Income Tax Severed Letters - 2012-09-14

Technical Interpretation - External

24 August 2012 External T.I. 2011-0422621E5 - Group sickness or accident insurance plan

Unedited CRA Tags
6(1)(a); 6(1)(f); 15(1); 56(2)

Principal Issues: Where multiple employers combine to form a group sickness or accident insurance plan, is each participating employer required to have at least two employees in the plan?

Position: Question of fact. It depends whether a single plan or multiple plans exist.

Reasons: It is CRA's longstanding position that a group sickness or accident insurance plan must have at least two employee plan members. Where there is a single plan, there is no requirement that both plan members be employees of the same employer.

24 August 2012 External T.I. 2011-0408181E5 - Employment at Special Work Sites

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

Principal Issues: 1. Whether an employee working on a project for a three to five year period is considered to be performing duties of a temporary nature for the purpose of subsection 6(6) of the ITA. 2. Whether allowances received by an employee in respect of board and lodging would no longer be taxable where a self-contained domestic establishment is acquired subsequent to the commencement of an employment contract.

Position: 1. Question of fact. 2. Yes

Reasons: 1. While it has been established that the two year period noted in paragraphs 5 and 6 in IT-91R4 is to be viewed as a guideline, it is always a question of fact whether the duties of employment were of a temporary nature for purposes of subsection 6(6) of the Act. 2. Where all other conditions have been satisfied, an employee acquiring a self-contained domestic establishment subsequent to the commencement of an employment contract would be entitled to the special work site exemption for a period during which the employee maintained a self-contained domestic establishment at another location as his or her principal place of residence.

30 July 2012 External T.I. 2011-0421801E5 F - Choix aux paragraphes 70(2) et 70(3)

Unedited CRA Tags
34(1), 70(2), 70(3), 70(4), 96(3)

Principales Questions: 1) Est-ce que les travaux en cours doivent être inclus ou est-ce que la succession devrait attendre de recevoir les sommes dues? 2) Est-ce que le paragraphe 70(3) s’applique? Si oui, comment est-il possible de corriger la situation et quand? 3) Est-il nécessaire de produire une déclaration T3 même si il n’y a pas d’argent dans la succession et que tous les biens ont déjà été transférés à son épouse?

Position Adoptée: 1) Oui et Non; 2) Oui. 3) Non, mais préférable.

Raisons: 1) D’une part, il serait possible pour la succession d’inclure les travaux en cours dans la déclaration de revenu du défunt ou, d’autre part, d’attendre à ce que la contrepartie des sommes à recevoir soit payable et ensuite reçue par la succession. 2) Si la succession opte pour le paragraphe 70(3), le revenu sera inclut dans la déclaration du bénéficiaire de la succession. Si un choix au paragraphe 70(2) a déjà été effectué par la succession, une révocation est possible, tel que prévu au paragraphe 70(4) de la LIR. L’avis de révocation doit respecter les délais prévus au paragraphe 70(2). 3). Il serait préférable pour la succession de produire une déclaration T3 pour l’année du décès du contribuable.

18 July 2012 External T.I. 2011-0425961E5 - Transportation costs for Special/Remote Work Sites

Unedited CRA Tags
8(1)(h)

Principal Issues: 1. Whether transportation costs incurred by employees to travel to/from a special work site/remote location are deductible in computing income. 2. Whether a completed form T2200 which specifies that travel is a requirement of employment is sufficient for an employee to deduct the travel costs incurred.

Position: 1. Question of fact, but likely no. 2. No.

Reasons: 1. The deduction of travel costs under paragraphs 8(1)(h) and 8(1)(h.1) of the Act is limited to situations where (among other things) an employee was ordinarily required to carry on the duties of employment away from the employer’s place of business or in different places. In this instance, employees ordinarily reported for work at a fixed place of business (a field office) of the employer. 2. While the completion and authorization of Form T2200 by an employer is a prerequisite for an employee to be able to claim a deduction, it does not provide an employee with any assurance that the expenses so incurred are deductible under the Act.

