Income Tax Severed Letters - 2013-08-28


2013 Ruling 2013-0483601R3 - Loss Consolidation

CRA Tags
69(1), 246(1), ITR 2401(6), 69(4), 245(2), 138(6), 56(2), 138(5), 15(1), 12(1)(x), 112, 248(1), 20(1)(c), 69(11), 12(1)(c)

Principal Issues: Is the Loss Consolidation acceptable?

Position: Yes

Reasons: Within established parameters. Similar to past Rulings granted.

2013 Ruling 2013-0483051R3 - Loss Consolidation

CRA Tags
191(6), 69(4), 112(1), 89(1), 245(2), 56(2), 187.1, 15(1), 12(1)(x), 187.4, 246(1), 248(1), 20(1)(c), 12(1)(c)

Principal Issues: Is the loss consolidation arrangement acceptable?

Position: Yes

Reasons: Within established parameters.

2013 Ruling 2012-0443321R3 - Donation of shares to public foundation

CRA Tags
149.1(12), 245(2), 149.1(3)

Principal Issues: (1) Will the transfer of 100% of the voting common shares of a taxable Canadian corporation to a public foundation result in the public foundation acquiring control of the corporation under paragraph 149.1(3)(c)? (2) Will the GAAR apply to the proposed transaction?

Position: (1) No, the foundation is deemed not to have acquired control of the corporation by virtue of paragraph 149.1(12)(a). (2) GAAR will not apply.

Reasons: (1) The foundation did not acquire for consideration more than 5% of the common shares of the corporation. (2) Based on the facts provided, the proposed transaction would not be considered an avoidance transaction.

2013 Ruling 2012-0447241R3 - First Nation 149(1)(c) - partnership income

CRA Tags

Principal Issues: Is the income from the limited partnership exempt from income tax because the First Nation is a public body performing a function of government for purpose of paragraph 149(1)(c) of the Income Tax Act?

Position: Yes.

Reasons: The First Nation has passed bylaws pursuant to sections 81 and 83 of the Indian Act. It is governed by a Chief and council accountable to its members and XXXXXXXXXX.

2012 Ruling 2011-0418721R3 - Convertible Notes

CRA Tags
212(3), 212(1)(b)
U.S. dollar convertible debenture with cash payment option on conversion

Principal Issues: Whether paragraph 212(1)(b) will apply to regular periodic interest payments on the convertible notes?

Position: No.

Reasons: PUBCO will deal at arm's length with ACO. The regular periodic interest payments will not be participating debt interest within the meaning of the definition in subsection 212(3).

2012 Ruling 2012-0452401R3 - Payment to settle a liability for child support

CRA Tags
56.1(4), 56(1)(b), 60(b)

Principal Issues: (1) Whether the recipient would be required to pay taxes on any part of the lump sum payment.
(2) Whether the lump sum payment made in respect of child support deductible to the payer in the year of payment?

Position: (1) No.
(2) No.

Reasons: (1) & (2) The lump sum payment is not considered a qualifying "support amount" for purposes of paragraphs 56(1)(b) and 60(b) of the Act. The proposed child support agreement indicates that the amounts be paid not as "support amounts" but as payment for a release of obligation.

Technical Interpretation - External

5 July 2013 External T.I. 2013-0479161E5 - Capital Loss Adjustment - 152(4)

CRA Tags
15(2), 111

Principal Issues: Whether a capital loss for a year that is statute barred can be amended to increase the amount of the capital loss and the capital loss carried forward to a year that is not statute barred?

Position: Yes

Reasons: A net capital loss exists independently of whether or not it is reported in the tax return for the taxation year when it is incurred.

Technical Interpretation - Internal

19 August 2013 Internal T.I. 2013-0490901I7 - medical expense tax credit

CRA Tags
118.2 (3)(b)
METC not reduced by refundable Ontario Healthy Homes Renovation Tax Credit

Principal Issues: Is the refundable Ontario Healthy Homes Renovation Tax Credit (OHHRTC) considered an amount that a taxpayer is "entitled to be reimbursed" for the purposes of paragraph 118.2(3)(b) of the Income Tax Act (the "Act")?

Position: The medical expenses for the medical expense tax credit will not be reduced by the OHHRTC. Revised position - replaces 2012-047038.

Reasons: See below.

19 April 2013 Internal T.I. 2012-0452791I7 - Effective Interest Date of Loss Carry Back

CRA Tags
Ontario Corporations Tax Act 79(7)(b), Ontario Corporations Tax Act 1617(b), Alberta Corporate Income Tax Act 39(3)(b)

Principal Issues: Whether the effective interest date of a request for a loss carry back to a previous year would be determined based on the date the return of the loss year was filed.

Position: No.

Reasons: The effective interest date of the loss carry back is the date the taxpayer made the request to carry back the losses.

27 March 2013 Internal T.I. 2012-0457251I7 - Appn of 159 to executor who distributes property

CRA Tags
159(2), 159(3)
no effect on secured creditors' priority

Principal Issues: Whether subsections 159(2) and (3) apply to an executor who distributes proceeds to (a) credit card companies and (b) a mortgagee with an unregistered mortgage.

Position: (a) Yes. (b) No position taken as this is outside the scope of Income Tax Rulings.

Reasons: (a) A credit card claim (an unsecured claim) cannot be paid ahead of an income tax claim, pursuant to subsection 159(2). (b) It has been suggested that the inquirer consult with Legal Services or a regional office of the Department of Justice.