151E5 - Special Work Site

Unedited CRA Tags
6(6);6(6)(a)(i)

Principal Issues: 1. Whether certain employees temporarily employed at a work site location qualify for the special work site exemption pursuant to subsection 6(6) of the Act? 2. Whether a change in an employee's manager determines if a work location qualifies as a special work site for purposes of subsection 6(6) of the Act? 3. Whether having permanent employees employed at a work location impacts whether the location can qualify for a special work site exemption for other employees under subsection 6(6) of the Act? 4. Does having a permanent work location in a major city impact on whether it can qualify as a special work site under subsection 6(6) of the Act?

Position: 1. Question of fact. 2, 3, & 4: No. Will depend on the facts of each case.

Reasons: 1. All conditions of subsection 6(6) of the Act must be met in order to qualify as a special work site for each employee. It is a question of fact whether each employee's situation would meet the conditions in subsection 6(6) of the Act. 2. 3. & 4. A change in an employee's manager does not impact whether a particular work site can be considered a special work site under subsection 6(6) of the Act. Having permanent employees employed at a work location does not impact on whether the location qualifies as a special work site under subsection 6(6) of the Act for other employees. Having a permanent work location in a major city does not impact whether the location can qualify for a special work site exemption for temporary employees under subsection 6(6) of the Act. Instead, all conditions of subsection 6(6) of the Act must be met for a work site to qualify as a special work site for purposes of subsection 6(6) of the Act.

27 June 2011 External T.I. 2011-0410811E5 - Prescribed International Organization

Unedited CRA Tags
110(1)(f)(iii); Regulation 8900; s.57 and 63 of the United Nations Charter

Principal Issues: Whether the Inter-American Development Bank is a prescribed international organization such that its employees are entitled to a deduction under paragraph 110(1)(f)(iii).

Position: No

Reasons: Not one of the specialized agencies prescribed in paragraph 8900(1)(b) of the Regulations.

27 June 2011 External T.I. 2011-0405821E5 - Indian - education assistance

Unedited CRA Tags
81(1)(a), 118.6, 56(1)(n), 56(3)

Principal Issues: 1. Is education assistance received by an Indian from a First Nation exempt from tax?

Position: 2. Likely, yes.

Reasons: 3. Generally, scholarships and bursaries are not included in income, due to the scholarship exemption, when received in connection with a program for which the student is able to claim the education tax credit.

24 June 2011 External T.I. 2011-0409741E5 F - Déductions d'impôt sur une bourse de recherche

Unedited CRA Tags
153(1)a), 56(1)o), 110(1)f), Règ. 200(2)
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)
assistance received by unenrolled student towards Ph.D. thesis research assistance was a research grant under s. 56(1)(o)
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 20
assistance received by unenrolled Chinese student towards Ph.D. thesis research assistance was Treaty-exempt

Principales Questions: Doit-on faire des retenues d'impôt sur les subventions de recherche

Position Adoptée: Non

Raisons: Aucune retenue n'est exigée en vertu de la Loi.

17 June 2011 External T.I. 2011-0402901E5 - OETC - Qualifying Period

Unedited CRA Tags
ITA 122.3

Principal Issues: Determination of "qualifying period" with respect to vacation times that is attributable to the time worked out side of Canada.

Position: General Comment

Reasons: General Comment

Conference

20 May 2011 Roundtable, 2011-0398351C6 - CLHIA 2011 - Update on various initiatives

Principal Issues: See Q&A

Position: See Q&A

Reasons: See Q&A

20 May 2011 Roundtable, 2011-0398461C6 - Charitable donation of life insurance policy

Unedited CRA Tags
118.1; 110.1; 149.1(1); 248(31); 248(32)

Principal Issues: 1. Do the premiums paid by an individual in respect of a life insurance policy that is owned by a registered charity, where the individual is the life insured under the policy, and the charity is the sole beneficiary qualify as a gift for tax purposes?
2. Under otherwise similar circumstances, would the premium payments qualify as a gift for tax purposes if the terms of the policy provide that the death benefits are split between the charity and the individual?

Position: 1. General comments provided. 2. Factual determination. Discussed proposed split-receipting legislation.

Reasons: 1. See comments in IT-244R3. 2. Such a determination is to be made on a case by case basis upon review of the terms and conditions of the particular arrangement.

20 May 2011 Roundtable, 2011-0398471C6 - CLHIA #8 - Prescribed Annuity Contract

Unedited CRA Tags
12.2(1); 56(1)(d); 304(1)(c)(iv) of the Regs

Principal Issues: Whether an income inclusion pursuant to subsection 12.2(1) is required for an annuity contract under which its first annuity payment is made after its first anniversary day, but before the end of the taxation year containing that anniversary day.

Position: Not if the annuity contract qualifies as a PAC.

Reasons: Provided that the annuity otherwise qualifies as a PAC, subparagraph 304(1)(c)(i) of the Regulations makes the annuity a PAC for the entire taxation year, such that the exclusion in paragraph 12.2(1)(b) is satisfied.

