Income Tax Severed Letters - 2014-03-26

Technical Interpretation - External

27 February 2014 External T.I. 2013-0506401E5 - Loan from a partnership to an individual

CRA Tags
15(2), 56(2)
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2)
partnership to partner shareholder loan
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2)
bona fide loan not a transfer

Principal Issues: Whether a bona fide loan constitutes a payment or transfer of property for the purposes of subsection 56(2) of the Act?

Position: No, except in certain circumstances.

Reasons: In accordance with the Act, case law and previous positions.

26 February 2014 External T.I. 2013-0487961E5 - Excluded Right or Interest

CRA Tags
128.1(10) "excluded right or interest", 128.1(4)(b)(iii), 7(1)
Summary Under
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(10) - excluded right or interest - (c)
unvested rights to free shares
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 15
apportionment of stock option benefits based on situs of employment during vesting period

Principal Issues: Will the rights to shares granted by the employer company be subject to the deemed disposition rules in paragraph 128.1(4)(b) of the Act when the employee emigrates from Canada?

Position: No.

Reasons: The rights are exempted from the deemed disposition rule by subparagraph 128.1(4)(b)(iii) of the Act since they fall into the definition of "excluded right or interest" in subsection 128.1(10) pursuant to paragraph (c) thereof.

25 February 2014 External T.I. 2013-0508451E5 - Commercial Fishing – Food Expenses

CRA Tags
67.1(1.1), 9(1), 18(1)(h), 8(1)(g), 18(1)(a), 67.1(1)

Principal Issues: 1) Whether offshore commercial fishers are permitted to deduct food expenses based on a per diem rate per sharesperson? 2) Whether the deductible portion of meal expenses may be determined with reference to subsection 67.1(1.1) of the Income Tax Act?

Position: 1) & 2) No.

Reasons: 1) & 2) See response.

21 February 2014 External T.I. 2013-0497601E5 - Ordinarily resident and 62(1) moving expenses.

CRA Tags
248(1) "eligible relocation", 62(1)

Principal Issues: Whether a taxpayer is entitled to deduct moving expenses under subsection 62(1) when he moved to the United States for work?

Position: Question of fact.

Reasons: Eligible moving expenses are not deductible unless the taxpayer ordinarily resides at the rented apartment in the United States.

20 February 2014 External T.I. 2013-0480051E5 F - Eligible dividend and safe income

CRA Tags
89(14), 55(2), 55(5)(f)
Summary Under
Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - General Rate Income Pool
full amount of designated dividend reduces payor's GRIP even though recipient's GRIP increased only by safe income portion
Summary Under
Tax Topics - Income Tax Act - Section 89 - Subsection 89(14)
eligible dividend designation treated as applying only to safe income portion of dividend

Principal Issues: 1. Opco designates a portion of a dividend it pays to Gesco to be an eligible dividend. Because of the application of subsection 55(2), Gesco is considered to have received a dividend of a lesser amount than the portion designated by Opco. Whether the GRIP of Opco will be reduced by the portion designated. Whether the GRIP of Gesco will be increased by an amount different from the amount of the reduction of the GRIP of Opco.
2. If Opco designates a portion of a dividend it pays to Gesco equal to the amount of the dividend considered to have been received by Gesco after the application of subsection 55(2) (but not higher than the GRIP of Opco), whether the GRIP of Gesco will be increased by the amount of the dividend considered to have been received by Gesco after the application of subsection 55(2).

Position: 1. The GRIP of Opco will be reduced by the portion of the dividend it pays to Gesco that was designated to be an eligible dividend. However, the GRIP of Gesco will be increased by the amount of the dividend considered received by Gesco after the application of subsection 55(2), which amount is less than the portion designated by Opco.
2. The GRIP of Gesco will be increased by the amount of the dividend considered received by Gesco after the application of subsection 55(2), which amount is equal to the portion of the dividend designated by Opco.

Reasons: 1. Wording of the Act and previous position.
2. Textual, contextual and purposive interpretation of the GRIP, of subsection 89(14) and of subsection 55(2).

19 February 2014 External T.I. 2013-0508501E5 - Taxable benefit - medical test

CRA Tags
6(1)(a)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)
employer-paid medical examinations

Principal Issues: Is there a taxable benefit to an employee when an employer pays for or reimburses the employee for a medical test?

Position: Question of fact.

