Income Tax Severed Letters - 2011-09-16

Ruling

2011 Ruling 2009-0307841R3 - Oil Sands Project

Unedited CRA Tags
Regulation 1104(7); definitions in subsection 1104(2); Class 41; Class 41.1

Principal Issues: (1) Whether all of the XXXXXXXXXX wells of phase I of the project constitute one mine and the XXXXXXXXXX wells for phase II constitute an expansion of the mine. (2) Whether depreciable property to be used in the project is property described in Class 41.

Position: (1)Yes (2) depreciable property for phase I is eligible for inclusion in Class 41 and accelerated CCA, while depreciable property of phase II is not grandfathered and will be included in new Class 41.1 such that accelerated CCA will be phased out as provided in paragraph 1000(1)(y.1).

Reasons: (1) Opinion received from NRCan (2) review of documentation submitted

Ministerial Correspondence

22 August 2011 Ministerial Correspondence 2011-0415541M4 - medical expenses - attendant care and DTC

Unedited CRA Tags
118.2(2)(b); 118.3

Principal Issues: Whether a patient can claim attendant care expenses pursuant to paragraph 118.2(2)(b) and also the disability tax credit?

Position: No.

Reasons: The law. Paragraph 118.3(1)(c) does not permit attendant care expenses to be claimed pursuant to paragraph 118.2(2)(b) and the disability tax credit. If a claim is made under 118.2(2)(b.1) of up to $10,000 ($20,000 in the year of death) for attendant care expenses, then the DTC can also be claimed.

Technical Interpretation - External

8 September 2011 External T.I. 2011-0393411E5 - Article XV of the Canada-US Tax Convention

Unedited CRA Tags
Article XV(2)(b) of the Canada-United States Tax Convention (1980); s. 7

Principal Issues: As a consequence of changes to Article XV(2)(b) of the Canada-United States Tax Convention (the "Convention") arising from the Fifth Protocol, does stock option employment income recognized by a United States resident continue to be exempt from tax in Canada under Article XV(2)(b) if the remuneration is not deductible in computing the income (i.e. not "borne by") of a Canadian resident employer?

Position: No. If the stock option remuneration is paid by, or on behalf of, a resident of Canada under the Convention, the remuneration will not be exempt from tax in Canada under Article XV(2)(b).

Reasons: New wording of the provision.

31 August 2011 External T.I. 2011-0416541E5 F - Montant admis en déduction - REÉR

Unedited CRA Tags
146(5)
Summary Under
Tax Topics - Income Tax Act - Section 146 - Subsection 146(5)
if premium not claimed, deduction amount is nil

Principales Questions: Un montant est-il admis en déduction en vertu du paragraphe 146(5)?

Position Adoptée: aucune

Raisons: Cette notion fait référence à l'article 922 de la Loi sur les impôts

23 August 2011 External T.I. 2010-0385581E5 - SIFT partnership

Unedited CRA Tags
197(1), 122.1(1)

Principal Issues: 1. In the situation described, would a partnership that has none of its units listed or traded on a stock exchange meet condition (b) of the definition of "SIFT partnership" in subsection 197(1) if the shares or trust units of one of its investors are listed or traded on a stock exchange? 2. Are the partnership units listed or traded in a public market.

Position: 1 Question of fact but unlikely given the facts in the submission. 2. Question of fact.

Reasons: 1. It is unlikely that the "security test" or the "replicate test" would be met based on the facts provided in the submission. 2. We were not provided with sufficient details to provide our views as to whether the partnership units might be considered as listed or traded on a public market.

15 August 2011 External T.I. 2011-0406231E5 - Settlement Payment for Partnership Losses

Unedited CRA Tags
54; 53(2)(c)

Principal Issues: The characterization of a settlement payment for income tax purposes.

Position: Question of fact.

Reasons: Based on the legal principle of surrogatum, it must be determined what the amount is intended to replace.

