Income Tax Severed Letters - 2013-04-10


2012 Ruling 2012-0439191R3 - Loss Consolidation

CRA Tags
112(1), 245(1), 12(1)(x), 20(1)(c)

Principal Issues: Is the loss utilization arrangement acceptable?

Position: YES

Reasons: meets the established positions

2012 Ruling 2012-0435211R3 - Article XXIX-A(3) of the Canada-US Tax Convention

CRA Tags
Treaties Article XXIX-A(3), Treaties Article X(2)(a)

Principal Issues: (1) Whether dividends paid by a Canadian corporation to a United States resident corporation qualifies for treaty benefits under Article XXIX-A(3) of the Treaty. (2) Whether the benefits of Article X(2)(a) will reduce the Part XIII withholding tax on the dividends paid by Canco to 5% of the dividend.

Position: (1) Yes. (2) Yes.

Reasons: (1) The dividend income is derived by a resident of the United States in connection with an active trade or business carried on in the United States that is substantial in relation to the activity in Canada that gave rise to the income. (2) Holdco is a resident of the U.S. and the beneficial owner of the dividends to be paid by Canco.

Technical Interpretation - External

8 March 2013 External T.I. 2012-0447651E5 - Deficiency Tax Account

CRA Tags
Ontario Corporations Tax Act 79

Principal Issues: Where a corporation has used Ontario corporation minimum tax credits to satisfy Ontario taxes owing in one year and subsequently requests that the Minister carry back a loss from a subsequent year to the prior year, will interest be charged on the balance of tax outstanding from the prior year?

Position: Yes

Reasons: The provisions of 79(7)(a) and (b) of the Corporations Tax Act (Ontario) clearly state that interest will be charged.

5 March 2013 External T.I. 2012-0440821E5 - Non-cash long-service award and cash donation

CRA Tags
6(1)(a), 56(2)

Principal Issues: Whether an employee will realize a taxable benefit if the employee foregoes a non-cash long-service award under $500 for a charitable cash donation in a specified amount made by the employer to a specified charity where the employer receives the charitable donation receipt.

Position: No.

Reasons: In light of the facts that the long-service award conferred on the charity would have been a non-taxable non-cash gift if it were received by the employee; the employee, employer and charity are dealing at arms length; the employee does not receive a charitable donation receipt; and the donation is under $500, it is our view that the CRA administrative policy on non-cash gifts and awards would apply providing that the employee would not forego any salary, other compensation or taxable benefits as a result of the donation.

10 December 2012 External T.I. 2012-0459421E5 - Subsection 160.1(3)

CRA Tags
15(2), 160.1(3)

Principal Issues: Whether an assessment which has been raised under the provisions of subsection 160.1(3) of the Income Tax Act (the "Act") must be made according to the time limitations provided by section 152 of the Act.

Position: No

Reasons: The wording of the Act grants the Minister the discretion to reassess a taxpayer under the provision of subsection 160.1(3) at any time.

1 November 2012 External T.I. 2012-0443171E5 - UK insurance policy

CRA Tags
56(1)(j), 148(1), 148(9)

Principal Issues: Tax treatment of U.K. life insurance policy acquired by non-resident individual who later immigrates to Canada.

Position: General comments provided.

Reasons: The law.

Technical Interpretation - Internal

15 March 2013 Internal T.I. 2013-0476501I7 - Assessment of Ontario Tax

CRA Tags

Principal Issues: Whether an assessment of Ontario tax can be raised after the normal reassessment period in a situation where the Ontario tax was not assessed.

Position: Yes.

Reasons: The Ontario taxes have not been assessed therefore the Ontario tax return is not statue barred.

18 February 2013 Internal T.I. 2013-0477821I7 F - Montants forfaitaires - XXXXXXXXXX

CRA Tags
3, 63, 5, 120.31, ITR 200(1), 110.2
damages received in wage discrimination suit for pain and suffering were non-taxable

Principales Questions: 1. Est-ce que certains montants versés à des employés dans le cadre d'une entente de règlement à l'amiable en matière d'équité salariale sont imposables? Are certain amounts paid to employees by their employer with respect to an out of court pay equity settlement agreement are taxable?
2. Quelles sont les obligations de remplir certains formulaires de renseignements par l'employeur? What are the obligations of the employer with respect to provide information returns?

Position Adoptée: 1. Si les montants sont versés pour compenser une perte de salaires des employés, ils doivent être inclus dans le calcul du revenu des employés à titre de revenu d'emploi. Cependant, s'ils sont versés pour compenser la violation des droits des employés selon la Loi canadienne des droits de la personne, ils ne sont pas imposables. Les montants versés pour compenser le préjudice moral ne sont pas imposables pour les employés. If the amounts paid by the employer to the employees are to compensate lost wages, they must be included in the income of the employees as employment income. However, if the amounts represent damages received by the employees for violation of human rights, they are not taxable for the employees. Also, the amounts paid for pain and suffering are not taxable to the employees.
2. L'employeur doit émettre des T4 et des T1198 si les montants versés sont pour compenser la perte de salaire des employés. The employer must file T4 and T1198 if the amounts were paid to employees as a wage loss compensation.

Raisons: 1. Dépendamment de la détermination de la nature des paiements par les parties à l'entente à l'amiable. Les montants versés qui représentent des dommages-intérêts généraux pour préjudice moral n'ont pas à être inclus dans le calcul du revenu des employés selon notre position indiquée dans le bulletin d'interprétation IT-365R2. Depending on the determination of the nature of the payments made by the parties of the agreement. The amounts paid to employees that represent general damages for pain and suffering are not required to be included in their income pursuant to our position in the interpretation bulletin IT-365R2.
2. Application de l'alinéa 153(1)a) de la Loi de l'impôt sur le revenu et l'article 200 du Règlement de l'impôt sur le revenu. Application of paragraph 153(1)(a) of the Income Tax Act and section 200 of the Income Tax Regulations.

15 February 2013 Internal T.I. 2012-0455351I7 - Composition of a Corporation's Instalment Base

CRA Tags
191.3(3), 157

Principal Issues: Two corporations elect pursuant to s. 191.3 to transfer liability for Part VI.1 tax. When calculating its first and second instalment base, is the transferee required to include the transferor's Part VI.1 tax liability for the preceding taxation years in its first and second instalment bases?

Position: No.

Reasons: A corporation's instalment bases are calculated based on its liabilities. Therefore, the transferor's Part VI.1 liabilities for preceding taxation years would not be included in the transferee's calculation.

19 December 2012 Internal T.I. 2012-0472761I7 - Definition of person in respect to a province

Principal Issues: Is a province considered a person for the purposes of section 231.2 of the Income Tax Act (the "Act")?

Position: Yes.

Reasons: Previous position regarding a reference to Her Majesty in right of a province.

11 December 2012 Internal T.I. 2012-0459341I7 - Adjustments Beyond Normal Reassessment Period

CRA Tags
(4)., 152(3.1)
substituting unclaimed expenses for non-capital losses

Principal Issues: Whether business expenses could be substituted for non-capital losses in a statute-barred year.

Position: Yes.

Reasons: As long as taxable income and thus tax payable does not change, there is no need to reassess; hence, neither subsection 152(3.1) or (4) would apply.