Income Tax Severed Letters - 2012-04-06

Ruling

2012 Ruling 2011-0423921R3 - Bump in the cost amount of eligible property

Unedited CRA Tags
88(1)(c), 88(1)(c)(vi) 88(1)(d)(i) and (ii)

Principal Issues: (i) Whether the cost amount of land assigned to the parent corporation on the winding-up of the subsidiary can be bumped to the extent of the limitations found in paragraph 88(1)(d); (ii) Whether the proposed transaction may be subject to the back-door butterfly rule found in subparagraph 88(1)(c)(vi)

Position: (i) Yes, (ii) No

Reasons: (i) all the statutory requirements and limitations governing the increase in the cost amount of the capital property held by Subco prior to the wind-up have been satisfied and complied with (ii) None of the assets distributed to Parentco or property acquired in substitution therefor were acquired by a person or a corporation described in subclauses 88(1)(c)(vi)(B)(I), (II) and (III)

Ministerial Correspondence

7 March 2012 Ministerial Correspondence 2012-0435091M4 - Proposed subparagraph 6(1)(a)(vi)

Unedited CRA Tags
Draft Legislation released October 31, 2011 - 6(1)(a)(vi)

Principal Issues: Whether proposed 6(1)(a)(vi) would exempt employee discounts provided by elementary and secondary schools from inclusion in an employee's income as a taxable benefit?

Position: Yes, as long as the benefit is not a substitute for salary, wages or other remuneration and the employee deals with the employer at arms length.

Reasons: Current wording of draft legislation and policy intent.

Technical Interpretation - External

29 March 2012 External T.I. 2010-0391311E5 F - OBNL, exploitation d'une entreprise

Unedited CRA Tags
149(1)l); 248(1) "entreprise"
Timmins expansive concept of "business" applied

Principales Questions: Est-ce qu'une organisation à but non lucratif peut exploiter une entreprise aux fins de diverses mesures fiscales?

Position Adoptée: Non

Raisons: Dans le contexte d'une OBNL, l'exploitation d'une entreprise relativement à certaines activités pourrait faire en sorte que les exigences de l'alinéa 149(1)l) ne soient pas respectées. Sens de l'expression " exploiter une entreprise ".

28 March 2012 External T.I. 2011-0430411E5 - Conversion of capital property to inventory

Unedited CRA Tags
248(1) "disposition"; 9; 54; 40(1)
intended conversion of apartment buildings to condos

Principal Issues: Whether the conversion of an apartment building into condo units for resale would be on account of capital or inventory.

Position: It is a question of fact.

Reasons: Jurisprudence. Dependent on the intention of the taxpayer.

28 March 2012 External T.I. 2011-0395201E5 - IT-496R

Unedited CRA Tags
149(1)(l)

Principal Issues: 1. Can a 149(1)(l) organization pay for a member or employee to attend a seminar and continue to claim the exemption from tax? 2. Alternatively, can the organization waive fees in exchange for services and maintain the tax exemption? 3. What is a personal benefit to a member?

Position:1. Likely, yes. 2. Likely, yes. 3. Question of fact.

Reasons: 1. If the member is attending on behalf of the organization and in support of the organization's not-for-profit objectives. 2. Similar to 1, or may be a reasonable exchange for services. 3. Question of fact.

28 March 2012 External T.I. 2011-0412541E5 F - Compte de dividendes en capital

Unedited CRA Tags
80(12), 89(1) CDC

Principales Questions: Est-ce que le gain en capital réputé selon le paragraphe 80(12) est inclus dans le calcul du CDC?

Position Adoptée: Oui.

Raisons: Paragraphe 80(12) et définition du CDC au paragraphe 89(1).

27 March 2012 External T.I. 2012-0435101E5 - Small Business Corporation

Unedited CRA Tags
248(1) "active business" "small business corporation"; 129(6); 125(7) "specified investment business".
s. 129(6) character preservation rule inapplicable

Principal Issues: Whether a corporation is a "small business corporation" ("SBC") pursuant to the definition in subsection 248(1).

Position: No.

Reasons: Subsection 129(6) does not apply to the definition of an SBC to recharacterize a specified investment business into an active business.

