Income Tax Severed Letters - 2014-01-22

Principal Issues: Would machinery and equipment that is used in the manufacturing or processing of malt be eligible for inclusion in class 29 or 43 and would buildings used in manufacturing or processing activities be eligible for additional CCA under 1100(1)(a.1) or (a.2)?

Position: General comments - Question of fact.

Reasons: See response

Principales Questions: Whether a corporation can designate the total amount of a dividend it pays to be an eligible dividend?

Position Adoptée: Yes.

Raisons: The law.

Principales Questions: In the hypothetical situations described, whether subsection 55(2) would apply.

Position Adoptée: In the first situation, no because of the application of paragraph 55(3)(a). In the second situation, possibly yes.

Raisons: In the second situation, there may be a significant increase in interest described in subparagraphs 55(3)(a)(ii) and (v).

Principal Issues: Can a transfer of a property from a personal trust to a beneficiary constitute both a settlement of a debt owing to the beneficiary and a distribution that meets the requirements for a rollover under subsection 107(2)?

Position: No.

Reasons: It cannot simultaneously be both.

Principal Issues: Whether an individual who becomes an "eligible individual" as a "shared-custody parent" for purposes of the CCTB can retroactively claim for the benefit, assuming all eligibility criteria are met?

Position: Generally yes

Reasons: An individual cannot be considered an eligible individual for a particular month until they meet the eligibility criteria for being an eligible individual in that month, and apply for the CCTB for that month. An individual cannot be considered to be an eligible individual at the beginning of a month, unless they have filed the prescribed forms and prescribed information within 11 months of the end of that month.

Principal Issues: 1. Whether the payments or reimbursements for an employee's tuition fees are deductible by the employer?
2. Whether employer-paid tuition fees are taxable benefits to the employee?
3. Which tax credits are available to an employee for tuition fees?

Position: 1. Normally deductible.
2. Question of fact.
3. Depends on the situation.

Reasons: 1. Payments or reimbursements for an employee's tuition fees which are incurred for business purposes are generally deductible under paragraph 18(1)(a).
2. Question of fact whether primarily for the benefit of the employer or employee.
3. Tax credits available depend on situation.

Principales Questions: The debts owed by some corporations of a group to a financial institution, are reduced by the amount of cash held by another corporation of the group and deposited in that same financial institution, in order to compute the interests charged to the debtors with respect to their debts. To compensate for the service rendered by the corporation holding the cash, that corporation charges a fee to the debtors equal to the amount of cash held by the corporation and deposited in the financial institution multiplied by the rate of interest charged by the said financial institution.
1. Whether the debtors can deduct those financing fees?
2. Whether the fees are reasonable?

Position Adoptée: 1. The fees would constitute capital expenditures. However, depending on the agreements between the parties (and all the relevant facts and circumstances of a particular situation), such fees may arguably be deductible pursuant to paragraph 20(1)(e.1).
2. No position taken.

Raisons: 1. It can be argued that these annual fees are service fees or similar fees that the corporations incur for the purpose of borrowing money used by the debtors to earn income from their business.
2. Question of fact.

Principal Issues: Where an arrangement described in subsection 7(6) of the Income tax Act (the "Act") exists, is it the employer/corporation or the trustee who has the obligation to withhold tax for purposes of subsection 153(1) of the Act?

Position: The corporation/employer.

Reasons: The provisions of subsections 7(6), 7(1), 153(1.01) and 153(1) of the Act.