Income Tax Severed Letters - 2013-05-01


2012 Ruling 2012-0447491R3 - Professional corporation contracting with partshp

CRA Tags
256(2), 125(7)

Principal Issues: Whether the income earned by a professional corporation from providing professional services to a partnership in which the professional is a partner will qualify for the small business deduction and will not be restricted under the rules for specified partnership income and personal services business.

Position: Yes.

Reasons: The facts and proposed transactions conform to the requirements set out in similar rulings.

Ministerial Correspondence

16 October 2012 Ministerial Correspondence 2012-0460711M4 - Class 43.1/43.2 Specified Energy Property

CRA Tags
ITR Schedule II - Class 43.2, ITR Schedule II - Class 43.1

Principal Issues: The taxpayer is asking for clarification of the restrictions limiting the deduction of CCA on Class 43.1/43.2 property.

Position: General comments provided.

Reasons: See response.

Technical Interpretation - External

16 April 2013 External T.I. 2013-0477981E5 F - Interpretation of Gift

CRA Tags
ability to opt out of a compulsory contribution to an employer-aligned charity would not necessarily establish a “gift”/Quebec “gift” is CCQ “donation”
Words and Phrases
gift don

Principales Questions: 1) Whether payments made by employees to a qualify donee pursuant to a provision of a collective agreement would qualify as gifts? 2) Would our position be the same if the collective agreement allowed the employees to opt out of the above-mentioned provision?

Position Adoptée: 1) No. 2) General comments provided.

Raisons: 1) The payments would not be voluntary. 2) Question of fact.

16 April 2013 External T.I. 2013-0480831E5 F - Frais médicaux - chirurgie esthétique

CRA Tags
118.2(1), 118.2(2), 118.2(2.1)
skin removal following bariatric surgery may qualify

Principales Questions: Est-ce que les frais engagés pour retirer un excès de peau suite à une perte rapide de poids sont admissibles aux fins du crédit d'impôt pour frais médicaux? Are costs incurred for the removal of excess skin following rapid weight loss eligible for the medical expense tax credit?

Position Adoptée: Question de fait. Oui si ces frais sont requis d'un point de vue médical et ce, aux termes du paragraphe 118.2(2.1) de la LIR. Question of fact. Yes if these costs are medically required as per subsection 118(2.1) of the ITA.

Raisons: Législation et position de l'ARC. The law and the CRA's position.

27 March 2013 External T.I. 2012-0450491E5 - Election under s. 216

CRA Tags
216, 215
full withholding on rents paid to non-Canadian partnership with some resident partners
tenant not generally expected to withhold

Principal Issues: (a) Does a Canadian resident payor of rent (the "tenant") have an obligation under the Act to withhold Part XIII tax on the whole of the amount of rent paid to a non-resident or only on a portion thereof? (b) If a partnership, which has both resident and non-resident partners, holds real property in Canada upon which it receives rent, is it necessary that the tenant withhold Part XIII tax on the entire amount of rent paid or on the proportionate share of the interest held by non-residents? (c) Where the non-residents have filed an election under subsection 216(4), is the tenant relieved of the obligation to withhold Part XIII tax? If so, is there any guidance that can be given as to what evidence the tenant may rely upon in order to be satisfied that elections have been accepted by the CRA?

Position: (a) The tenant must withhold Part XIII tax from the entire amount of rent paid. (b) The tenant must withhold Part XIII tax from the entire amount of rent paid and not only from the non-resident's proportionate share. (c) Technically, the tenant is not relieved of the obligation to withhold Part XIII tax on the rent. However, when a subsection 216(4) election is filed, the tenant would only withhold Part XIII tax from the rent in limited situations.

Reasons: (a) Subsection 215(1) requires that the tenant withhold Part XIII tax on the entire amount of the rent paid. (b) Paragraph 212(13.1)(b) deems a partnership to be non-resident if it has one or more non-resident partners. As such, the tenant should withhold Part XIII on the entire amount, notwithstanding that some of the interests may be held by a Canadian resident. (c) Where a non-resident appoints an agent pursuant to subsection 216(4), the agent is required to withhold Part XIII tax on amounts paid to the non-resident. As such, the CRA would not expect a tenant to withhold Part XIII tax, except in limited situations.

