Income Tax Severed Letters - 2013-10-02


2013 Ruling 2013-0493801R3 - Subsection 73(1)

CRA Tags

Principal Issues: Confirmation that subsection 73(1) would apply to defer a capital gain upon the transfer of shares between a Taxpayer and Former Spouse as part of a negotiated matrimonial property settlement.

Position: Favourable ruling issued.

Reasons: Conditions met.

2013 Ruling 2011-0425221R3 - Butterfly reorganization

CRA Tags

Principal Issues: Whether the proposed transaction qualifies for the butterfly exemption found in paragraph 55(3)(b)

Position: Yes

Reasons: The proposed transaction meets the statutory requirements found in paragraph 55(3)(b)

Ministerial Correspondence

1 August 2013 Ministerial Correspondence 2013-0487351M4 - Taxation of settlements

CRA Tags
6(1), 5(1)

Principal Issues: Whether a lump-sum payment received in settlement of a Human Rights complaint is taxable to recipients?

Position: Question of fact. Payments which compensate employees for lost wages are generally taxable as employment income; payments which represent general damages are non-taxable to employees.

Reasons: Case law (surrogatum principle) and previously published positions

Technical Interpretation - External

25 September 2013 External T.I. 2013-0477571E5 F - Partnership - fin. fees and mng fees

CRA Tags
96(1), ITR 402(7)
service performed by service to partnership must have been previously performed by a partnership employee and relate to a short-term task

Principales Questions: 1. Are the financing fees included in box 22 or in box 59 on the T5013 form? 2. Whether the fees paid by a partnership to a third party for activities regularly performed by the partnership's employees are deemed to be salaries paid by the partnership for the purpose of provincial income allocation?

Position Adoptée: 1. Box 22. 2. Question of facts.

Raisons: 1. Financing fees incurred by the partnership are calculated in the net income of the partnership as per Section 96 of the ITA. 2. Particular conditions in 402(7) and 402(8) of the ITR.

20 September 2013 External T.I. 2012-0471261E5 - conversion of CDA into functional currency

CRA Tags

Principal Issues: How to convert a capital dividend account ("CDA") into a corporation's functional currency?

Position: In this case, July 1, 2011 to June 30, 2012 is Canco's last Canadian currency year. Therefore, the taxpayer must convert the balance in the CDA on June 30, 2012 using the relevant rate quoted by the Bank of Canada at noon on June 30, 2012.

Reasons: 261(7)(h)

18 September 2013 External T.I. 2012-0462061E5 F - Amount included in the income of the annuitant

CRA Tags
146(8.3), 146(8), 146.01(3)
no application of s. 148(8.3) where excluded withdrawal followed by contribution and withdrawal from own RRSP

Principales Questions: Should an amount withdrawn from an RRSP be included in the income of the annuitant pursuant to subsection 146(8) or in the income of his spouse pursuant to subsection 146(8.3)?

Position Adoptée: No

Raisons: The amount withdrawn is from an RRSP for which the annuitant was the sole contributor.

4 September 2013 External T.I. 2013-0490631E5 F - Éoliennes d'Essai 

CRA Tags
ITR 1219
opinion on test wind turbines installed on wind farm

Principales Questions: Will the wind turbines qualify as "test wind turbines" as that term is defined under subsection 1219(3) of the Regulations

Position Adoptée: Yes, provided the facts and representations remain as stated.

Raisons: NRCan opinion XXXXXXXXXX

19 August 2013 External T.I. 2013-0488011E5 - Real Estate Referral Fees

CRA Tags
3(1), 56(2)

Principal Issues: Is a referral fee taxable to a home purchaser where a real estate agent directed his or her brokerage to pay a portion of his or her commission to the home purchaser as a referral fee?

Position: Question of fact.

Reasons: Subsection 56(2) of the Act would likely apply to include the referral fee in the income of the real estate agent. Generally, there would be no tax consequences to a home purchaser.

16 August 2013 External T.I. 2013-0484941E5 - Crowdfunding

CRA Tags
18(1)(a), 9(1)

Principal Issues: Treatment of funds obtained through "crowdfunding" received by a taxpayer.

Position: Amounts received by a taxpayer from crowdfunding activities would generally be included in income pursuant to subsection 9(1) of the Act, as income from carrying on a business.

Reasons: Paragraph 4 of IT-334R2 indicates that voluntary payments received by virtue of a profession or by virtue of carrying on a business are taxable receipts.

