Income Tax Severed Letters - 2011-11-11

Ruling

2011 Ruling 2011-0408241R3 - Loss Consolidation

Unedited CRA Tags
20(1)(c)

Principal Issues: Is the loss utilization arrangement acceptable?

Position: Yes

Reasons: meets our published position

Technical Interpretation - External

4 November 2011 External T.I. 2011-0412471E5 - Director liability for interest

Unedited CRA Tags
s. 153(1), 161(1), 227(9.2) & (9.4), 227(10) & (10.1), 227.1(1)

Principal Issues: Whether a director can be held liable for interest on arrears related to the company's unremitted source deductions that arose prior to becoming a director.

Position: No.

4 November 2011 External T.I. 2011-0406271E5 - Sole Shareholder-Employee Home Purchase Loan

Unedited CRA Tags
15(2); 80.4(1)
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.4) - Paragraph 15(2.4)(e)

Principal Issues: Whether a loan made to a sole shareholder-employee to facilitate the repayment of a secured line of credit used to finance a home purchase would qualify as a home purchase loan.

Position: Question of fact, but likely no.

Reasons: It is a question of fact whether any benefit, including a loan to purchase a dwelling, is conferred on an individual by virtue of employment or shareholdings.

4 November 2011 External T.I. 2011-0399991E5 - Taxation of a Settlement

Unedited CRA Tags
3; 5(1); 9(1)

Principal Issues: 1. Are amounts received in settlement of a class action lawsuit taxable? 2. Where taxable, would the amounts be included into income in the year of receipt or apportioned to all taxation years covered by the lawsuit?

Position: 1. Question of fact. 2. Amounts are taxable in the year of receipt.

Reasons: 1. Based on the surrogatum principle, a settlement has the same tax treatment as the amount it is intended to replace. Generally, only the portion of a settlement payment which represents damages in respect of personal injury or death would be exempt from tax. 2. Lump sum payments received on account of income are taxable in the year of receipt.

3 November 2011 External T.I. 2011-0423381E5 - Principal residence exemption - farming

Unedited CRA Tags
40(2)(b), (c); 54; 110.6(1), (1.3), (2); 248(1) Farming

Principal Issues: 1. Whether land in excess of 1/2 hectare is part of principal residence in a particular situation. 2. Whether the environmentally protected land is subject to capital gains tax. 3. Whether any of the land is qualified farm property.

Position: 1. Possibly. 2. Yes. 3. No.

Reasons: 1, 2, 3 - See comments.

2 November 2011 External T.I. 2011-0413641E5 F - CIEE

Unedited CRA Tags
122.3
Summary Under
Tax Topics - Income Tax Act - Section 122.3 - Subsection 122.3(1) - Paragraph 122.3(1)(b)
qualifying activities determined by reference to the employer’s business rather than employee’s activities

Principales Questions: Le c/t veut savoir s'il peut se prévaloir du CIEE alors que son employeur, un transporteur maritime, l'a dépêché afin de superviser les travaux d'ingénierie lors de la construction de XXXXXXXXXX effectuée par un tiers à l'étranger.

Position Adoptée: Non

Raisons: L'employeur étant un transporteur maritime, il n'exerce pas lui-même d'activités admissibles au sens de la Loi.

1 November 2011 External T.I. 2011-0423071E5 - Small Business Deduction

Unedited CRA Tags
125, 12(1)(t), 127(5)

Principal Issues: Can income resulting from an ITC refund in respect of SR&ED be eligible for the small business deduction where the corporation ceased carrying on business?

Position: It is possible depending on facts.

Reasons: Position in paragraph 9 of IT-73R6

4 October 2011 External T.I. 2011-0410491E5 - Dissolution of a Limited Partnership.

Unedited CRA Tags
s. 159(2) & (3), 248(1) def'n "legal representative".

Principal Issues: Whether, before making the final distribution to the limited partners, a certificate under subsection 159(2) needs to requested for only the partnership itself or for the partnership and each partner.

Position: One notification of disposition can be filed and clearance certificate requested on behalf of the partnership provided that the required information is filed together with the request.

