Income Tax Severed Letters - 2013-03-27

Technical Interpretation - External

11 March 2013 External T.I. 2012-0432201E5 F - Payment of tax by an institute

CRA Tags
104(13.1), 108(1) "testamentary trust", 70(6)(b)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(3) - Paragraph 248(3)(a)
application of testamentary trust rules to a substitution by testament
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 108 - Subsection 108(1) - Testamentary Trust - Paragraph (d)
spousal beneficiary of substitution by testament does not taint the resulting deemed testamentary trust by paying the trust taxes

Principales Questions: Whether a testamentary trust is tainted where a beneficiary (institute) pays taxes owed by a trust on income taxed as a result of a designation under subsection 104(13.1)?

Position Adoptée: No

Raisons: Interpretation of the Act and previous positions.

5 March 2013 External T.I. 2012-0466091E5 - RESP Additional tax on Accumulated Income Payment

CRA Tags
Part X.5, 146.1(2)(d.1), 204.94(1)

Principal Issues: Whether all payments of income made out of an RESP is subject to Part X.5 tax.

Position: Yes, unless eligible as an RRSP deduction or rollover to an RDSP

Reasons: The law is clear and intended to apply to all RESPs that make accumulated income payments.

1 March 2013 External T.I. 2013-0477911E5 - Expenses to host employees and spouses at a resort

CRA Tags
18(1)(l), 20(10), 18(1)(a), 67.1
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(l) - Subparagraph 18(1)(l)(i)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(10)

Principal Issues: 1. Whether 20(10) will restrict the deductibility of the expenses; 2. Whether 18(1)(l)(i) will restrict the deductibility of the expenses; 3. Whether any other sections will restrict the deductibility of the expenses

Position: 1. No, 2. No, 3. Question of fact

Reasons: 1. Not a convention, 2. Not a lodge, 3. Fact specific

27 February 2013 External T.I. 2013-0476541E5 - Eligible Dependant

CRA Tags
118(1)(b)

Principal Issues: 1. Clarification of the age limitation in paragraph 118(1)(b) of the Act.

Position: 1. Generally, children over the age of 18 do not qualify for the purposes of 118(1)(b).

Reasons: 1. The Act.

21 February 2013 External T.I. 2012-0435881E5 - Wind-up and Reg. 5908

CRA Tags
ITR 5908(1), ITR 5908(4), ITR 5908(2), ITR 5908(3)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5908 - Subsection 5908(4)
wind-up of Cdn sub holding other interest in holding partnership for FA treated as a transfer of FA shares from sub to parent

Principal Issues: Whether proposed subsection 5908(4) will apply where a taxable Canadian corporation winds up its taxable Canadian wholly-owned subsidiary, which causes the partnership formed by these two corporations to cease to exist, which results in the shares of a foreign affiliate previously held by the partnership to be distributed to the surviving partner.

Position: Yes.

Reasons: The deeming rules in subsections 5908(1) and (2) will apply such that subsection 5908(4) will apply.

21 February 2013 External T.I. 2012-0465711E5 F - Attribution Rules after Divorce

CRA Tags
74.2(1), 74.5(3)
Summary Under
Tax Topics - Income Tax Act - Section 74.2 - Subsection 74.2(1)
entire rather than only pro rata portion of a post-divorce capital gain is not subject to attribution

Principales Questions: Whether, in a particular situation, the attribution rules in subsection 74.2(1) would apply after a divorce, taking into consideration some comments made in doc. 2006-0166041E5.

Position Adoptée: No.

Raisons: According to the Law and previous positions.

23 January 2013 External T.I. 2012-0435511E5 - Employee Bursary Taxable

CRA Tags
6(1)(a), 118.5, ITR 200(2), 118.6

Principal Issues: 1. Are the bursaries to be treated as a taxable benefit?
2. If a taxable benefit: How are they reported? Are they subject to source deductions? Are they subject to the Tuition, textbook or educations tax credits?
3. If a non-taxable benefit what deductions can be made by the employees with a T2202A?

