Income Tax Severed Letters - 2013-01-02


2012 Ruling 2011-0421261R3 - Partnership Allocation

CRA Tags
103(1), 96(1), 245(2), 103(1.1), 97(2)
discretionary unequal capital distributions

Summary under s. 103(1).

Principal Issues: Whether subsections 103(1) and (1.1) will apply to redetermine the allocation of any income or loss from the manner described in the partnership agreement.

Position: No.

Reasons: The allocation of income and loss is proportionate based on the ownership of units which is considered reasonable in the circumstances.

Technical Interpretation - External

13 November 2012 External T.I. 2012-0433941E5 - Section 80 of the Income Tax Act (the "Act")

CRA Tags
107(2), 80(11), 69(1)(c), 80(2), 80(2)(a), 70(5), 80

Principal Issues: Would the debt forgiveness rules in section 80 of the Act apply on inter vivos settlements of non-arm’s length obligations?

Position: Question of fact. Yes, in the scenario presented.

Reasons: The debt has been settled.

30 October 2012 External T.I. 2012-0460531E5 - Deductibility of IPP Contributions

CRA Tags
ITR 8500, 20(1)(q), 147.2

Principal Issues: Whether an employer IPP contribution made in Year 2, in respect of Year 1, is deductible in Year 2.

Position: Yes.

Reasons: An IPP contribution made in a taxation year in respect of periods before the end of that year is deductible, providing all of the other criteria in section 147.2 is met.

17 October 2012 External T.I. 2012-0438691E5 - Carrying on Business in Canada

CRA Tags
Treaties Article V, 115, 253, Treaties Article VII, 248

Principal Issues: (1) Whether a U.S. corporation is carrying on business in Canada pursuant to section 253 of the ITA. (2) Given the circumstances, is the U.S. corporation carrying on a business through a permanent establishment in Canada. (3) The U.S. corporation's Canadian filing requirements.

Position: Insufficient facts and information are provided for a definitive response to the questions. General comments are provided.

Reasons: Whether a non-resident corporation is carrying on business in Canada is a question of fact. If the U.S. corporation is carrying on business in Canada and meets the conditions of Article V(6) of the treaty, the U.S. corporation will not be carrying on business through a permanent establishment in Canada and will not be liable for Part I tax under the Act.

15 October 2012 External T.I. 2012-0442561E5 - German reparation pension

CRA Tags
Canada-Germany Convention Article 18(3)(b), 56(1)(a)(i), 110(1)(f)(i), 81(1)(g), Treaties Article XVIII

Principal Issues: Are German reparation pension payments known as “Wiedergutmachungs rente” received by a Canadian resident taxable for Canadian tax purposes?

Position: The German reparation pension payments in question are likely not taxable. It would be a question of fact whether the payments are excluded under 81(1)(g) of the ITA or deductible under 110(1)(f) due to subparagraph 3(b) of Article 18 of the Treaty. It is likely that the payments are excluded under 81(1)(g).

Reasons: See below.

2 October 2012 External T.I. 2012-0443771E5 - Interest Deductibility

CRA Tags

Principal Issues: Where an individual borrows money from a financial institution and subsequently loans the borrowed funds to another party, is the interest expense incurred by that individual fully deductible for income tax purposes when the interest expense incurred exceeds the interest income earned.

Position: As noted in paragraph 10 of IT-533, income earned need not be in excess of interest paid, but draft legislation Income Tax Act should be considered.

Reasons: Until the Department of Finance’s review of the October 2003 legislative proposals is complete, and the results are made available to the public, we cannot comment further on their impact on interest deductibility.

15 August 2012 External T.I. 2012-0457311E5 - Deemed Non-Resident

CRA Tags

Principal Issues: Whether or not an individual is considered to be a deemed non-resident of Canada. The individual in question has a "habitual abode" in a treaty country and has a spouse that remains in Canada.

Position: We recommend that the individual complete and submit Form NR73 to ITSO for an opinion.

Reasons: Insufficient information is provided by the requester to make a residency determination. The location of the individual's "habitual abode" is only one factor to consider in a complete examination of the treaty tie breaker rules.

27 July 2012 External T.I. 2012-0432661E5 - Reassessment to implement technical-bill amendment

CRA Tags
123.4(1)(b)(iii), 152(4.2)

Principal Issues: How do we apply the retroactivity in the Proposed ITA subparagraph 123.4(1)b)(iii)?

Position: Applicable on royal assent.

Reasons: Clause 157 of this Bill extends the application of subsection 152(4.2) solely for the purpose of allowing the application of the relieving measures included in this Bill.

Technical Interpretation - Internal

21 November 2012 Internal T.I. 2012-0455501I7 - NPO Project

CRA Tags

Summary under s. 149(1)(l).

Principal Issues: Whether the NPO meets the requirements of 149(1)(l).

Position: Likely no

Reasons: Fact specific

20 November 2012 Internal T.I. 2012-0439951I7 - NPO Project

CRA Tags

Principal Issues: Whether the NPO meets the requirements of paragraph 149(1)(l).

Position: Likely no.

Reasons: Fact specific.

7 November 2012 Internal T.I. 2012-0465701I7 - Subsection 7(1.7)

CRA Tags
110(1)(d), 7(1)(b), 7(1.7)

Principal Issues: Will the provisions of subsection 7(1.7) apply where employee's hold stock options, the stock options are not exercisable in accordance with the terms of the stock option agreements and the employer pays the employees cash as consideration for the stock options held, in connection with a corporate reorganization that affects the employer's share structure?

Position: Yes, based on the facts.

Reasons: The situation described falls within the parameters of subsection 7(1.7).