Income Tax Severed Letters - 2012-06-29


2012 Ruling 2011-0422761R3 - Canadian Exploration Expenses

Unedited CRA Tags

Principal Issues: Whether the expenses relating to a proposed exploration program will qualify as Canadian exploration expenses under paragraph (f) of the CEE definition, and will not be considered to be related to a mine that has come into production in reasonable commercial quantities or to a potential or actual extension thereof.

Position: The proposed surface exploration expenses that will be incurred more than 1.2 km from the existing mine shaft will qualify as CEE under section 66.1(6) of the Act.

Reasons: Based on the facts presented and a XXXXXXXXXX opinion prepared by Natural Resources Canada.

2012 Ruling 2012-0437891R3 - Structured Settlement

Unedited CRA Tags

Principal Issues: An individual (Plaintiff), who was a minor at the time of the accident (and, who has attained majority since the commencement of the action described below), suffered personal injuries as a result of a motor vehicle accident. The Plaintiff, by his father and next friend, (collectively, the "Plaintiffs"), commenced an action for damages against the driver and the owner of the other vehicle (Defendants). Pursuant to an out of court settlement, the Defendants’ insurer (pursuant to a Settlement Agreement And Release), will purchase a single-premium annuity contract with two life insurance companies to provide the proposed periodic payments to be received under the settlement agreement. The Defendants’ insurer will direct the life insurance companies to pay the periodic payments under the annuity contracts to the Plaintiff. Will such payments be taxable in the hands of the recipient?

Position: No.

Reasons: The terms of the structured settlement are consistent with the CRA's position as set out in paragraph 5 of Interpretation Bulletin IT-365R2

Technical Interpretation - External

18 June 2012 External T.I. 2012-0446131E5 - Meaning of "at that time" in 43(1)

Unedited CRA Tags

Principal Issues: Does the reference to "at that time" in 43(1) refer to a time that is immediately before the disposition?

Position: Yes.

Reasons: Section 43 provides that for the purposes of computing the gain or loss where part of a property is disposed of, the adjusted cost base (ACB) of the property owned immediately prior to the disposition must be reasonably apportioned between the part disposed of and the part retained. The phrase “at that time” refers to the time immediately before the triggering event that resulted in the application of subsection 43(1) which was the partial disposition of a property.

14 June 2012 External T.I. 2011-0428341E5 F - Crédit activités physiques, activités artistiques

Unedited CRA Tags
118.03; 118.031; 9400; 9401
expenses that qualified for the child fitness or children's arts tax credit potentially could qualify as child care expenses

Principales Questions: 1) Est-ce qu'un programme peut se qualifier à la fois pour le crédit d’impôt pour la condition physique des enfants (CICPE) et le crédit d’impôt pour les activités artistiques des enfants (CIAAE) tout en étant admissible aux frais de garde?
2) Si oui, comment émettre les reçus?
3)Est-ce que les organismes doivent tenir des registres particuliers relatifs au CICPE ou au CIAAE?

Position Adoptée: 1) Une activité qui est admissible pour le CICPE ne peut pas l'être aussi pour le CIAAE. Cependant, une activité peut être admissible pour les frais de garde d'enfant et l'être aussi pour le CICPE ou le CIAAE.
2) Un seul reçu devrait être émis et il devrait contenir l'ensemble de l’information pertinente aux différentes mesures fiscales.
3) Non

Raisons: 1) Une activité physique (alinéa 9400(1)) est spécifiquement exclue de la définition d’activité artistique culturelle, récréative ou d’épanouissement indiquée à l'alinéa 9401(1). Ceci n'est pas le cas pour les frais de garde.
2) Commentaires généraux
3) La tenue de registres relatifs au CICPE et au CIAAE n'est pas une exigence de la Loi de l'impôt sur le revenu ni du Règlement de l'impôt sur le revenu.

13 June 2012 External T.I. 2011-0430351E5 - Child Care Expense-Nanny Costs

Unedited CRA Tags

Principal Issues: Are specific Nanny costs eligible for the child care expense, such as:
1. Transportation costs for the caregiver to travel from the caregiver’s country of permanent residence to the location of work in Canada;
2. Interim medical insurance coverage; and
3. WSIB employer premiums.

Position: A question of fact

Reasons: If the costs fulfill the requirements of subsection 63(3), then yes.

13 June 2012 External T.I. 2011-0420971E5 - support payments

Unedited CRA Tags
56(1)(b), 60(b)

Principal Issues: Is there any tax relief for a Canadian resident (the “Payer”) working in Japan that pays spousal support to a former spouse who is a Canadian resident (the “Recipient”)? Is there any tax relief in respect of the spousal support payments if the Payer was a non-resident for Canadian tax purposes?

Position: It appears that there is no specific tax relief provision provided for in the Canada-Japan Income Tax Convention in respect of spousal support.

Reasons: Canada-Japan Income Tax Convention

13 June 2012 External T.I. 2012-0440381E5 - Application of Income Tax Regulation 2602

Unedited CRA Tags
Reg. 2602, 2(3), 115(1)

Principal Issues: Whether a non-resident who earns Canadian employment income in multiple provinces has to allocate his income to each province.

Position: Question of fact. Generally, a non-resident earning employment income from an employer with a permanent establishment in Canada is subject to Part I tax. This employment income would have to be allocated to the provinces in which it was earned.

Reasons: Legislation; Articles V and XV Canada- U.S. Income Tax Convention

13 June 2012 External T.I. 2011-0403301E5 - principal residence

Unedited CRA Tags
54, 40(2)(b), 40(7), 75(2), 107(2), 248(1)

Principal Issues: Can the principal residence exemption be claimed by a person or trust in various situations?

Position: It depends on the facts.

Reasons: The law.

4 June 2012 External T.I. 2012-0439271E5 - QSBCS deduction by the beneficiary

Unedited CRA Tags
104(6),(13),(21.2),(21.24); 110.6(1), (2.1), (14)(c)

Principal Issues: Whether the beneficiary of an inter vivos, discretionary trust is subject to the holding period requirement of the QSBC definition in case the trust designates its taxable capital gain on QSBC to him, for the purposes of claiming the capital gain deduction under s. 110.6(2.1).

Position: No, in general

Reasons: Law

31 May 2012 External T.I. 2011-0413871E5 - Taxable Benefits - Retirement Moves

Unedited CRA Tags

Principal Issues: 1. Whether an employer's payment of moving costs and travel expenses in connection with a retirement move can be treated as a non-taxable benefit.

Position: 1. Question of fact.

Reasons: 1. No taxable benefit is imputed with respect to reimbursed or paid expenses where a relocation is out of a “remote place” at the termination of the employment or it is determined that an employer is the primary beneficiary of the amount paid or reimbursed or no economic advantage is conferred on the employee by virtue of the payment or reimbursement.

10 May 2012 External T.I. 2011-0423761E5 - Settlement Awards

Unedited CRA Tags
5, 6(3), 56(1(a)(ii), 248(1), 60(0.1), 3(a)

Principal Issues: Whether amounts received pursuant to a settlement agreement are subject to tax.

Position: Question of fact.

Reasons: When personal injury relates to the loss of employment, the related damage award would generally be considered a retiring allowance. However, where a portion of the damages awarded is separate from the loss of an office or employment, that portion may not be taxable.