26 March 2012 External T.I. 2010-0367351E5 F - Emprunt pour faire prêt sans intérêt à une fiducie

Unedited CRA Tags
20(1)c)(i)
interest deduction on money borrowed to fund interest-free advance to subsidiary trust used, in turn, for income-producing purpose

Principales Questions: Les intérêts payés ou payables sur de l'argent emprunté par une fiducie (Fiducie A) pour faire un prêt sans intérêt à une autre fiducie (Fiducie B), dont elle est l'unique bénéficiaire, sont-ils déductibles?

Position Adoptée: Dans les circonstances décrites, oui.

Raisons: L'utilisation directe de l'argent emprunté par Fiducie A (l'octroi du prêt à Fiducie B) aurait une incidence suffisante sur la capacité de Fiducie A de gagner un revenu.

12 March 2012 External T.I. 2011-0421981E5 - Single-Tier Fiscal Period Alignment

Unedited CRA Tags
249.1(8) and 249.1(10)

Principal Issues: Whether a single-tier fiscal period alignment election can be made to end on a particular day that is after the day on which the fiscal period would have otherwise ended.

Position: No.

Reasons: The preamble to subsection 249.1(8) and paragraph 248(1)(e).

Technical Interpretation - Internal

22 March 2012 Internal T.I. 2012-0436311I7 - payroll withholdings by non-resident employer

Unedited CRA Tags
153(1)(a)
obligation of non-resident without Canadian business to withhold

Principal Issues: 1. Is a non-resident employer required to deduct withholdings at source from the salary it pays to an employee who is a resident of Canada, even where the employer does not directly or indirectly do business in Canada? 2. If the employee is required to pay US income taxes, is the non-resident employer relieved of its obligation to withhold Canadian payroll deductions from the Canadian resident employee's salary? 3. Is there an inconsistency between our position in 2010-0383561I7 and the information provided in the Canada Revenue Agency Guide for Business Enquiries Agents and the Employer's Guide to Payroll Deductions (T4001)?

Position: 1. Yes. 2. No. 3. See discussion below

Reasons: See below

20 February 2012 Internal T.I. 2011-0429471I7 F - OBNL et profits accessoires

Unedited CRA Tags
149(1)l)
food and beverage sales at a the NPO’s annual hosting of festival conformed with operating for non-profit purpose

Principales Questions: La vente au détail de produits de consommation tels que nourriture, bière et vin, lors de certaines activités extérieures d'une organisation constituée et administrée pour animer, organiser et promouvoir un événement festivalier sans intention pécuniaire a-t-elle pour conséquence, en soi, d'empêcher l'organisation de se qualifier sous l'alinéa 149(1)l)?

Position Adoptée: Non.

Raisons: Il s'agit d'une activité qui est, en soi, entreprise pour atteindre les buts non lucratifs de l'organisation en ce sens qu'elle fait partie de la mise en place d'installations appropriées à la tenue de l'événement festivalier en cause. De plus, les montants impliqués et l'ampleur des activités de vente au détail sont minimes en regard des opérations de l'organisation dans leur ensemble.

20 February 2012 Internal T.I. 2011-0427391I7 - Amounts Paid for Employee Protection

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

Principal Issues: Whether amounts paid to ensure the safety and security of employees are taxable?

Position: It is a question of fact, but likely not.

Reasons: A taxable benefit would not be assessed in circumstances where an employee's safety is at risk because of his/hers employment duties and the employer arranges and incurs reasonable costs for protective security measures.

29 September 2011 Internal T.I. 2011-0420701I7 - Interest on a Taxpayer Requested Adjustment

Unedited CRA Tags
s. 161(7)(b)(ii) & (iv)

Principal Issues: What is the date to be used when calculating interest where Years 1 to 7 were reassessed, resulting in losses being converted to income, and the taxpayer states during the audit that it would be applying losses for the current year to reduce taxable income in one of those reassessed years?

Position: Subparagraph 161(7)(b)(ii) applies: interest is calculated until 30 days after the date on which the return is filed for the current year.

Reasons: Subparagraph 161(7)(b)(ii) applies when a taxpayer files a return for a subsequent year and requests sufficient losses be carried back to a preceding year to offset that year's income. This would be the case even if the income is later increased, when, as a result of an audit, the preceding year's income is higher than originally reported.