Income Tax Severed Letters - 2012-10-24

Ruling

2012 Ruling 2011-0408981R3 - Canadian Exploration Expenses

CRA Tags
66.1(6)
Summary Under
Tax Topics - Income Tax Act - Section 66.1 - Subsection 66.1(6) - Canadian exploration expense - Paragraph (g)

Principal Issues: Whether a mine which may be established would be a "new mine" for purposes of paragraph (g) to the definition of CEE.

Position: A mine established in accordance with the proposed transactions described herein would be a "new mine" for purposes of paragraph (g) to the definition of CEE.

Reasons: Based upon the facts, proposed transactions and a written opinion from Natural Resources Canada.

2012 Ruling 2011-0428171R3 - Eligible funeral arrangement - Insurance Policy

CRA Tags
148.1(4), 148.1(5), 148.1(2), ITR 201(1)(f), 12(1)(z.4), 12.2, 148.1(3), 148.1(1)

Principal Issues: 1. Will a particular arrangement qualify as an "eligible funeral arrangement" as defined in subsection 148.1(1)? 2. Will an amount that has accrued, is credited or is added to the eligible funeral arrangement be included in the income of the funeral home or of the taxpayer pursuant to section 12.2? 3. Will an amount be considered to be distributed from the original eligible funeral arrangement and included in taxpayer's income under subsection 148.1(3)? 4. Will an amount be required to be withheld under section 153? 5. If enacted in its current form, would the proposed subsection 148.1(5) apply such that proposed subsection 148.1(4) would not apply?

Position: 1. Yes, 2. No, 3. No, 4. No., 5. Yes.

Reasons: 1. The proposed arrangement meets the definition of an "eligible funeral arrangement" in subsection 148.1(1), 2. Preamble of subsection 148.1(2) contains "notwithstanding any other provision of this Act", therefore section 12.2 would not override paragraph 148.1(2)(a), 3. Taxpayer never receives the funds, transfer is between two eligible funeral arrangements, 4. There is no withholding requirement in subsection 153(1), 5. All conditions in proposed subsection 148.1(5) are met.

2012 Ruling 2011-0430761R3 - Paid-up capital Increase

CRA Tags
212(2), Treaty Article IV, Treaty Article X
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 4
two-step distribution with S-Corp shareholder

See Summary: Treaties Article IV

Principal Issues: Whether Article IV(7)(b) applies to deemed payment of dividend under s. 84(1) by Canadian-resident unlimited liability company that is fiscally transparent for United States tax purposes to its United States-resident shareholder.

Position: No.

Reasons: United States tax treatment of the dividend income deemed to arise in Canada under s. 84(1) is the same whether or not the unlimited liability company is fiscally transparent for United States tax purposes.

2012 Ruling 2011-0431101R3 - Cross-border spin-off butterfly

CRA Tags
20(1)(c), 245(2), 20(24), 55(3)(b), 55(3.1)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c)
interest deduction following b/f cross-redemption
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution
cross-border b/f as part of double Code s. 355 spin-off
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Permitted Exchange
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.1) - Paragraph 55(3.1)(b) - Subparagraph 55(3.1)(b)(i)

See summary: s. 55(1) - distribution, and permitted exchange, s. 55(3.1)(b)(i), and s. 20(1)(c).

Principal Issues: Spin-off butterfly of assets from a corporation to another.

Position: Favourable rulings given.

Reasons: In compliance with the law and previous positions.

Ministerial Correspondence

9 July 2012 Ministerial Correspondence 2012-0442201M4 - Indian Tax Exemption - Bill C3

CRA Tags
81(1)(a)

Principal Issues: What is the date of application of the Indian tax exemption available to individuals registered under Bill C-3?

Position: The earliest date is January 31, 2011.

Reasons: It's the date Bill C-3 came into effect; determined by AANDC.

Technical Interpretation - External

28 September 2012 External T.I. 2011-0429141E5 - NPO - Loan to Taxable Subsidiary

CRA Tags
149(1)(l)
Summary Under
Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(l)

Principal Issues: Whether a 149(1)(l) entity can make loans to a taxable subsidiary and maintain its tax exempt status.

Position: No.

Reasons: Suggests a for-profit purpose unrelated to its not-for-profit objectives.

27 September 2012 External T.I. 2011-0412961E5 - NPO and Taxable Subsidiary

CRA Tags
149(1)(l)
Summary Under
Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(l)

Principal Issues: 1. Will an organization exempt from tax under paragraph 149(1)(l) of the Act jeopardize its exemption if it incorporates and holds shares in a for-profit taxable subsidiary?
2. Is the answer the same if the non-profit organization uses a trust instead of a corporation?

Position: 1. An organization may continue to be exempt from tax - it is a question of fact.
2. Cannot answer in the context of a general interpretation.

Reasons: 1. Whether an organization is organized and operated for non-profit purposes is a question of fact in each situation.
2. This question is better handled in an advance income tax ruling request.

24 September 2012 External T.I. 2012-0455741E5 - AIM of the London Stock Exchange

CRA Tags
248(1) "recognized stock exchange", 248(1) "designated stock exchange", 262
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Recognized Stock Exchange
Summary Under
Tax Topics - Income Tax Act - Section 262
AIM not designated

Principal Issues: Is AIM considered a “recognized stock exchange” as defined under subsection 248(1) of the Income Tax Act?

Position: yes

Reasons: AIM is a stock exchange located in the UK which is a member of the Organisation for Economic Co-operation and Development and that has a tax treaty with Canada as required by definition.

