Income Tax Severed Letters - 2013-03-20

Principales Questions: Est-ce que des frais de gestion d'un immeuble locatif payés à un conjoint sont déductibles?/ Whether management fees paid by a taxpayer to his spouse with respect to a rental property are deductible.

Position Adoptée: Question de fait, possiblement si les frais de gestion sont raisonnables et sont versés dans le but de gagner du revenu d'entreprise ou de biens./ Question of fact, possibly if the management fees are reasonable and laid out to earn income from a business or property.

Principales Questions: Dans le cas où les aires de plancher d'un bâtiment qui servent aux installations sanitaires, à la cafétéria et au bureau excèdent 10 % de l'aire de plancher totale du bâtiment, est-ce que le critère de 90 % de l'aire de plancher utilisée pour la fabrication et la transformation au Canada de marchandises destinées à la vente ou à la location prévu à l'alinéa 1100(1)a.1) du Règlement de l'impôt sur le revenu ("Règlement") est respecté?/ In a situation where the floor spaces of a bathroom, a cafeteria, and an office of a building exceed 10 % of the total floor space of the building, is the criteria of 90 % of the floor space used for the manufacturing and processing in Canada for goods for sale or lease pursuant to subsection 1100(1)a.1) of the Income Tax Regulations, respected?

Position Adoptée: Question de fait. Il est nécessaire d'examiner l'usage de ces aires par le personnel qui exécute les activités de fabrication et de transformation. Si l'usage de ces aires servent au personnel qui exécute des activités de la fabrication et transformation au Canada de marchandises destinées à la vente ou à la location, oui./ Question of fact. It is necessary to examine if these floor spaces above mentioned are used by the personnel that execute the manufacturing or processing in Canada of goods for sale or lease. If it does, yes.

Principales Questions: Est-ce que la région de la Montérégie Rive-Sud peut être considérée comme une région admissible aux fins du crédit d'impôt à l'investissement ("CII")? Si non, depuis quand ne se qualifie-t-elle plus?/ Is the Montérégie Rive-Sud area considered as an eligible area for the purposes of the investment tax credit (ITC)? If not, since when did this area not qualify?

Position Adoptée: La région de Montérégie-Rive Sud ne fait pas partie de Terre-Neuve-et-Labrador, l'Ïle-du-Prince-Édouard, la Nouvelle-Ecosse, le Nouveau-Brunswick, ou la péninsule de Gaspé ni de la zone extracôtière visée par règlement ou d'une région désignée visée par règlement. Pour des biens admissibles acquis depuis 1988, l'expression "au Canada", qui se retrouve au sous-alinéa 127(9)a)(vii)(D) de la définition de "pourcentage déterminé", qui inclue la région de Montérégie Rive-Sud, donne un pourcentage déterminé nul aux fins du CII./ No the area is not part of Newfoundland, Prince Edward Island, Nova Scotia, New Brunswick or Gaspé Peninsula or a prescribed offshore region or a prescribed designated region. For qualified properties acquired after 1988 for the use in Canada in clause 127(9)a)(vii)(D) of the Income Tax Act, the specified percentage is nil for the purposes of ITC.

Raisons: Application de la définition de "pourcentage déterminé" au paragraphe 127(9) de la Loi de l'impôt sur le revenu, plus particulièrement du sous-alinéa 127(9)a)(vii)./Application of the definition of "specified percentage" at subsection 127(9) of the Income Tax Act and more particularly at subparagraph 127(9)a)(vii).

Principal Issues: The taxpayer requests confirmation of the tax implications of a U.K. mortgage endowment policy which will be transferred to her by her former spouse.

Position: General comments provided. To the extent that the rollover rule in subsection 148(8.1) applies, there are no tax implications to the former spouse as a result of the transfer. On maturity of the policy, any gain from the disposition is required to be included in the taxpayer's income.

Reasons: The former spouse's interest in the policy may be transferred to the taxpayer at its adjusted cost basis under subsection 148(8.1). When the policy matures, the taxpayer will be required to report the proceeds of disposition in excess of the adjusted cost basis of the policy in income pursuant to paragraph 56(1)(j) and subsection 148(1) of the Act.

Principal Issues: Whether contributions to a German social security arrangement by a German resident that relate to employment income performed in Canada by the German resident are eligible for Canadian tax relief in accordance with paragraph 4 of Article 29 of the Canada-Federal Republic of Germany Tax Treaty. Specifically, whether Article 29(4) of the Treaty applies where no relief is provided by Germany for the contributions due to the fact the related Canadian employment income is exempt from German taxation.

Position: Yes, provided all conditions are met.

Reasons: The determination of whether eligible contributions qualify for tax relief in Germany is analysed in the context of the individual hypothetically being resident and performing the services in Germany.

Principal Issues: If a prohibited investment held by an RRSP or RRIF is sold to the annuitant of the RRSP or RRIF for cash consideration equal to the fair market value of the prohibited investment, will the transaction be treated as an RRSP strip within the meaning assigned by subsection 207.01(1)?

Position: No