Reasons: See response

19 February 2014 External T.I. 2013-0511171E5 - Travel expenses, meals –simplified method

CRA Tags
8(1)(h), 8(1)(g), 67.1

Principal Issues: Whether a non-transport employee making an otherwise allowable claim for meals under paragraph 8(1)(h) of the Act is entitled to use the simplified method described in IC 73-21R9.

Position: No.

Reasons: See response.

18 February 2014 External T.I. 2013-0515011E5 - Life insurance premiums and policy loan

CRA Tags
56(1)(j), 148(1), 148(9), 60(s)
Summary Under
Tax Topics - Income Tax Act - Section 148 - Subsection 148(9) - Adjusted Cost Basis
general discussion re corporate owned policy
Summary Under
Tax Topics - Income Tax Act - Section 148 - Subsection 148(9) - Proceeds of the Disposition
general discussion re corporate owned policy

Principal Issues: Clarification on the income tax treatment of life insurance premiums and policy loans.

Position: General comments provided.

Reasons: The legislation.

11 February 2014 External T.I. 2013-0507421E5 - Taxable benefit - travel expenses

CRA Tags
8(1)(h), 6(1)(a), 8(1)(h.1)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)
reimbursement for travel between home and regular place of employment is taxable benefit, but not where between RPEs

Principal Issues: 1. Whether a taxable benefit arises for employee travel between home and a work location where an employee has multiple work locations and multiple employers? 2. Whether an employee can deduct travel expenses under the same set of facts?

Position: Question of fact.

Reasons: See response

23 January 2014 External T.I. 2012-0467711E5 - Clergy Residence Deduction

CRA Tags
8(1)(c)
Summary Under
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(c)
flunked 4 of 6 religious order criteria

Principal Issues: Whether an organization is a religious order for purposes of the clergy residence deduction provided by paragraph 8(1)(c) of the Act?

Position: See response.

Reasons: See response.

30 December 2013 External T.I. 2013-0501351E5 - Employee award

CRA Tags
6(1)(a)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)
cash awards to employees

Principal Issues: Whether the value of an award is included in the employee recipient's income?

Position: Yes.

Reasons: The award appears to be a benefit received in respect of, in the course of, or by virtue of employment.

10 December 2013 External T.I. 2013-0490621E5 - Taxation of gift from parent to teacher

CRA Tags
6(1)(a)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)
parents' donate to foundation to reduce teachers' ticket prices

Principal Issues: Are teachers in receipt of a taxable benefit where parents donate money to a private charitable foundation to assist teachers in paying for tickets to a gala fundraiser that benefits the private school where they teach?

Position: Question of fact, but probably not.

Reasons: See response

Technical Interpretation - Internal

24 February 2014 Internal T.I. 2013-0484461I7 - specified foreign property

CRA Tags
233.3(1)
Summary Under
Tax Topics - Income Tax Act - Section 233.3 - Subsection 233.3(1) - Specified Foreign Property
partner loan to partnership with joint and several partner liability

Principal Issues: Is indebtedness owed by a general partnership (some of the members of which are persons not resident in Canada) to a Canadian resident, "specified foreign property" of the Canadian resident within the meaning of paragraph (g) of the definition of that term in subsection 233.3(1) of the Act?

Position: Yes.

Reasons: In the context of applying paragraph (g) of the definition of "specified foreign property" in subsection 233.3(1) of the Act, subsection 96(1) of the Act does not apply and the general partnership is not considered a separate person. In addition, there is no other provision in the Act which deems a partnership to be a separate person for the purposes of paragraph (g) of the definition of "specified foreign property" in subsection 233.3(1) of the Act. Therefore, each of the non-resident partners would be viewed as the debtors in respect of the full amount of the loan for the purposes of applying paragraph (g) of the definition of "specified foreign property" in subsection 233.3(1) of the Act.

17 February 2014 Internal T.I. 2013-0498121I7 - Follow up to XXXXXXXXXX

CRA Tags
Vienna Convention on Diplomatic Relations Article 39, 162(7), Vienna Convention on Diplomatic Relations Article 34
Summary Under
Tax Topics - Income Tax Act - Section 116 - Subsection 116(3)
diplomatic exemption/discretion if property sold at loss
Summary Under
Tax Topics - Income Tax Act - Section 162 - Subsection 162(7)
diplomatic exemption/discretion if property sold at loss

Principal Issues: Is a diplomatic agent exempt from a penalty under 162(7) as a result of filing a notice of disposition late?