15 August 2013 External T.I. 2013-0486061E5 - Reporting tax shelters and reportable transactions

CRA Tags
237.3, 237.1

Principal Issues: Whether an information return should be filed under the tax shelter rules or the reportable transaction rules.

Position: Tax shelter rules

Reasons: Paragraph 237.3(14)(a) provides that a reportable transaction does not include a transaction that is, or is part of a series of transactions that includes the acquisition of a tax shelter for which an information return has been filed under subsection 237.1(7).

8 August 2013 External T.I. 2013-0479271E5 - Employee Recognition Program

CRA Tags
5(1), 6(1)(a)

Principal Issues: Whether gifts selected from a catalogue by employees based on a points system for employment related activities, long service, and other factors, are taxable.

Position: Question of fact but in this case yes.

Reasons: CRA's administrative policy as outlined in ITTN #40 does not apply to gift or awards where the points are accumulated and redeemed for merchandise from a catalogue.

8 August 2013 External T.I. 2013-0486851E5 - Non-Economic Loss Award for Pain and Suffering

CRA Tags
56(1)(v), 110(1)(f)(ii), ITR 232(4)

Principal Issues: Whether a workers' compensation non-economic loss award for pain and suffering must be included in income under 56(1)(v) and reported on a T5007 slip.

Position: It is a question of fact but likely no.

Reasons: A lump sum award for pain and suffering is likely not considered compensation received as a "workers' compensation benefit".

7 August 2013 External T.I. 2012-0460511E5 - Reg 402(6) and SIFT Partnerships

CRA Tags
96(1.1), ITR 402(3), 12(2.1), 197(1), ITR 414, ITR 402(6)

Principal Issues: Whether a corporate partner in a SIFT partnership must include its share of the gross revenue and salaries and wages of the SIFT partnership in its calculation of income earned in a province pursuant to subsection 402(3) of the Regulations.

Position: Yes.

Reasons: There is nothing in the Regulations that would exclude the gross revenue and salaries and wages from the calculation.

18 June 2013 External T.I. 2012-0449641E5 - Mineral Certification

CRA Tags
248(1) "mineral resource"

Principal Issues: Do the graphite deposits owned by the Corporation meet the definition of mineral resource?

Position: Yes.

Reasons: Based on the opinion provided by NRCan.

18 June 2013 External T.I. 2013-0474611E5 - Mineral Resource Certification

CRA Tags
248(1) "mineral resource"

Principal Issues: Do the deposits qualify as a mineral resource, as that term is defined in subsection 248(1) of the Act?

Position: All but one qualifies. NR Can would not issue a certification with respect to a property that the Corporation does not appear to own.

Reasons: Based on the opinion received from Natural Resources Canada dated April 30, 2013.

6 May 2009 External T.I. 2008-0295581E5 F - Bourses et aide financière aux médecins

CRA Tags
6(1)(b), 6(1)(a), 56(3), 118.6(2), 12(1)(x), ITR 200(1), 60q), 56(1)(n), ITR 200(2), 153(1)
specialized training grants made to unlicensed medical residents to encourage them to settle in remote areas were s. 56(1)(n) fellowships
s. 12(1)(x) inclusion of assistance to foreign doctors to become licensed so that they will practise in a remote area

Principales Questions: Dans le cadre de différents programmes ayant pour objet d'inciter les médecins à s'installer en région éloignée, certaines agences de santé et de services sociaux du Québec octroient des sommes sous forme de bourses ou d'aide financière à des médecins en exercice et à des étudiants en médecine. Dans chacune des situations suivantes, quel est le traitement fiscal des sommes offertes aux médecins et quels sont les feuillets à émettre :
(1) Bourse de formation spécialisée aux médecins résidents
(2) Bourse de perfectionnement aux médecins en exercice
(3) Bourse de la RAMQ aux étudiants en médecine
(4) Aide financière au permis restrictif offerte aux médecins étrangers pendant leurs démarches d'obtention d'un permis de médecine au Québec
(5) Stage pour les étudiants en médecine

Position Adoptée: (1)(2)(3) Les bourses de formation spécialisée, de perfectionnement et les bourses versées par la RAMQ sont imposables sous l'alinéa 56(1)n). Lorsque les bourses sont versées à des médecins qui exercent une entreprise de médecine, elles doivent être incluses dans le revenu selon 12(1)(x). Lorsqu'elles sont versées dans le cadre de l'occupation d'un emploi, les sommes sont imposables selon 6(1)a).
(4) Ces montants seront généralement inclus dans le revenu du récipiendaire en vertu de l'alinéa 12(1)(x).
(5) Les allocations forfaitaires versées aux étudiants pendant leurs stages, le remboursement des coûts de transport aller-retour au lieu d'emploi et l'allocation versée pour couvrir les frais de logement sont des montants à inclure dans le calcul du revenu d'emploi des stagiaires.