22 March 2013 External T.I. 2012-0473661E5 - Joint Spousal or Common-Law Partner Trust Status

CRA Tags
104(4)(a), 248(1)
spousal trust still exposed after divorce

Principal Issues: Whether a joint spousal or common-law partner trust will maintain its status after a divorce for purposes of paragraph 104(4)(a). Whether the deemed disposition rules in paragraph 104(4)(a) would apply on the death of the latter of the two ex-spouses.

Position: Provided the trust originally qualifies as a joint spousal or common-law partner trust, it will continue to be treated as such after a divorce. Yes.

Reasons: Our comments in paragraph 11 of IT-325R2 also apply to a joint spousal or common-law partner trust. Clause 104(4)(a)(iv)(B) will apply so that the joint spousal or common-law partner trust is deemed to dispose of its capital property on the later death of the settlor and the settlor's ex-spouse.

20 March 2013 External T.I. 2013-0474861E5 - Subparagraph 107.4(3)(a)(i) election

CRA Tags
107.4(1), 107.4(3)(a)(i)

Principal Issues: How to file an election under subparagraph 107.4(3)(a)(i) as there is no prescribed form available.

Position: In place of a prescribed form, the transferor trust should attach a letter, setting out the details of the election, to the T3 Trust Income Tax and Information Return for the taxation year that includes the time of the qualifying disposition. The election should be filed on or before the filing due date of the transferor's T3 Trust Income Tax and Information Return.


27 November 2011 CTF National Conference CTF Roundtable, 2011-0426111C6 - 2011 CTF Question re NPOs

CRA Tags

Principal Issues: General questions about 149(1)(l)

Position: General positions provided.

Technical Interpretation - Internal

14 March 2013 Internal T.I. 2012-0451131I7 - Trustee's Rights & Obligations under the Act

CRA Tags
Bankruptcy and Insolvency Act 13, 164(2.01), 241(4)(k), 241(5), 128, 150(3), Bankruptcy and Insolvency Act 22

Principal Issues: 1. Whether the Minister may disclose taxpayer information to a trustee in bankruptcy?
2. Whether a trustee is required to file all outstanding returns, or just those for the year before a bankruptcy and the year of bankruptcy?

Position: 1. Yes.2. All outstanding returns.

Reasons: 1. A trustee is entitled to taxpayer information under subsection 164(1) of the Bankruptcy and Insolvency Act; therefore, paragraph 241(4)(k) of the Income Tax Act applies. In addition, pursuant to section 128 of the Income Tax Act, a trustee is deemed to be the agent of the bankrupt for all purposes of the Act; therefore section 241(5) of the Income Tax Act applies. And under subsection 164(1) of the Bankruptcy and Insolvency Act, a trustee is entitled to obtain information and property of a bankrupt.
2. Subsection 150(3) requires a trustee to file all outstanding returns, while subsection 164(2.01) forbids the Minister from paying a refund otherwise payable unless all outstanding returns under the Act, the Air Travellers Security Charge Act, the Excise Act, and the Excise Tax Act are filed.

7 March 2013 Internal T.I. 2011-0428491I7 - Paragraph 149(1)(c)

CRA Tags
149.1(1), 149(11), 149(1)(c)

Principal Issues: Request for our views on a "municipal or public body performing a function of government in Canada" within the meaning of paragraph 149(1)(c) of the Act for the purpose of the definition of "qualified donee" in subsection 149.1(1) of the Act.

Position: General comments and suggested information/ documentation to be submitted to the Charities Directorate for registration purposes given.

Reasons: Municipal or public bodies performing a function of government in Canada must apply to the Charities Directorate to be a "qualified donee" to be able to issue charitable donation receipts for gifts received.