20 May 2011 Roundtable, 2011-0401401C6 - CICA Conference Question 20, Life Estates

Unedited CRA Tags
70(5), 70(6), 70(9), 40(2)(g)(iii)

Principal Issues: Various issues related to life estates and the valuation of life and remainder interests in real property (particularly in relation to document 2002-0154725)

Position: General comments provided based on published positions

Reasons: CRA historic views have been expressed

20 May 2011 Roundtable, 2011-0399761C6 - CLHIA #3 - IFRS and Life Insurers

Unedited CRA Tags
138(12); 138(17.1), 138(16); 138(17); 138(18); 138(19)

Principal Issues: 1. How is the adjustment to retained earnings resulting from the change in accounting for term certain annuities under IFRS treated for tax purposes?
2. Can the CRA confirm that subsection 138(17.1) should be applied to subsections 138(16) and (17) to determine the referenced amounts and whether subsection 138(18) or (19) applies?

Position: 1. The adjustment is to be included or deducted in computing income in the first year in which the taxpayer uses IFRS pursuant to subsection 9(1).
2. Yes.

Reasons: 1. Consistent with the CRA's general position. It is our view that the adjustment to retained earnings as a result of the adoption of IFRS treatment for term certain annuities should be reported in the first year in which IFRS is used.
2. In our view, subsection 138(17.1) should be applied to determine whether subsection 138(16) or (17) would have applied without reference to excluded policies for the purpose of determining whether subsection 138(18) or (19) applies.

20 May 2011 Roundtable, 2011-0398491C6 - CLHIA 2011 - CRA & Comfort Letters

Principal Issues: See Q&A

Position: See Q&A

Reasons: See Q&A

Technical Interpretation - Internal

28 June 2011 Internal T.I. 2011-0406741I7 - Honorarium Payments

Unedited CRA Tags
5(1), 6(1)(a), 248(1) "office", 153(1), 81(3)

Principal Issues: Clarification on the correct withholding and reporting requirements of honorarium payments to board and committee members.

Position: Honorarium payments are considered income from an office and the payer is required to withhold income tax, CPP and EI. The payer is also required to issue a T4 information slip.

Reasons: The definition of an office in 248(1) includes any office the incumbent of which is elected by popular vote or is appointed in a representative capacity. In this case the board and committee members are either elected or appointed.

28 June 2011 Internal T.I. 2011-0399691I7 - Automobile Standby Charges - Leased Vehicles

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

Principal Issues: 1. Is a terminal charge on the disposition of an automobile lease included in the standby charge?
2. Is there an alternate method for calculating the taxable benefit to an employee that excludes a terminal charge

Position: 1. Yes. 2. No.

Reasons: 1. In accordance with subsection 6(2) of the Act, all payments made by an employer to a lessor for the termination of a lease including those arising at the end of a lease are required to be included in the employer's cost of leasing the automobile for that year.
2. The standby charge is computed using the formula provided by subsection 6(2) of the Act. There are no alternate methods available.

21 June 2011 Internal T.I. 2010-0379561I7 - Condominium Corporation--149(1)(l)

Unedited CRA Tags
149(1)(l); 149(5)

Principal Issues: Does a condominium corporation that operates a public golf course qualify for the tax exemption provided by 149(1)(l)?

Position: No.

Reasons: The condominium corporation is not operating exclusively for a purpose other than profit. Income of the condominium corporation appears to be available to its members.

23 May 2011 Internal T.I. 2011-0405701I7 - The 3 year limitation period in 129(1)

Unedited CRA Tags
150(1)(a), 152(1), (3.1), (4), 129(1), 220(3)

Principal Issues: Whether subsection 220(3) applies to permit the Minister to extend the 3 year limitation period in subsection 129(1) so as to permit a dividend refund.

Position: No.

Reasons: Ministerial discretion in subsection 220(3) is only applicable to provisions such as subsection 150(1). Allowing a return of income to be filed past the 3 year limitation period would not alter or affect the fact that the return would not be filed "within 3 years after the end of the year".

13 January 2011 Internal T.I. 2011-0410961I7 - Re-appropriation of Statute Barred Amounts

Unedited CRA Tags
S. 164(1), 164(1.5), 164(2) & 164(3); s. 220(3.1); s. 221.2(1) & (2); s. 223(1).

Principal Issues: Can a re-appropriation under s. 221.2 be applied to produce a refund?

Position: No; but an otherwise statute barred amount may be re-appropriated either to an amount that is payable or to an amount that may become payable.

Reasons: Section 221.2 does not permit a refund of an overpayment of tax; rather, it permits the Minister to re-appropriate an amount from one debt to another.

Internal Memorandum

18 May 2011 Internal Memo 2011-0405811R11 - Appeal by Trustee of a Trust

Unedited CRA Tags
s. 104(2), 225.1(1) & (7)

Principal Issues: Does a trust company, in its capacity as trustee of a trust, have to pay, pursuant to subsection 225.1(7), 50% of any tax assessed against the trust before the trust can appeal an assessment of its own tax?

Position: No.

Reasons: Under subsection 104(2), a trust is taxed as an individual, and its liability for tax is separate from the trustee's liability for tax. Since the trustee is not appealing an assessment of tax levied against it, but rather is appealing the tax assessed against the trust, subsection 225.1(7) does not come into play.