21 September 2012 External T.I. 2012-0455231E5 - Section 89(1) - defn of a "public corporation"

CRA Tags
249(3.1), 125(7), 249(4), 89(1)
Summary Under
Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Public Corporation

Principal Issues: Whether the definition in subsection 89(1) for a "public corporation" includes "corporations controlled by public corporations"?

Position: No

Reasons: A corporation will not be a "public corporation", within the meaning of the definition of that term in 89(1), merely because it is controlled by a corporation that, itself, qualifies as a "public corporation".

21 September 2012 External T.I. 2012-0457951E5 - Fee for Information

CRA Tags
153(1)(g), Treaty Article VII, 212(1)(d), Treaty Article XII, ITR 105
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(d) - Subparagraph 212(1)(d)(ii)
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 12
information on customer leads was exempted as information on commercial experience

See Summaries: Treaties - Art. 12 and s. 212(1)(d)(ii)

Principal Issues: A Canadian corporation makes payments to an unrelated U.S. corporation for the provision of information. What are the Canadian tax implications to the payor?

Position: Withholding applies depending on the nature of the payments.

Reasons: If the payments are for services to a non-resident, Regulation 105 applies. If the payments are for the provision of commercial information or customer lists, subparagraphs 212(1)(d)(ii) applies. However, under the Treaty, the exemption under Article XII(3)(c) will reduce the withholding tax rate to nil.

4 September 2012 External T.I. 2012-0454881E5 - Treatment of services performed for XXXXXXXXXX

CRA Tags
153(1)(a), ITR 8900(1), 248(1) "employment", 110(1)(f)(iii)

Principal Issues: 1. Is an individual (“Taxpayer”) who works for a Canadian university (“University”) subject to withholding on the work performed by the Taxpayer for XXXXXXXXXX in respect of a contract between XXXXXXXXXX and the University?
2. Are the amounts earned by the Taxpayer in respect of work performed for XXXXXXXXXX exempt from taxation for Canadian tax purposes?
3. If XXXXXXXXXX contracted the Taxpayer directly, would the amounts earned by the Taxpayer in respect of work performed for XXXXXXXXXX be exempt from taxation for Canadian tax purposes?

Position: Q1: Yes.
Q2: No.
Q3: Question of fact.

Reasons: 1. All amounts received by an employee from the employer that are not income from business of the employee are included in "salary or wages" and therefore subject to withholding under 153(1)(a). 2. Income earned by employee is not income from employment with XXXXXXXXXX therefore it is not eligible for a deduction under 110(1)(f)(iii). 3. Question of fact.

24 August 2012 External T.I. 2012-0436031E5 - Designated Stock Exchange

CRA Tags
248(1), 262(1)
Summary Under
Tax Topics - Income Tax Act - Section 262

See Summary: s. 262

Principal Issues: Whether the NYSE MKT, LLC is a designated stock exchange within the meaning of subsection 248(1) and 262(1) of the Act.

Position: Department of Finance will be consulted.

Reasons: Department of Finance makes determination.

22 August 2012 External T.I. 2012-0456491E5 - Form T1134B Filing Requirements

CRA Tags
95, 233.5, 233.4

Principal Issues: Is Form T1134B required to be filed in respect of a foreign affiliate if the foreign affiliate does not have a tax year ending in the reporting taxpayer's tax year?

Position: Yes.

Reasons: To ensure accurate record of the history of the foreign affiliate and transparency of offshore structures, filing is required in this circumstance.

2 August 2012 External T.I. 2011-0422781E5 - Part XIII tax-fee to use on-line trading program

CRA Tags
153(1)(g), 212(1)(d), 105
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(d) - Subparagraph 212(1)(d)(i)
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 12
fee for software use is not generally a royalty unless Treaty so directs

Summary under s. 212(1)(d)(i).

Principal Issues: Whether Part XIII Tax is payable on fees paid to a non-resident vendor for the use of on-line trading program.

Position: A payment to a non-resident vendor for right to use digital property does not generally constitute a royalty payment described in subparagraph 212(1)(d)(i) of Part XIII of the Act.

Reasons: The CRA views that a payment to access digital property (subject to certain exceptional cases) generally gives rise to business proceeds.

22 June 2012 External T.I. 2012-0444821E5 - Canadian tax return filing requirements.

CRA Tags
180.2, 215(5), 212(1)(h), 212(1)(q), 115, 2(3), ITR 809
  • Principal Issues: Whether an individual is a non-resident of Canada and required to file a tax return to report pension income.

Position: Where an individual living abroad has no significant ties to Canada, the non-resident tax withheld is generally the final tax obligation to Canada on certain pension income.

Reasons: General comments provided.

23 May 2012 External T.I. 2011-0418691E5 - 149(1)(l) - Lease or Sale of Lockers to Members

CRA Tags
149(5), 149(2), 149(1)(l)
Summary Under
Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(l)

Principal Issues: 1. Whether a condominium corporation would lose its 149(1)(l) status if it sells locker space to its members. 2. Whether a condominium corporation would lose its 149(1)(l) status if it leases locker space to its members.

Position: 1. Likely not. 2. Likely not if incidental.

Reasons: Fact specific. Depends on provincial law.

Technical Interpretation - Internal

20 June 2012 Internal T.I. 2011-0426231I7

CRA Tags
149(10), 149(1)(l)
Summary Under
Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(l)

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