Income Tax Severed Letters - 2012-06-01

Ruling

2012 Ruling 2012-0432431R3 - Reduction of stated capital

Unedited CRA Tags
84(2); 84(4.1)
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2)
PUC distribution of resource subsidiary

Principal Issues: Whether subsection 84(2) applies to a reduction of stated capital.

Position: Yes.

Reasons: Complies with the law and CRA administrative positions.

2012 Ruling 2011-0413661R3 - Butterfly

Unedited CRA Tags
55(3)(b) 142.5(1)
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution
split-up of LP treated as inv't prop

Principal Issues: Butterfly of Assets of a Financial Institution

Position: Favourable Ruling Given

Reasons: Meets Requirements of Legislation

23 September 2011 Ruling 2011-0411151R3 - Tax Treatment of a Payment under a Guarantee

Unedited CRA Tags
s. 20(1)(c); 39(1)(c ), 39(12)

Principal Issues: 1. Is a judgment against the guarantors a second loan or a continuation of the initial loan?
2. What is the tax treatment for a payment under a guarantee of indebtedness of a corporation?

Position: 1. No.
2. The payment could be treated as a capital loss, a business investment loss, or a non-capital loss.

Reasons: 1.It is neither a second loan nor a continuation of the initial loan. If the judgment is paid, the guarantors would generally be considered to have acquired the rights of the creditor and would have recourse against the corporation to the extent of the payment.
2. Case law.

Ministerial Correspondence

24 May 2012 Ministerial Correspondence 2012-0441061M4 - CATC - Fees paid for an optional school trip

Unedited CRA Tags
ITA 118.031

Principal Issues: 1. Whether the fees paid for an optional school trip that is outside of the school’s curriculum are eligible expenses for the children’s arts tax credit.
2. Whether the optional annual fee paid to a fund organized by the Music Parents Society would be an eligible expense.

Position: 1. Yes, if it meets all of the requirements provided under section 118.031 of the Act. Specifically, fees paid for costs related to travel, meals, and accommodation do not qualify as eligible expenses for the CATC.
2. Yes, providing all other requirements of the legislation are met.

Reasons: 1. Based on the legislation, artistic activities include performing arts and music programs, and therefore, if the activity meets all other requirements, an optional six-day school trip that is outside of the school’s curriculum may qualify as an eligible activity for the CATC.
2. The content of the legislation.

4 May 2012 Ministerial Correspondence 2012-0433851M4 - wholly dependent person tax credit

Unedited CRA Tags
118 (1)(b)

Principal Issues: Is a grandmother entitled to the wholly dependent person tax credit in a situation where the grandmother is caring for a grandchild under a kinship care arrangement?

Position: No, an individual that receives support payments from a government agency to be used for the purposes of caring for the person would mean that the person is not wholly dependent for support on the individual and therefore is ineligible to claim the Credit.

Reasons: One of the requirements for an individual to be able to claim the Credit is that the person must be wholly dependent for support on this individual. In general terms, support involves the provision of the basic necessities of life such as food, shelter, and clothing. “Wholly dependent for support” on the individual means that the person is financially dependent on the individual such that the individual provides almost entirely for the person’s well-being.

12 April 2012 Ministerial Correspondence 2012-0439601M4 - Deductibility of Fees paid to a Montessori School

Unedited CRA Tags
ITA 63

Principal Issues: Can the fees paid to a Montessori School be deductible for income tax purposes?

Position: No, unless they are considered as child care expenses under section 63 that are incurred for the purpose of allowing the taxpayer to work, carry on a business or undertake certain certain educational/research activities.

Reasons: The provisions of the Income Tax Act do not allow any deductions for "costs of education" incurred in respect of a child's private education.

Technical Interpretation - External

23 May 2012 External T.I. 2010-0391511E5 - Split-receipting for fundraising events

Unedited CRA Tags
248(30); 248(31); 248(32); 248(35); 248(37)

Principal Issues: Whether a donation receipt can be issued by a charity to an individual who has agreed to donate wines and incur expenses in hosting a fundraising dinner on behalf of the charity, and to the individuals who purchase the right to attend the fundraising dinner.

Position: Question of fact. Provided general comments.

Reasons: Legislation and draft legislation.

23 May 2012 External T.I. 2011-0425771E5 - Transfer of Retiring Allowance to an RRSP

Unedited CRA Tags
60(j.1), 251(2)

Principal Issues: Whether a taxpayer's years of service with previous employers can be included in the calculation of the amount that is eligible to be transferred to a registered retirement savings plan?

Position: Question of fact.

Reasons: The requirements of paragraph 60(j.1) must be met.

14 May 2012 External T.I. 2011-0426631E5 - Donation of Flow-through Shares

Unedited CRA Tags
40(12), 38.1
Summary Under
Tax Topics - Income Tax Act - Section 38.1
Summary Under
Tax Topics - Income Tax Act - Section 40 - Subsection 40(12)

Principal Issues: Would subsection 40(12) of the Income Tax Act apply to a specific set of transactions?

Position: General comments provided.

Reasons: Such a determination is a question of fact.

1 May 2012 External T.I. 2012-0436401E5 F - Frais de bureau à domicile

Unedited CRA Tags
9; 18(12)
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(12)
permanent works taxes treated the same as other property taxes/general discussion including of s. 18(12)(c)

Principales Questions: Un contribuable qui exploite une entreprise dans des bureaux situés dans son domicile peut-il déduire les taxes pour "travaux permanents" ou "d'améliorations locales"?

Position Adoptée: Question de fait. Probablement que oui, si les exigences prévues au paragraphe 18(12) sont réunies.

Raisons: Loi de l'impôt sur le revenu.

24 April 2012 External T.I. 2012-0440151E5 - Due date for filing partnership information return

Unedited CRA Tags
229(5) ITR, 249.1(1)(b) ITA

Principal Issues: Where a partnership is not a tax shelter and all of its members are professional corporations, what is the filing due date of the partnership information return.

Position: Five months from the end of the fiscal period of the partnership.

Reasons: 229(5)(a) ITR

Technical Interpretation - Internal

12 March 2012 Internal T.I. 2011-0398721I7 - Interest expense deduction

Unedited CRA Tags
20(1)(c), 20.1, 39(1)(c), 39(12).
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c)
post-judgment interest

Principal Issues: When a court orders the guarantor of a corporate loan to honour the guarantee, and where the amount ordered by the court is interest bearing, can the guarantor claim a deduction pursuant to paragraph 20(1)(c) of the Act, for the court ordered interest, i.e., is the post-judgment interest deductible?

Position: No.

Reasons: The court ordered post-judgment interest is payable in respect of an amount owed by the corporation as guarantor, and this amount owed is not borrowed money for the purposes of subparagraph 20(1)(c)(i). The amount owed by the corporation as guarantor is not considered to be a continuation of the corporate loan that had been guaranteed nor a second loan.