Raisons: (1)(2)(3) Application de la LIR et positions administratives
(4) Ces montants sont reçus par les récipiendaires relativement à une entreprise de médecine.
(5) Un employé doit inclure dans son revenu la valeur des avantages et des allocations pour frais personnels ou de subsistance qu'il a reçus de son employeur au cours de l'année selon les alinéas 6(1)a) et b).


12 June 2012 STEP Roundtable, 2012-0442911C6 - STEP CRA Round Table - June 2012

CRA Tags
15(2), 15(2.6)

Principal Issues: (1) Whether a shareholder loan repaid by the Estate of that shareholder within one year after the end of the taxation year of the creditor in which the loan was made should be included in computing the shareholder's income under subsection 15(2); (2) Whether the Estate can claim a deduction pursuant to paragraph 20(1)(j) where the amount of the loan that was included in computing the deceased shareholder's income under subsection 15(2) is repaid.

Position: (1) Yes (2) Yes

Reasons: (1) Subsection 15(2.6) applies to deny the application of subsection 15(2) irrespective of whether the loan is repaid by the shareholder or the estate for the deceased shareholder. (2) The deduction found in paragraph 20(1)(j) can be claimed in accordance with CRA's administrative views stated in IT-119R4.

Technical Interpretation - Internal

18 September 2013 Internal T.I. 2013-0487871I7 - Filing Due Date for Elections

CRA Tags
244(16), 45(2), ITR 600, 248(1), 220(3.2)-(3.5), 150(1)

Principal Issues: Whether an election will be considered late-filed where the election is required to be filed "in the taxpayer's return of income for the year" and the election is filed in the taxpayer's return of income before or after the filing due date of the return.

Position: No.

Reasons: The law.

4 September 2013 Internal T.I. 2013-0497401I7 F - Remboursement partiel de frais d'abonnement

CRA Tags
generally a taxable benefit where reimbursement of fitness centre membership fees

Principales Questions: Le fait pour un employeur de rembourser partiellement les frais d'abonnement à des centres de conditionnement physique à des employés constitue-t-il un avantage imposable pour ces derniers? / Do partial reimbursement of a fitness club fees provided to employees by an employer constitute a taxable benefit for the employees?

Position Adoptée: Question de fait. En l'espèce, possiblement. / Question of fact. In the present case, yes possibly.

Raisons: Positions antérieures/ Previous positions.

28 August 2013 Internal T.I. 2013-0496861I7 F - Allocation de résidence pour les juges

CRA Tags
6(1)(b), 6(6)
exemption was potentially available for a housing allowance received by a Chief Justice or Associate Chief Justice under a temporary appointment

Principales Questions: Une allocation de résidence versée par décret à un juge qui est nommé soit juge en chef, juge en chef adjoint est-elle imposable ? / Is the housing allowance given to a judge appointed as chief judge or as associate chief judge a taxable benefit?

Position Adoptée: En général l'allocation sera imposable. In general, the allowance is taxable.

Raisons: Question de fait. L'allocation est imposable en vertu de l'alinéa 6(1)b) puisqu'elle ne rencontre aucune des exceptions prévues qui y sont spécifiquement prévues. Puisque le décret prévoit une nomination XXXXXXXXXX, la nature du travail n'est pas temporaire et l'allocation ne peut être visée par les exceptions prévues au paragraphe 6(6).

The allowance will be taxable under paragraph 6(1)b) since the exceptions provided therein are not applicable in this situation. Since the decree indicates an appointment for XXXXXXXXXX, the duties performed are not considered of a temporary nature, the allowance does not meet the conditions under subsection 6(6).

1 August 2013 Internal T.I. 2013-0497791I7 - Penalty for Receipt Issued with False Information

CRA Tags
188.1(9), 188.1(10), 149(1), 248(1), 163.2.

Principal Issues: Whether subsection 188.1(9) applies to a municipality.

Position: Yes.