4 July 2012 External T.I. 2011-0429601E5 F - Roulement et société de personnes

Unedited CRA Tags
97(2), 98(3), 96(1), 248(1) "contribuable"
98(3) wind-up of LP into LP

Principales Questions: 1. Est-ce qu'une société de personnes peut être considérée comme un contribuable pour les fins du paragraphe 97(2) de la Loi de l'impôt sur le revenu?
2. L'ARC accepte-elle qu'on puisse appliquer le paragraphe 97(2) puis ensuite le paragraphe 98(3) dans le but de fusionner deux sociétés de personnes? À l'inverse, l'ARC accepte-elle qu'on puisse d'abord appliquer le paragraphe 98(3) puis le paragraphe 97(2) dans le but de fusionner deux sociétés de personnes?

Position Adoptée: 1. Oui. La pratique de l'ARC consiste à considérer une société de personnes comme une personne et un contribuable lorsqu'il s'agit de calculer le revenu au niveau de la société de personnes conformément à la section B de la partie I de la Loi, qui comprend le paragraphe 97(2).
2. Nous ne pouvons nous prononcer sur les conséquences fiscales en découlant que dans le cadre d'une demande de décisions anticipées. Toutefois, il est possible que le paragraphe 98(3) puisse être utilisé avant le paragraphe 97(2).

Raisons: 1. Application des paragraphes 96(1) et 97(2).
2. Nécessite l'ensemble des faits et opérations. Position dans le bulletin d'interprétation IT-471R.

Conference

8 May 2012 Roundtable, 2012-0435781C6 - CALU CRA Roundtable - May 2012 - Question 11

Unedited CRA Tags
147.4(1), ITR 8502(d)(ix)

Principal Issues: 1. Where the commuted value of a member’s benefits under a defined benefit RPP exceeds the annuity purchase price, can the excess be paid to the member? 2. Will subsection 147.4(1) apply in the opposite situation where the commuted value is not sufficient to purchase an annuity with the same payout as the plan?

Position: 1.Yes 2. Yes.

Reasons: 1.Provided that the excess is required to be paid under pension benefits standards legislation, ITR 8502(d)(ix) permits the amount to be paid to the member as a taxable lump-sum. 2. The fact that the annuity payments are less than the benefits provided under the plan will not in and of itself cause the annuity acquisition to lose the protection afforded by subsection 147.4(1).

8 May 2012 Roundtable, 2012-0436141C6 - Commission Income on Life Insurance Policies

Unedited CRA Tags
5, 9

Principal Issues: Can the CRA provide an update regarding its review of its longstanding administrative position described in paragraph 27 of IT-470R?

Position: The position will not be changed at this time.

Reasons: The position is intended to reduce the compliance burden of businesses in respect of insignificant amounts.

8 May 2012 Roundtable, 2012-0435691C6 - CALU CRA Roundtable Q3

Unedited CRA Tags
73(1)

Principal Issues: Alter ego and joint partner trusts, impact of a duty to fund a life insurance policy

Position: General comments only - question of fact

8 May 2012 Roundtable, 2012-0435771C6 - CALU CRA Roundtable – May 2012 - Question 10

Unedited CRA Tags
207.6(2)

Principal Issues: 1) What factors does the CRA consider in determining whether the RCA deeming rule in subsection 207.6(2) applies to a particular life insurance policy? 2) Can the deeming rule apply where the life insurance policy is acquired before the retirement benefits become provided? 3) Can the deeming rule apply to segregated fund policies?

Position: 1) Listed some of the relevant factors. 2) Yes, depending on the circumstances. 3) Yes.

Reasons: 1) Reflects draft position prepared in response to Question 8 at the 1992 CALU roundtable. 2) The wording "reasonably be considered to be acquired to fund, in whole or in part, those benefits" has a broad meaning.3) The definition "life insurance policy" in subsections 138(12) and 248(1) includes a segregated fund policy.

8 May 2012 Roundtable, 2012-0435661C6 - Shareholder Benefit - Co-Ownership Life Insurance

Unedited CRA Tags
15(1); 246(1); 12(1)x); 148

Principales Questions: Holdco and Subco purchase together a permanent life insurance policy (split-dollar insurance). Holdco is the owner of the cash surrender value of the policy and Subco is entitled to the death benefit attributable to mortality gain. Subco pays the entire amount of premium and Holdco will reimburse its portion of the premiums.
1) Whether Holdco will have a shareholder benefit under subsection 15(1)?
2) Whether section 9, paragraph 12(1)(x) or subsection 246(1) apply?

Position Adoptée: 1) Question of facts but there is a potential for Subco to confer a benefit on the shareholder through the premium sharing arrangement.
2) Question of facts

Raisons: 1) Where the premium paid by the shareholder is less than that which would be paid for comparable rights available in the market under a separate insurance policy, the corporation may be viewed as having conferred a benefit to the other.

