Income Tax Severed Letters - 2012-12-19

Technical Interpretation - External

14 November 2012 External T.I. 2011-0418821E5 - Tax-free transfer under 146(16)(b) after death

CRA Tags

Principal Issues: Does paragraph 146(16)(b) permit a tax free transfer from an individual's RRSP to his/her former common-law partner's RRSP or RRIF in settlement of rights arising on the breakdown of their common-law partnership, where the individual dies before the transfer is made?

Position: No.

Reasons: Paragraph 146(16)(b) does not apply after the death of the transferor annuitant.

1 November 2012 External T.I. 2012-0453861E5 - Donation of real property

CRA Tags

Principal Issues: Taxpayer has described various scenarios involving the gifting of his principal residence or a rental property. He is requesting confirmation of the tax implications in order to decide on a course of action.

Position: No comments provided as we do not offer tax planning advice.

Reasons: Income tax implications are dependent on the taxpayer's course of action. Referred the taxpayer to several CRA publications for general comments.

23 October 2012 External T.I. 2012-0440101E5 - Article X(6) Canada-US Treaty

CRA Tags
Treaty Article XXIX-A(3), Treaty Article IV(6), 219, Treaty Article X(6), Treaty Article XXIX-A(2)

Summary under Treaties - Art. 10.

Principal Issues: How does Article X(6) and Article IV(6) of the Canada-United States Income Tax Convention (1980) (the “Treaty”) impact a US limited liability company (“LLC”) carrying on business in Canada through a permanent establishment?

Position: The Treaty benefits may be available to the LLC with respect to income considered to be derived by corporate members of an LLC but not to individual members.

Reasons: The LLC has only one $500,000 exemption. There is no provision in the Treaty that is equivalent to Article X(6) for individual members of an LLC.

22 October 2012 External T.I. 2012-0455921E5 - Free Rent in Lieu of Receiving Interest Income

CRA Tags
9, 3
receipt of a free rental accommodation in exchange for an interest free loan is a barter transaction

Principal Issues: How should the amount of interest income that a Vendor includes in income be determined when a second mortgage on the sold property is registered in favour of the Vendor and the Vendor has use and possession for a property rent-free in lieu of the payment of interest on a mortgage.

Position: The value of the rent foregone granted by the Purchaser in exchange for the interest-free loan from the Vendor is subject to taxation in the hands of the Purchaser and the Vendor.

Reasons: The receipt of a free rental accommodation in exchange for an interest-free loan is a barter transaction.

16 October 2012 External T.I. 2012-0463881E5 - Transfer Retiring Allowance to RRSP

CRA Tags
248(1), 60(j.1)

Principal Issues: What are the limits concerning the amount of a retiring allowance that can be transferred to an RRSP?

Position: Contained in 60(j.1) of the Act.

Reasons: Limits established under the Act.


29 May 2012 CTF Prairie Tax Conference 2012 Roundtable, 2012-0445661C6 - Late Eligible Dividend Designation

CRA Tags
89(14), 89(14.1), ITR 600

Summary under s. 89(14.1).

Principal Issues: 1) Whether the purpose of subsection 89(14.1) was to cover situations where a corporation would deliberately or on a regular basis make a late eligible dividend designation. 2) Whether section 600 of the Income Tax Regulations will be amended to make reference to late eligible dividend designations. 3) Whether a penalty will be attached to filing late eligible dividend designations.

Position: 1) No. 2) No. 3) No.

Reasons: Wording of the proposed legislation.