Reasons: Subsection 188.1(9) imposes a penalty on a person for issuing a receipt for a charitable donation deduction or tax credit, if the receipt includes a false statement made under circumstances amounting to culpable conduct. Subsection 248(1) defines a person to include a tax-exempt entity listed in subsection 149(1). A municipality is listed in paragraph 149(1)(c) as a tax-exempt entity. Therefore, subsection 188.1(9) applies to a municipality.

16 July 2013 Internal T.I. 2013-0481151I7 - Application of 152(4)(b)(iv) and 110.5

CRA Tags
126(2), 126(1), 110.5, 152(4)(b)(iv)

Principal Issues: 1. Whether subparagraph 152(4)(b)(iv) provides that the Minister may make a reassessment beyond the normal reassessment period where a taxpayer has requested an adjustment to include an amount in income under section 110.5 and a foreign tax credit provide under subsection 126(1) or 126(2). 2. Whether an addition to income under section 110.5 is a permissive amount in the context of IC84-1.

Position: 1. Yes. 2. Yes.

Reasons: 1. The provisions of 152(4)(b)(iv) allow for a reassessment beyond the normal reassessment period where the reassessment is a consequence of a payment or reimbursement of income or profits tax to or by the government of a country other than Canada. Subsections 126(1) or (2) permit a taxpayer to claim a foreign tax credit when the credit is equal to the lesser of the foreign tax paid on the foreign source income and the Canadian tax that would otherwise be payable on that income. In certain situations, section 110.5 permits a corporation to increase taxable income in order to claim a foreign tax credit provided by subsection 126(1) or (2). An adjustment which involves by necessity both section 110.5 and subsection 126(1) or 126(2) would be a reassessment made as a consequence of a payment or reimbursement of income tax to the government of a country other than Canada and subparagraph 152(4)(b)(iv) is applicable. 2. The taxpayer may choose to add an amount to income under section 110.5, and therefore the amount is permissive. However, if the adjustment under 110.5 changes provincial tax payable, the adjustment would not meet the criteria in IC84-1, and would not be permitted beyond the extension of the normal reassessment period provided for in subparagraph 152(4)(b)(iv).

8 July 2013 Internal T.I. 2012-0434991I7 F - Déductibilité d'une perte

CRA Tags
40(2)(g)(ii), 20(1)(p)
ordinary business requirement looks to the presence of an organized and continuous system
per jurisprudence on guarantees, taxpayer’s reason for assuming an obligation (to protect an interest-bearing investment) must be examined

Principales Questions: (1) Le contribuable peut-il déduire un montant aux termes de l'alinéa 20(1)p)?
(2) Si le montant n'est pas déductible aux termes de l'alinéa 20(1)p), pourrait-il se qualifier à titre de perte en capital?
(3) Quel serait le montant que le contribuable pourrait déduire à titre de perte en capital?
(4) Quel serait le traitement des honoraires professionnels engagés dans la situation décrite ci-dessus?

Position Adoptée: (1) Non, car l'entreprise habituelle du contribuable ne semble pas être le prêt d'argent;
(2) Oui.
(3) Le contribuable pourra déduire tout le montant payé au créancier de premier rang.
(4) Il s'agit d'une dépense de nature capitale.

Raisons: Voir la lettre ci-dessous.

8 July 2013 Internal T.I. 2012-0472651I7 F - Crédit pour l'embauche par les petites entreprises

CRA Tags
3, 118.2(2), 118.2(3)(b)
small business job credit received for payroll of non-business employees, exempt
small business job credit received for personal-care workers was “reimbursement”
Words and Phrases
single service does not qualify as attendant care

Principales Questions: Quel est le traitement fiscal du montant de crédit pour l'embauche visant les petites entreprises ("CEPE") reçu par un contribuable qui n'exploite pas d'entreprise? What is the tax treatment of the Hiring Credit of Small Business ("HCSB") received by a taxpayer who is not carrying a business?

Position Adoptée: Le CEPE n'est pas inclus dans le calcul du revenu du contribuable. Toutefois, le CEPE pourrait avoir un impact sur d'autres déductions ou crédits prévus par la Loi, notamment le crédit d'impôt pour frais médicaux./ The HCSB would not be included in the income of the taxpayer. However, the HCSB may have an impact on some other deductions or credits of the Act, including the medical expenses tax credit.