8 May 2012 Roundtable, 2012-0435681C6 - CALU CRA Roundtable Q2

Unedited CRA Tags
70(6)(b)

Principal Issues: Ownership of insurance in a spouse trust

Position: General comments provided

8 May 2012 Roundtable, 2012-0435641C6 - CALU CRA Roundtable Question 6 – May 2012

Unedited CRA Tags
104(1), 89(1)(d)

Principal Issues: Whether a corporation can be considered to have received insurance proceeds for the purpose of paragraph (d) in the definition of "capital dividend account" in subsection 89(1)?

Position: Question of fact.

Reasons: Depends on the facts of each scenario provided.

8 May 2012 Roundtable, 2012-0435671C6 - 2012 CALU CRA Roundtable - Question 8

Unedited CRA Tags
20(1)(e.2), Regulation 308

Principal Issues: Where there is no benefit on death in respect of an interest in a life insurance policy at the end of the year (as a result of a payment of the benefit on death during the year), the NCPI would be nil, resulting in no deduction available under paragraph 20(1)(e.2). Would the CRA extend administrative relief to allow a deduction for the premiums paid during the year in this circumstance?

Position: No.

Reasons: Matter should be referred to the Department of Finance to consider possible legislative changes.

8 May 2012 Roundtable, 2012-0435731C6 - CALU CRA Roundtable – May 2012 – Question 5

Unedited CRA Tags
ITR 8304(10), 8503(26)

Principal Issues: 1. Possible conflict between pension benefits standards legislation and new IPP minimum payment requirement in ITR 8503(26). 2. Whether RRIF assets can be transferred to an IPP to satisfy the special IPP PSPA in ITR 8304(10).

Position: 1. Plan administrator should contact pension benefits standards regulator to seek a resolution. 2. No.

Reasons: 1. Registration of plan is revocable if IPP minimum payment is not made. 2. The income tax rules do not allow RRIF to defined benefit RPP transfers.

8 May 2012 Roundtable, 2012-0435761C6 - CALU CRA Roundtable - May 2012 - Question 9

Unedited CRA Tags
6(1)(a), 6(1)(f)

Principal Issues: Whether a ROP option on a disability policy disqualifies the plan as a GSAIP where the ROP premiums are paid by the employer, the employer is the beneficiary of the ROP, and the ROP premiums were not deducted by the employer?

Position: Yes

Reasons: The purpose of the exempting provision in subparagraph 6(1)(a)(i) of the ITA is to provide employees with a plan of insurance against loss in the face of sickness and accident, from which payments will be taxed as employment income under paragraph 6(1)(f) of the ITA The purpose is not to provide an exemption where the plan may provide benefits which are not taxable.

8 May 2012 Roundtable, 2012-0435701C6 - CALU CRA Roundtable Q4

Unedited CRA Tags
70(6), 108(1)

Principal Issues: The potential impact of a "joint last to die" life insurance policy held by a trust on various provisions of the Act

Position: General comments provided

7 May 2012 Roundtable, 2012-0436151C6 - Income Tax Folio Initiative Update

Principal Issues: Q #1(b): CALU requested an update regarding which Interpretation Bulletins had been identified as priorities for update.

Technical Interpretation - Internal

10 July 2012 Internal T.I. 2011-0429401I7 - Is an award from a human rights tribunal taxable?

Unedited CRA Tags
56(1)(a)(ii), 248(1), 5(1)

Principal Issues: The taxpayer applied for a XXXXXXXXXX job with a school board and was unsuccessful. XXXXXXXXXX filed a complaint with the Human Rights Commission and was awarded compensation for general damages and special damages including an amount for lost income. Before the tribunal's decision, the taxpayer was hired by another school board which subsequently amalgamated with several other boards, including the one the taxpayer had originally applied to. The question is whether the taxpayer can be said to have received a retiring allowance from the amalgamated school board.

Position: No, the amount is neither employment income nor a retiring allowance.

Reasons: The definition of retiring allowance states that it includes an amount received as a result of a loss of employment. Since the taxpayer was not employed by either school board at the time the human rights action was initiated, it cannot be a retiring allowance. The case of Schwartz v. The Queen (96 DTC 6103) confirmed the loss of prospective employment does not fit the definition of retiring allowance.