Position: No.

Reasons: The exemption in Article 34 relates to dues and taxes on immovable property held on behalf of the sending State for the purpose of the mission. The property, in this case, was not for the purpose of the mission. Furthermore, the diplomatic agent had left Canada and therefore the privileges and immunities no longer applied.

14 February 2014 Internal T.I. 2013-0495661I7 - Taxability of payment from US charitable trust

CRA Tags
6(1)(a), 63, 56(1)(u)
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(u)
financial assistance to former charity employee
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b)
financial assistance to former charity employee

Principal Issues: Are monthly payments from a US charitable trust paid to a former employee taxable?

Position: Question of fact, but likely no.

Reasons: Included under 56(1)(u) in net income and deducted under 110(1)(f) in computing taxable income.

7 February 2014 Internal T.I. 2013-0506151I7 - Section 216 returns and interest

CRA Tags
216, 216(1), 227(8.3), (4).
Summary Under
Tax Topics - Income Tax Act - Section 216 - Subsection 216(4)
accrual of interest until filing of s. 216(4) return
Summary Under
Tax Topics - Income Tax Act - Section 227 - Subsection 227(8.3)
accrual of interest until filing of s. 216(4) return

Principal Issues: Where there has been a failure to withhold under Part XIII followed by a 216 election to file under Part I, at what point does interest stop accruing on the Part XIII assessment?

Position: Interest on section 215 amounts will accrue until the section 216 elective filings have been made. After that point, interest will continue to accrue on any amount of Part XIII interest in arrears.

Reasons: On filing a Part I return under section 216, the Part XIII liability is replaced with a Part I liability. Following the Tax Court of Canada decision in Pechet, the process is contemporaneous so that the interest on the subsection 215 amounts would not continue to accrue beyond the point where the ultimate tax debt was settled. A 216 return effectively settles the Part XIII tax by replacing it with a Part I liability. Interest arrears on the original Part XIII tax remain owing until the 216 filing, and interest will continue to accrue on those arrears after the 216 filing.

7 February 2014 Internal T.I. 2013-0512601I7 - Clarification of 2013-0481151I7

CRA Tags
110.5, 126
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 110.5
110.5 addition not a permissible 84-1 adjustment
Summary Under
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4)
110.5 addition not a permissible 84-1 adjustment

Principal Issues: Whether the income included under section 110.5 and a foreign tax credit provided by subsection 126(1) or 126(2) would be permissive amounts under IC84-1?

Position: No

Reasons: IC84-1 definition of permissive amounts.

14 January 2014 Internal T.I. 2013-0514331I7 - Application of 111(1)(a) and 152(4.2)

CRA Tags
152(4.2), 152(4), 111(1)(a), 111(8), 152(3.1), 34.1(1), 34.1(3)
Summary Under
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.2)
carry-forward to subsequent year within 10 years

Principal Issues: Whether the Minister may recognize a non-capital loss that was not previously reported by a taxpayer in a taxation year that is statute-barred, and therefore, increase the non-capital loss carry forward available to be applied to a future taxation year that is not statute-barred.

Position: Yes, provided a loss determination under 152(1.1) has not been issued for the taxation year the non-capital loss was incurred.

Reasons: A non-capital loss exists whether or not the loss has been reported in the tax return for the taxation year when it was incurred, despite the fact that such taxation year cannot be reassessed.

January 14, 2014

6 December 2012 Internal T.I. 2012-0458401I7 - Penalties - Foreign Reporting Forms

CRA Tags
162(7)
Summary Under
Tax Topics - Income Tax Act - Section 162 - Subsection 162(7)
s. 162(5) or (7) choice

Principal Issues: Whether a prescribed form which is filed without the required information and/or documentation would be subject to a penalty, even though it was filed on or before the filing deadline?

Position: Yes, subsection 162(7) or 162(5) would apply depending on whether the missing information affects the substance of the form.

Reasons: In situations such that the prescribed form is substantially incomplete, whether missing relevant information or required documents, the form may be considered as invalid and will not be accepted as filed, and the penalty provided by subsection 162(7) for the failure to file the information return as and when required by the Act would be applicable. In situations where the form is filed prior to the filing deadline, but it is missing information which does not affect the substance of the form, a penalty provided by subsection 162(5) is applicable for the failure to provide information required on a prescribed form.