Income Tax Severed Letters - 2014-04-02


2014 Ruling 2013-0498951R3 - Split-up Butterfly

CRA Tags
standard split-up b/f of CCPC between two TCs

Principal Issues: Typical split-up butterfly

Position: Ruling given

Reasons: complies with paragraph 55(3)(b)

2014 Ruling 2014-0520971R3 - change in facts

CRA Tags

Principal Issues: Whether inclusion of Brother as beneficiary of the Trust will affect the 55(3)(b) ruling given in 2013-049895?

Position: No.

Reasons: It will not result in a transaction or event described in paragraph 55(3.1)(b).

2013 Ruling 2013-0490341R3 - No-type of property spin-off butterfly

CRA Tags
20(1)(c), 245(2), 55(3)(b), 112, 80, 86
s. 55(3.02) public spin-off of CFAs to new sister TC with post butterfly FX loan by TC to DC; new public corp inserted above DC before b/f

Principal Issues: Creation of a new public corporation to own the distributing corporation and the transferee corporation. Spin-off of some foreign assets to the transferee corporation.

Position: Favourable rulings given.

Reasons: In compliance with the Act and previous positions.

Technical Interpretation - External

17 March 2014 External T.I. 2014-0524181E5 - Error correction to capital cost of an asset

Principal Issues: Addition to letter issued, document 2014-051673.

Position: Requested by taxpayer.

Reasons: See below.

24 February 2014 External T.I. 2013-0505391E5 F - Clause de earnout renversé

CRA Tags
40(1)(a)(iii)(C), 12(1)(g), 40(1)(a)(iii)
no capital gains reserve on reverse earn-out for a share sale
a sale price that is subject to a reverse earnout is not considered to be payable after the year (no reserve)

Principales Questions: 1) La position énoncée dans l'interprétation technique 2000-0051115 est-elle encore valide? Is the position contained in technical interpretation 2000-0051115 still valid?
2) Est-il possible de déduire un montant à titre de provision pour gain en capital lorsqu'un contrat de vente d'actions contient une clause de earnout renversée? Is it possible to deduct an amount on account of the capital gains reserve where there is a reverse earnout agreement in a share purchase agreement?

Position Adoptée: 1) Oui. / Yes. 2) Non. / No.

Raisons: 1) Il n'y a pas eu de modifications suite à cette interprétation. / No modifications have been made following this interpretation.
2) Dans le cas d'une clause de earnout renversé, nous sommes d'avis que le produit de disposition n'est pas déterminable au moment de la vente, soit l'une des conditions requises pour pourvoir déduire un montant à titre de provision pour gain en capital. / Where there is a reverse earnout agreement, it is our view that the proceeds of disposition is not certain at the moment of disposition, which is one the requirements to be eligible to deduct an amount as a capital gains reserve.

14 February 2014 External T.I. 2013-0504601E5 F - Bénéfices de fabrication et de transformation

CRA Tags
construction exclusion avoided if road asphalt is produced by related corp
avoidance through M&P carried on through related corp

Principales Questions: Dans la situation où une deuxième société serait constituée dans le seul but de fabriquer l'asphalte qu'elle vendrait presqu'exclusivement à une société existante, est-ce que cette deuxième société serait admissible au crédit pour BFT? In the situation where a second corporation would be created for the sole purpose of producing asphalt to sell almost exclusively to an existent corporation, would that second corporation be eligible for the M&P tax credit?

Position Adoptée: Oui. Yes.

Raisons: La Loi. The Act.

11 February 2014 External T.I. 2014-0517611E5 F - Actions d'une société agricole familiale

CRA Tags
73(4), 70(10), 73(4.1)
"principally" refers to the majority of years, so that active farming by deceased father could qualify shares, transferred years' thereafter, by passive child
Words and Phrases

Principales Questions: 1. Les actions d'une société de gestion se qualifient-elles à titre d'actions du capital-actions d'une société agricole familiale? Do the shares of a holding corporation qualify as shares of the capital stock of a family farm corporation?
2. Comment détermine-t-on si les biens de la société ont été utilisés "principalement" dans l'exploitation d'une société agricole familiale? How do we determine if the property owned by the corporation was used "principally" in the course of carrying on the business of farming?

Position Adoptée: 1. Question de fait. Question of fact.
2. Les biens seront considérés comme ayant été "principalement" utilisés dans l'exploitation de l'entreprise agricole si une personne admissible les a utilisés ainsi pendant plus de 50 % du temps. Property will be considered as "principally" used in the course of carrying on the business of farming if a qualified person used them as such more than 50 % of the time.

Raisons: 1. Les seuls actifs de la société de gestion sont les actions d'Opco. La totalité ou presque de la juste valeur marchande des biens d'Opco est attribuable à des biens qui ont été utilisés principalement dans le cadre de l'exploitation d'une entreprise agricole au Canada par une des personnes mentionnées au paragraphe 70(10) de la définition d'"action du capital-actions d'une société agricole familiale". The only assets of the holding corporation are Opco's shares. All or substantially all of the fair market value of the property owned by Opco is attributable to property that was used principally in the course of carrying on a farming business in Canada by one of the persons mentioned in the definition of "share of the capital stock of a family farm corporation" at subsection 70(10).
2. Position antérieure. Previous position.

5 February 2014 External T.I. 2012-0466671E5 - Non-resident source withholdings

CRA Tags
153(1)(g), ITR 105

Principal Issues: Whether withholdings are required under Reg 105 on payments for services to a partnership formed in India with non-resident membership?

Position: Possibly.

Reasons: Question of fact. General comments provided.

Technical Interpretation - Internal

7 March 2014 Internal T.I. 2013-0506671I7 F - Subparagraph 104(27)(d)(ii) and paragraph 60(j)

CRA Tags
104(27)(d)(ii), 60(j)
flow-through pension benefit must have been an s. 60(j) eligible amount had it had been received directly

Principales Questions: Can a testamentary trust make a designation of an amount where the conditions of subparagraph 104(27)(d)(ii) are not met?

Position Adoptée: No.

Raisons: Application of subparagraph 104(27)(d)(ii) with paragraph 60(j).

7 March 2014 Internal T.I. 2013-0507171I7 F - Obligation de produire un T4A

CRA Tags
ITR 200(1), 153(1)
dual T4A issuance for fees to artist's corporation and dues to the artist's union

Principales Questions: Le producteur qui engage un artiste incorporé, à titre de travailleur indépendant, doit-il émettre un T4A à l'artiste (l'individu) pour les avantages sociaux qu'il verse à l'Union des artistes, au bénéfice de l'artiste (l'individu)? / Whether a producer who hires an incorporated artist, as a self-employed, must issue a T4A to the artist (the individual) for the benefits paid to the Union des artistes for the benefit of the artist (the individual)?

Position Adoptée: Oui, notamment en raison du paragraphe 200(1) du Règlement prévoit que toute personne qui fait un paiement visé au paragraphe 153(1) de la Loi doit produire une déclaration de renseignements selon le feuillet prescrit (un T4A en l'espèce) pour le paiement effectué. / Yes, in part because subsection 200(1) of the Regulations provides that every person who makes a payment described in subsection 153(1) of the Act must issue an information return in prescribed form (a T4A in this case) in respect of the payment.

Raisons: Le libellé de la Loi. The wording of the Act.