Income Tax Severed Letters - 2012-04-20

Principales Questions: S'ils étaient acquis pour être utilisésdirectement ou indirectement par un contribuable au Canada surtout pour la fabrication et la transformation de marchandises en vue de la vente ou de la location, un conteneur et une machine à cisailles seraient compris dans quelle catégorie aux fins de la déduction pour amortissement?

Position Adoptée: Question de fait. Possiblement catégorie 29.

Raisons: Conditions des différentes catégories. Les biens ont été acquis en 2011.

Principal Issues: Whether the terms of a testator's will creates a trust.

Position: Determination of the intention of the testator. The absence of a transfer or conveyance of the property to a trustee precludes a conclusion that the testator did intend to create a trust.

Reasons: Examination of the Will and jurisprudence.

Principal Issues: Whether subparagraph 152(4)(b)(iii) applies to extend the period the Minister may make an assessment, reassessment or additional assessment in a situation where as a result of a wind-up of a Canadian subsidiary into the Canadian parent, the shares of a foreign subsidiary are distributed to the Canadian parent.

Position: Depends on the income being assessed or reassessed.
Relevant assessment or reassessment was made "as a consequence" of that transaction.

Reasons: The wind-up of a Canadian subsidiary into a Canadian parent would result in the disposition of the shares of a foreign subsidiary held by the Canadian subsidiary to the Canadian parent. In our view, this is a transaction involving the Canadian parent and the foreign subsidiary, a non-resident person with whom the Canadian parent is not dealing at arm's length. Therefore, this is a transaction to which subparagraph 152(4)(b)(iii) could apply, but only if it could be established that the relevant assessment or reassessment was made "as a consequence" of that transaction.

Principal Issues: What is the correct treatment of a U.S. Social Security Disability lump sum benefit paid to a resident of Canada?

Position: The entire amount is included in the recipient's income pursuant to clause 56(1)(a)(i)(B) and a deduction is allowed under paragraph 110(1)(f) for the amount (15%) exempted by the Convention. The taxpayer may opt to have subsection 56(8) apply and a special tax calculation in section 120.3 may reduce the recipient's Canadian tax.

Reasons: Paragraph 5(a) of Article XVIII of the Canada-US Tax Convention provides that a benefit under the social security legislation in the United States paid to a resident of Canada shall be taxable in Canada as though it were a benefit under the Canada Pension Plan, except that 15 percent of the amount of the benefit will be exempt from Canadian tax. Therefore a resident of Canada in receipt of a retroactive lump-sum U.S. Social Security benefit is eligible to make the election pursuant to subsection 56(8).