Technical Interpretation - Internal

27 October 2011 Internal T.I. 2010-0382161I7 F - CPN-144 - remises et ristournes

Unedited CRA Tags
9(1), 248(1).
Summary Under
Tax Topics - Income Tax Act - Section 9 - Computation of Profit
purchase price rebates earned after purchase are income rather than inventory cost reduction
Summary Under
Tax Topics - Income Tax Act - Section 10 - Subsection 10(1)
change in methodology for determining cost does not require CRA approval

Principales Questions: 1. Est-ce la méthode adoptée par un contribuable à l'effet que les remises ou ristournes, reçues ou à recevoir, peuvent réduire le coût des marchandises vendues, et le coût des stocks de la fin, selon le CPN-144, est acceptable pour la détermination du coût des biens en inventaire d'un contribuable et pour la détermination du bénéfice aux fins de la Loi de l'impôt sur le revenu (la "Loi")?
2. En ce qui a trait à la situation présentée au point 1, est-ce que l'alinéa 12(1)x) de la Loi pourrait être applicable?
3. Est-ce qu'un changement de méthode qui implique la détermination des coûts des biens figurant à l'inventaire requière l'approbation du ministre?

Position Adoptée: 1. Question de fait. Notre position actuelle est que les remises/ristournes payées ou payables après l'achat constituent du revenu et doivent être incluses dans le calcul du revenu. Toute méthode de comptabilisation des remises ou ristournes qui irait à l'encontre de ce principe ne serait pas acceptable aux fins de l'impôt sur le revenu.
2. L'alinéa 12(1)x) pourrait possiblement s'appliquer, si une de ces exceptions de cet alinéa ne s'appliquent pas.
3. Non.

Raisons: 1. Paragraphe 9(1).
2. Si pour une quelconque raison, l'article 9 ne s'applique pas, l'alinéa 12(1)x) pourrait être envisageable.
3. Notre position énoncée dans le document 2009-0330401C6.

18 October 2011 Internal T.I. 2011-0408371I7 - Consideration on s.160 Assessment

Unedited CRA Tags
160(1)

Principal Issues: Whether the amount of a section 160 assessment against a transferee of property is reduced by payments by the transferee to the transferor's company

Position: Possibly.

Reasons: See below.

11 October 2011 Internal T.I. 2011-0404211I7 - Refund paid in error to a bankrupt

Unedited CRA Tags
128(2), 160.1(1)

Principal Issues: Whether subsection 160.1(1) applies to a refund paid in error such that it would be an excess refund that is payable by the taxpayer.

Position: Subsection 160.1(1) the ITA would apply to a refund in respect of the year which is deemed to begin in accordance with sub-paragraph 128(2)(d)(i) of the ITA.

Reasons: See below.

30 September 2011 Internal T.I. 2011-0402871I7 - Taxation of accrued interest on immigration

Unedited CRA Tags
12(1)(c), 12(4), 12(11), 126(1), 128.1(1)
Summary Under
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(1) - Paragraph 128.1(1)(b)
extension of Holzhey to immigration

Principal Issues: What is the tax treatment of interest on an investment contract that accrued but was not payable while the individual was a non-resident, and the individual immigrates to Canada before the maturity of the investment?

Position: The interest that accrues to the anniversary day of the investment contract or any interest received or that became receivable when the taxpayer is a resident would be included in income by virtue of subsection 12(4) or paragraph 12(1)(c) of the Act.

Reasons: Subsection 12(4) of the Act requires a taxpayer, holding an interest in an investment contract on any anniversary day of the contract, to include in income for the year the interest that accrued to the end of that day to the extent that it has not already been included in computing the taxpayer's income for the year or any preceding year.

27 September 2011 Internal T.I. 2011-0405061I7 - Government assistance

Unedited CRA Tags
12(1)(x)

Principal Issues: Is a portion of the Government assistance (called the Contribution) a repayable loan?

Position: No

Reasons: Only one agreement - meant as government assistance with terms that are made to stimulate the economy and not made in the same way as in private business.