Income Tax Severed Letters - 2013-07-03

Technical Interpretation - External

18 June 2013 External T.I. 2013-0491161E5 - QFP, CDA, replacement property

CRA Tags
110.6(1), 83(2), 44(1), 89(1)(b), 110.6(1.3), 248(1)

Principal Issues: Whether the capital gains exemption is available on a sale of property? Would a corporate sale of property create a capital dividend account ("CDA") balance that could be paid out as tax-free dividends? Could the corporation use the replacement property rules to replace the property that was sold and defer the capital gain?

Position: Question of fact.

Reasons: See response.

17 June 2013 External T.I. 2013-0486901E5 - Petroleum & Natural Gas Lease

CRA Tags
66(15) "Canadian resource property", 66.4
Summary Under
Tax Topics - Income Tax Act - Section 66.4 - Subsection 66.4(5) - F
proceeds of CRP upon entering into oil and gas lease

Principal Issues: How is an amount received for granting a lease of rights to explore for, drill for or extract petroleum, natural gas or other hydrocarbons reported for income tax purposes?

Position: May be included in income.

Reasons: The entering of such a lease is a disposition of CRP which is a reduction in the CCOGPE account. If the taxpayer's balance in the CCOPGE account is less than the amount of the lease payment, then the account will be negative and this amount will be included in income.

14 June 2013 External T.I. 2012-0461301E5 F - Retention of books and records

CRA Tags
230, ITR 5800
Summary Under
Tax Topics - Income Tax Act - Section 230 - Subsection 230(4)
relationship between 2-year post dissolution and 6-year hold tests
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5800 - Subsection 5800(1)
Reg. 5800(1)(a) doc must be retained 2 years' after dissolution without regard to 6-year period
Summary Under
Tax Topics - Income Tax Act - Section 230 - Subsection 230(4) - Paragraph 230(4)(a)
generally only the GL rather than ancillary journals or back-up are subject to the extended corporate accounting-record retention period under s. 230(4)(a)

Principales Questions: What are the different limitation periods for keeping books and documents for a corporation?

Position Adoptée: Permanent documents must be kept for a period ending 2 years following the dissolution of the corporation and general documents must be kept for a period ending six years following the last year for which they relate, unless the corporation is dissoved, in which case the period ends two years following the dissolution of the corporation.

Raisons: Wording of the Act

9 April 2013 External T.I. 2012-0461051E5 F - Employee of an international organization

CRA Tags
81(1)(a), 126(3), 110(1)(f), ITR 8900(1)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 8900 - Subsection 8900(1) - Paragraph 8900(1)(b)
organization was not a specialized agency related to the UN
Summary Under
Tax Topics - Income Tax Act - Section 81 - Subsection 81(1) - Paragraph 81(1)(a)
exemption for UN officials did not apply to a Canadian resident
Summary Under
Tax Topics - Income Tax Act - Section 126 - Subsection 126(3)
credit for local taxes imposed on salary of Canadian resident working for an international organization

Principales Questions: Whether the employment income received by a Canadian citizen who is resident of Canada from the XXXXXXXXXX is exempt from Canadian income tax?

Position Adoptée: No.

Raisons: The XXXXXXXXXX is not a prescribed entity under the Regulation 8900(1).

21 February 2013 External T.I. 2012-0473301E5 F - Test Wind Turbines

Summary Under
Tax Topics - Income Tax Regulations - Regulation 1219 - Subsection 1219(3)
favourable opinion on test wind turbine project

Principal Issues: Whether each of XXXXXXXXXX proposed wind turbines will qualify as a test wind turbine within the meaning of subsection 1219(3) of the Regulations.

Position: Provided that the facts and representations relating to the wind farm project remain as stated

Technical Interpretation - Internal

1 May 2013 Internal T.I. 2009-0321721I7 - Stock Option Recharge on Grant Date

CRA Tags
15(1), 214(3)(a), 7(3)(b)
Summary Under
Tax Topics - General Concepts - Fair Market Value - Options
use of Black-Scholes
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1)
stock option reimbursement in year of grant

Principal Issues: The parent company (USCo) grants employee stock options to the subsidiary's (Canco's) employees. Canco reimburses USCo an amount equal to the fair value of the option at the grant date. Would the reimbursement constitute a benefit paid by Canco to USCo, such that Part XIII applied to the payment?

Position: No, however, the method used to compute the fair value may be reviewed.

Reasons: It would not be unreasonable for USCo to recoup the portion of the stock option benefit that it has effectively provided to the employees on Canco's behalf.