25 July 2011 External T.I. 2010-0386841E5 - SIFT partnership

Unedited CRA Tags
197(1), 122.1(1)

Principal Issues: In a specific hypothetical situation, would a partnership that has none of its units listed or traded on a stock exchange or other public market meet condition (b) of the definition of "SIFT partnership" in subsection 197(1) if the common shares of one of its investors are listed or traded on a stock exchange or other public market? Specifically, would the common shares of the investor be viewed as an "investment" in the partnership as that term is defined in subsection 122.1(1)?

Position: Question of fact but unlikely given the facts in the hypothetical situation.

Reasons: Given the facts in the hypothetical situation, it is unlikely that the common shares of the investor would be viewed as an "investment" in the partnership since neither the "security test" nor the "replicate test" appears to be met.

Technical Interpretation - Internal

7 September 2011 Internal T.I. 2011-0401241I7 - Adjustments outside the Normal Assessment Period

Unedited CRA Tags
78(1)(a), 78(2), 152(4)

Principal Issues: Can 78(1)(a) be invoked to include in a taxpayer's income unpaid management fees in taxation years for which the taxpayer previously reported non-capital losses and for which the normal reassessment period has expired?

Position: Generally yes provided that the income inclusion does not result in an assessment of taxes payable. However 78(1)(a) will generally not be invoked by CRA where two non-arm's length taxpayers both account for income on an accrual basis unless the unpaid amounts appear to be part of a tax avoidance scheme. However, in such a situation, it is our view that the taxpayer may choose to apply 78(1) and file amended returns for any taxation year which is not statute-barred.

Reasons: Previous positions taken and CRA policy.

6 September 2011 Internal T.I. 2011-0401191I7 F - Automobiles mises à la disposition des employés

Unedited CRA Tags
6(1)e), 6(2), 248(1)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(2)
standby not computed for months in which automobiles in storage and unavailable for use

Principales Questions: Est-ce que l'usage des véhicules à moteur fournis par l'employeur dans la situation décrite ci-dessus donne lieu à un avantage imposable à être inclus dans le revenu des employés utilisant lesdits véhicules

Position Adoptée: Question de fait. En l'espèce, l'automobile ne serait pas à la disposition de l'employé pendant la saison hivernale.

Raisons: Loi de l'impôt sur le revenu, Jurisprudence.

2 September 2011 Internal T.I. 2011-0419111I7 F - Programme de compensation du MESS

Unedited CRA Tags
56(1)u); 110(1)f); 233(1) RIR; 233(2) RIR
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(u)
social assistance payments aggregating less than $500 not required to be included in income

Principales Questions: Les sommes versées en vertu du programme de compensation pour les prestataires de l'aide financière de dernier recours du MESS doivent-elles être incluses dans le calcul du revenu des bénéficiaires?

Position Adoptée: Non. Lorsqu'une déclaration T5007 n'a pas à être émise relativement à une prestation d'assistance sociale en raison du paragraphe 233(2) du Règlement de l'impôt sur le revenu, l'ARC a comme position de ne pas exiger que la prestation soit incluse dans le calcul du revenu net du bénéficiaire. Aucune déduction à la source n'est nécessaire dans ces cas.

Raisons: Loi de l'impôt sur le revenu.

29 August 2011 Internal T.I. 2011-0397071I7 - Interest on instalments

Unedited CRA Tags
261; 157(1); 161(2); 161(4.1)

Principal Issues: 1. Is it acceptable to convert a particular currency into another currency by dividing the amount by a Bank of Canada exchange rate?
2. How will interest on late instalment payments be computed where a taxpayer chooses an instalment payment option in paragraph 157(1)(a) that is not the method that gives rise to the least amount of instalments of tax for the year as stated in subsection 161(4.1)?

Position: 1. Yes
2. The Minister is bound to respect the choice of option that a corporation makes in calculating the payment of taxes to be remitted in monthly instalments. Should the corporation be deficient in making such remittances, interest may be assessed. However, the calculation of interest should be limited to the monthly amount required based on whichever allowable method in the circumstances gives rise to the least total amount of such parts or instalments of tax for the year.

Reasons: 1. It is our opinion that in most cases, dividing the Bank of Canada rate would be acceptable.
2. Per legislation and supported by jurisprudence (I.G. Rockies Corp. v The Queen).