Income Tax Severed Letters - 2011-12-30

Technical Interpretation - External

16 December 2011 External T.I. 2011-0412502E5 F - Remboursement - frais de scolarité

Unedited CRA Tags
118.5; 118.6
Summary Under
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(5) - Paragraph 118.1(5)(a) - Subparagraph 118.1(5)(a)(iii)
credit can be claimed where employee is subsequently required to reimburse employer for employer-paid tuition
Summary Under
Tax Topics - Income Tax Act - Section 118.6 - Subsection 118.6(1) - Qualifying Educational Program
no benefit denying credit if employee is subsequently required to reimburse employer for employer-paid tuition

Principales Questions: 1) Est-ce qu'un contribuable pourrait réclamer le crédit d'impôt pour frais de scolarité prévu à l'article 118.5 et le crédit d'impôt pour études prévu à l'article 118.6 dans une situation donnée?
2) Si oui, pour quelle année d'imposition?

Position Adoptée: 1) Le sous-alinéa 118.5(1)a)(iii) prévoit qu'un montant de frais de scolarité payé pour le compte d'un contribuable par son employeur et qui n'est pas inclus dans le calcul de son revenu ne donne pas droit au crédit d'impôt pour frais de scolarité. Pour les fins du crédit d'impôt pour études, le contribuable ne doit toutefois pas avoir reçu d'avantage.
2) Le crédit d'impôt pour frais de scolarité est disponible dans l'année pour laquelle le particulier est inscrit à un établissement d'enseignement conformément à l'alinéa 118.5(1)a). Le crédit d'impôt pour études est disponible dans l'année pour laquelle le particulier est inscrit notamment à un programme de formation admissible ou à un programme de formation déterminé conformément au paragraphe 118.6(2).

Raisons: Analyse législative et positions antérieures

12 December 2011 External T.I. 2011-0407661E5 - Lump-Sum Child Support Payments

Unedited CRA Tags
12(1)(c), 56(1)(b), 110.2(2), 120.31

Principal Issues: 1) Whether the interest portion of a lump-sum payment for arrears would be taxable? 2) Whether the principal portion of a lump-sum payment for child support arrears is taxable?

Position: 1) Yes, pursuant to 12(1)(c). 2) Question of fact. Yes, pursuant to 56(1)(b).

Reasons: 1) Interest income is included in income either when received or when it is receivable. 2) The arrears that have been paid reflect the amounts payable under the initial order which have fallen into arrears. The initial order is dated before May 1997.

9 December 2011 External T.I. 2011-0428071E5 - Clarifications of Application of 87(11)

Unedited CRA Tags
87(11); 88(1); 88(1.4); 88(1.7); 248(1)
Summary Under
Tax Topics - Income Tax Act - Section 87 - Subsection 87(11)

Principal Issues: Whether, in the context of the particular hypothetical situation, subsections 87(11) and 88(1) of the Income Tax Act (the "Act") would apply to each of Subco 1 and Subco 2 for purposes of determining the proceeds of disposition to Amalco for the shares of the capital stock of each subsidiary and for the purposes of determining the cost to Amalco of each capital property of Subco 1 and Subco 2 acquired on the amalgamation, including any "bump amount" calculated under paragraphs 88(1)(c) and (d)?

Position: Clarifications provided.

Reasons: In accordance with the Act and our previous positions.

2 December 2011 External T.I. 2011-0424446E5 - Interaction of Subsections 249(3.1) and 249(4)

Unedited CRA Tags
125(1); 125(7); 256(9); 249(4); 251(5)(b); 249(3.1)
Summary Under
Tax Topics - Income Tax Act - Section 249 - Subsection 249(3.1)

Principal Issues: Whether, in the circumstances where a sale of the shares of the capital stock of a Canadian-controlled private corporation ("CCPC") to a non-resident purchaser results in a change of CCPC status and a change of control on the same day, the hypothetical corporation would be considered to be a CCPC throughout the taxation year such that the small business deduction provisions of subsection 125(1) would apply?

Position: Clarifications provided.

Reasons: In accordance with the Act and our previous positions.

21 November 2011 External T.I. 2011-0422191E5 F - Price adjustment clause and redemption of shares

Unedited CRA Tags
84(3)
Summary Under
Tax Topics - General Concepts - Effective Date
additional payment, pursuant to price adjustment clause, in year following shares; redemption is recognized then
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(3)
price adjustment payment recognized as s. 84(3) dividend when received

Principal Issues: In the course of an estate freeze, preferred shares are issued to a taxpayer in consideration for common shares. The redemption value of those shares would be equal to the fair market value of the common shares acquired by the corporation. The rights, privileges and restrictions of the preferred shares described in the articles of incorporation would contain a price adjustment clause. Pursuant to that price adjustment clause, the redemption value of the preferred shares would be adjusted to reflect the fair market value of the consideration if the amount considered to be the fair market value is changed. If the preferred shares are redeemed before an upward adjustment to the redemption value, the corporation would pay an additional amount to the taxpayer. What would be the tax treatment of such additional payment made by the corporation in favour of the taxpayer?

Position: In such a case, the CRA's position is that the additional payment made by the corporation in favour of the taxpayer, as a result of the price adjustment clause becoming operative, would be treated as a dividend. Such a dividend would have to be included in the shareholder's income in the year of receipt under subsection 84(3) of the Act.

Reasons: Previous positions.

Technical Interpretation - Internal

21 December 2011 Internal T.I. 2010-0382231I7 - Taxation of gravel extraction payments

Unedited CRA Tags
Canada-XXXXXXXXXX Tax Convention; section 212, 216 of the Act

Principal Issues: The issues are as follows: (1) what is the correct classification of the gravel extraction payments? (2) what is the correct withholding and reporting of the payments and (3) what are the GST/HST tax implications of the payments?

Position: Canada has the right to tax under Article 6 of the Canada-XXXXXXXXXX tax convention and subparagraph 212(1)(d)(v) of the Act applies. The payments are subject to tax at 25% under Part XIII. Pursuant to subsection 162(2) of the ETA, the supply of the right under the agreement is deemed not to be a supply. Therefore, GST/HST is not exigible on the payments in consideration for the right.

Reasons: The income is considered income from immovable property under the Canada-XXXXXXXXXX tax convention and rents, royalties and similar payments under subparagraph 212(1)(d)(v) of the Act.