Income Tax Severed Letters - 2014-01-08


2013 Ruling 2012-0464921R3 - Payment in lieu of continued PHSP coverage

CRA Tags
63, 5
commutation of PHSP under CCAA

Principal Issues: Will a lump sum payment in lieu of continued PHSP coverage for retirees of an employer that entered into insolvency prior to XXXXXXXXXX be taxable?

Position: No

Reasons: See below

2013 Ruling 2013-0477871R3 - 5900(1)(a) and dividends from foreign affiliate

CRA Tags
ITR 5907(1) "exempt surplus", 5907(11.2), 113(1), ITR 5907(1) "exempt earnings", Treaties Article IV, ITR 5907(1) "net earnings", ITR 5901, ITR 5900
repayment by set-off against dividend
dividends from Malaysian offshore company

Principal Issues: Whether the amount of a foreign affiliate's surplus balances in respect of a corporation resident in Canada will be determined on the basis that dividends received by the affiliate from its Labuan subsidiary, also a foreign affiliate of the corporation, would be prescribed by paragraph 5900(1)(a) to have been paid out of the subsidiary's exempt surplus in respect of the corporation.

Position: Yes.

Reasons: At the time each dividend was paid from the Labuan subsidiary to its parent, the total of the Labuan subsidiary's net earnings, as defined in 5907(1), were equal to or in excess of the amount of the respective dividend, and for the purposes of 5907(11.2), the Labuan subsidiary was considered to be resident in Malaysia under the Canada-Malaysia Tax Treaty.

2013 Ruling 2013-0488351R3 - Conversion of a MFC to a MFT

CRA Tags
ITR 4803(3), 107.4(1), 108(2), 107.4(3), 132(6), ITR 4803(4), 248(1), 20(1)(c), 132.2
conversion of MFC to MFT and subtrust elimination
conversion of MFC to MFT and subtrust elimination
election of GP to capitalize loss before elimination of subtrust

Principal Issues: Whether section 132.2 would apply to the conversion of an MFC that used to be a TCC to an MFT?

Position: Yes.

Reasons: Refer to 2011-0395091R3

2013 Ruling 2013-0501811R3 - Internal Reorganization - 55(3)(a)

CRA Tags
112(1), 55(3)(a), 84(4), 212.1
redemption of cross-shareholding by grandchild of NR Pubco - s. (iii) and (iv); no public disclosure of transactions

Principal Issues: Internal reorganization involving subsidiaries of a public corporation.

Position: Favourable rulings provided.

Reasons: In compliance with the law and previous positions.

Ministerial Correspondence

28 October 2013 Ministerial Correspondence 2013-0500921M4 - Political Contributions

CRA Tags

Principal Issues: 1. Taxpayer is seeking clarification of the rules for sharing the tax credit for political contributions.

Position: 1. No position taken. Referred to ITRD for reply.

Reasons: 1. Interpretative question to be addressed by ITRD.

Technical Interpretation - External

11 December 2013 External T.I. 2013-0504681E5 - Home Buyers Plan

CRA Tags

Principal Issues: Where a Guarantor added to title to a property, is the otherwise qualifying individual for the HBP no longer eligible for the HBP?

Position: General comments provided

Reasons: Previous position

10 December 2013 External T.I. 2013-0480771E5 F - Winding-Up of a Corporation

CRA Tags
deemed year end under s. 88(2)(a)(iv) is only for surplus computation purposes

Principales Questions: Subparagraph 88(2)(a)(iv) provides for a deemed taxation year-end in the course of the winding-up of a corporation only for some limited purposes, such as the computation of the corporation's capital dividend account. However, the T2 Form and the T2 Guide specify that because of this deemed taxation year-end, the corporation has to file an income tax return. Whether the requirement on the T2 Form and the comments provided in the T2 Guide are consistent with the Act?

Position Adoptée: No.

Raisons: According to the law and previous positions.

4 December 2013 External T.I. 2013-0504951E5 - Objection Part III Tax -184(3) Election

CRA Tags
184(2), 83(2.1), 184(3), 83(2)
election conditional on unsuccessful objection

Principal Issues: Whether the CRA would defer processing a validly made election under subsection 184(3) until the Appeals Branch of the CRA confirms the Part III tax assessment, or until the court rejects the corporation's appeal?

Position: In document 2007-0221211I7, it was confirmed that, technically, the CRA could not defer the processing of a validly filed subsection 184(3) election until the ultimate resolution of an objection or determination by a court. The position has now been changed. The Assessment and Benefit Services Branch is now generally accepting to hold in abeyance a subsection 184(3) election filed in a timely manner until the resolution of the objection and subsequent appeal to court, if any, of the Part III tax assessment.