Raisons: Le CEPE ne constitue pas un revenu imposable tiré d'une source en vertu de l'article 3 de la Loi, mais il peut réduire, en ce qui a trait aux frais de préposé aux soins, le crédit d'impôt pour frais médicaux car il s'agit d'un remboursement selon l'alinéa 118.2(3)b) de la Loi./ The HCSB does not constitute income from a source pursuant to section 3 of the Act, but with respect to the cost of an attendant care, it may reduce the medical expenses tax credit because it is a reimbursement pursuant to paragraph 118.2(3)(b) of the Act.

8 July 2013 Internal T.I. 2013-0482821I7 - Business number - clarification of 241(9.3)

CRA Tags
241(10), 241(9.3), 241

Principal Issues: Whether subsection 241(9.3) permits the Minister to disclose a corporation's business number to a third party with respect to the preparation of T5 slips.

Position: No.

Reasons: Subsection 241(9.3) provides the Minster with the discretion to disclose the business number to the public if it is in connection with a program, activity or service undertaken by the Minister. As the preparation of T5 slips is not a program, activity or service undertaken by the Minister, the provisions of subsection 241(9.3) are not applicable.

14 June 2013 Internal T.I. 2013-0486251I7 - Consequential Assessment - 152(4.3)

CRA Tags
152(4)(a)(ii), 165(1.1), 152(4.3), 152(4.4)

Principal Issues: Whether a reassessment beyond the normal reassessment period can be issued under the provisions of either subsection 152(4.3) or subparagraph 152(4)(a)(ii) to include the taxpayer's request for additional deductions under either paragraph 20(1)(m) or section 111.

Position: No.

Reasons: Subsection 152(4.3) allows the Minister to reassess beyond the normal reassessment period for a taxation year where the balance is changed from an earlier year. However the reassessment can only be made to the extent that the reassessment can reasonably be considered to relate to the change in the particular balance of the taxpayer for the particular year. It is our view that neither the deduction under 20(1)(m) nor the deduction under section 111 reasonably relate to the change in the balance in these circumstances. Furthermore, where there is a waiver provided for under subparagraph 152(4)(a)(ii), subsection 152(4.01) limits the circumstances in which the Minister can reassess beyond the normal reassessment period. In that regard, where there is a waiver the Minister may reassess beyond the normal reassessment period only to the extent that it can reasonably be regarded as relating to the issues identified in the waiver. In these circumstances the deductions requested by the taxpayer were not identified in the waiver, therefore the Minister is not permitted to include these deductions in the reassessment.

10 April 2013 Internal T.I. 2013-0475991I7 F - Montant- période de raccordement

CRA Tags
248(1) "salary deferral arrangement", 5(1), 56(1)(a), 63, 248(1) "retiring allowance"
terminated employee treated as continuing to be an employee due to employer’s continued treatment as an employee for EI, CPP and RPP purposes

Principales Questions: Quel est le traitement fiscal de diverses sommes qui sont versées à un employé dont le poste est aboli? What is the tax treatment of various amounts paid to an employee whose position is abolished?

Position Adoptée: Question de fait. Lorsque les droits d'un employé à une pension s'accumulent, l'Agence du revenu du Canada considère qu'une relation d'emploi se poursuit et que les montants doivent être imposés à titre de revenu d'emploi./ If there is accrual pension benefits for the employee, Canada Revenue Agency considers that an employment relationship continues to exist, such that the amounts would be taxed as employment income.

Raisons: 1. Application du bulletin IT-337R4/ Application of bulletin IT-337R4.
2. Les documents fournis ne permettent pas de déterminer si les paiements constituent un montant différé d'une entente d'échelonnement de traitement ni s'ils représentent une allocation de retraite ou du revenu d'emploi. The documentation does not allow us to determine if the amounts are deferred amounts under a salary deferral arrangement, a retiring allowance or employment income.

19 March 2013 Internal T.I. 2013-0481351I7 - Receipt of Instalment Payments

CRA Tags

Principal Issues: When is an instalment payment considered to have been made?

Position: If the amount is a source deductions remittance or an amount payable by a corporation, it is sent when the Receiver General receives it. If the amount is an instalment payment from an individual, it is received when sent by first class mail or its equivalent.

Reasons: Subsection 248(7) deems anything, other than a remittance of source deductions or an amount payable by a corporation, to have been received when it is sent by first class mail or its equivalent. An instalment payment from an individual, sent by first class mail or its equivalent, is deemed to have been received on the day that it is sent.