Position: General comments

Reasons: Legislation

22 January 2013 External T.I. 2012-0445401E5 - Eligible Dependent – Support by Court Order

CRA Tags
118.5(b)

Principal Issues: Does a father who is required to pay child support able to claim the eligible dependent, even when the court order so indicates?

Position: No

Reasons: Legislation & Court positions

22 January 2013 External T.I. 2012-0465511E5 - Deductible Support Payments

CRA Tags
60(b)

Principal Issues: Are support payments deductible where the payments are made before the date of the agreement?

Position: A question of fact

Reasons: Depends if the agreement references the payments made before the date of the agreement.

8 January 2013 External T.I. 2011-0412181E5 - Request for Comments - EPSP

CRA Tags
144, 207.8(2)

Principal Issues: The taxpayer is requesting our comments regarding the Canadian tax implications of contributions to an employee profit sharing plan (EPSP) in the case of resident and non-resident employees.

Position: General comments provided. Taxpayer must request an advance tax ruling in the manner set out in Information Circular 70-6R5.

Reasons: IC70-6R5

21 December 2012 External T.I. 2012-0440761E5 - Child Support Payments

CRA Tags
56(1)(b), 56.1

Principal Issues: 1. Is non-payment of support payments considered an income loss to the recipient?
2. Can a government pension be effectively garnished for the arrears of support payments?

Position: 1. No
2. A question beyond the scope of ITRD

Reasons: 1. Legislation
2. Referred client to Service Canada and/or legal advice

30 November 2012 External T.I. 2012-0442181E5 - Tuition-US Institution-full vs. part time

CRA Tags
118.5(1)(b)

Principal Issues: Would a student that was part time for a portion of a year and full time for the remaining portion, qualify for the Tuition Tax Credit?

Position: Depends

Reasons: CRA generally relies on the educational institution's determination as to whether the individual is registered as a full-time or part-time student if the method of classification is reasonable and consistent.

Technical Interpretation - Internal

4 March 2013 Internal T.I. 2012-0449371I7 - Downstream absorptive merger

CRA Tags
87(8.2)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition - Paragraph (n)
Summary Under
Tax Topics - Income Tax Act - Section 87 - Subsection 87(8.2)

Principal Issues: Would proposed subsection 87(8.2) to the Act apply to the 2006 foreign downstream absorptive merger described.

Position: Yes

Reasons: The conditions in the preamble to proposed subsection 87(8.2) to the Act are met and if enacted in its current form subsection 87(8.2) will apply in respect of mergers or combinations that occur after 1994 unless the taxpayer elects to have the subsection apply only in respect of mergers or combinations that occur after August 19, 2011.

20 November 2012 Internal T.I. 2011-0416761I7 - Non-Resident, Part XIII Tax

CRA Tags
212(2)(a), 56(2), 15(1), 15(2), 214(3)(a), 227(6.1)
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2)
repayment of advance after FX change

Principal Issues: Whether Part XIII tax is payable on a payment made by a Canadian partnership on behalf of a non-arm's length foreign corporation in respect of the foreign corporation's Part XIII tax liability.

Position: The potential application of the relevant benefit provisions of the Act should be applied given the facts of each case.

Reasons: The relevant benefit provisions of the Act do not apply given the facts of this case. XXXXXXXXXX.

8 April 2004 Internal T.I. 2003-0037291I7 - US LLC and Regulation 5907(1.3)

CRA Tags
5907(1.3), 91(4)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Dividend
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Tax
no deduction for LLC sub income unless distributed
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1.3)

Principal Issues: Whether compensatory payment under a tax sharing agreement was foreign accrual tax pursuant to Regulation 5907(1.3) made by a US LLC which was treated as a disregarded entity under the Internal Revenue Code?

Position: No

Reasons: Regulation 5907(1.3) only applies to a group where the members are otherwise taxable. The tax paid by the taxable member of the LLC qualifies as foreign accrual tax when the earnings of the LLC in respect of which the tax was paid are distributed to the member. Accordingly, had Regulation 5907(1.3) applied to the compensatory payment, this would lead to duplication.