Reasons: Assessment and Benefit Services Branch position.

28 November 2013 External T.I. 2013-0499731E5 - Medical Expense

CRA Tags
248(1), 118.2(2)(a)

Principal Issues: Do fees paid to a medical practitioner to obtain Special Authority status for a prescription medication qualify as a medical expense under 118.2(2)?

Position: Yes

Reasons: The completion of the form(s) for Special Authority by a medical practitioner would normally be ancillary to the medical service provided by the practitioner. Accordingly, amounts paid to the practitioner for the completion of the form(s) for Special Authority would qualify as a medical expense for the METC.

27 November 2013 External T.I. 2012-0473421E5 - Indian Tax Exemption - Business Income

CRA Tags

Principal Issues: Whether the business income of Indian fishers qualifies for the Indian Act exemption pursuant to section 87 of the Indian Act and paragraph 81(1)(a) of the Income Tax Act.

Position: Depends.

Reasons: See discussion in letter.

26 November 2013 External T.I. 2013-0498601E5 - Voluntary contribution to U.K. Pension

CRA Tags
56(1)(i), 147.2(4), Treaties Article XVIII
top-up contribution to UK plan

Principal Issues: Whether the taxpayer can deduct a "top-up" contribution to a U.K. pension plan in determining taxable income for Canadian tax purposes?

Position: No. In general, contributions to a pension plan are only deductible in computing a Canadian resident's taxable income where the pension plan is registered with the CRA for the purposes of subsection 147.2(4) of the Act. A U.K. pension does not meet this requirement and therefore the contribution would not be deductible in computing taxable income for Canadian tax purposes.

Reasons: The requirements under subsection 147.2(4) of the Act are not met.

18 October 2013 External T.I. 2013-0502611E5 - Home Buyers Plan

CRA Tags

Principal Issues: Would the taxpayer qualify under the HBP if they had an owner-occupied home outside of Canada during the prior four calendar years?

Position: No.

Reasons: An individual is considered to have an owner-occupied home if he or she owns a housing unit, whether inside or outside Canada, which is inhabited by the individual at any point in time as the individual's principal place of residence.

1 October 2013 External T.I. 2013-0478801E5 - Examination Fee under Tuition Tax Credit

CRA Tags

Principal Issues: Is the International Qualification Examination (IQEX) fee for CPAs eligible under the Tuition Tax Credit?

Position: Not likely

Reasons: The payment for the examination fee for the IQEX will not likely qualify under paragraph 118.5(1)(d) as there is no direct relationship between the examination and obtaining the professional status to practice in Canada.

30 September 2013 External T.I. 2013-0490121E5 - Medical Practitioner - Doulas in Alberta

CRA Tags
118.2(2)(a), 118.4(2)

Principal Issues: Are the services provided by a doula in Alberta considered as services provided by a medical practitioner for the purposes of the medical expense tax credit?

Position: No.

Reasons: Paragraph 118.4(2)(a) states that where the reference to a medical practitioner is used in respect of a service rendered to an individual, that reference is to a person authorized to practice as such pursuant to the laws of the jurisdiction in which the service is rendered.

27 September 2013 External T.I. 2013-0490671E5 - Eligibility of Professional Exam Fees

CRA Tags

Principal Issues: Whether the fees incurred by members who take the professional examination to obtain the Certified Human Resources Professional designation in Alberta would qualify for the tuition tax credit under 118.5(1)(d).

Position: No

Reasons: The examination is not required to obtain a professional status under federal or provincial statute.

12 July 2013 External T.I. 2012-0447191E5 - RRSP trust taxation under 146(10.1)

CRA Tags
204 "qualified investment", 207.05, 207.04, 207.01, 146(10.1), 146(1) qualified investment

Principal Issues: Whether the trustee properly determined the RRSP trust's Part I income on non-qualified investments under Subsection 146(10.1).

Position: Yes

Reasons: Subsection 146(10.1) of the Act provides that an RRSP trust is taxable on any income earned on non-qualified investments.

Technical Interpretation - Internal

4 December 2013 Internal T.I. 2013-0489051I7 - Personal-Use-Property & Article XIII(9)

CRA Tags
54, 248(1), Treaties Article XIII(9), Treaties Article VI(2)
personal-use land and building are one property
personal-use land and building are one property

Principal Issues: Is the cottage considered part of the land?

Position: Depends.

Reasons: Where both the cottage and land are used as personal-use-property, if the cottage built on the land forms a substantial connection with the land and the purpose of annexing the cottage to the land is to improve the use of the land, then the principles in property law would consider the cottage to be part of the land.