Income Tax Severed Letters - 2014-05-07

Ruling

2014 Ruling 2013-0510551R3 - Upstream Loans - Specified Debtor

CRA Tags
251, 90(6), 90(15)
Summary Under
Tax Topics - Income Tax Act - Section 90 - Subsection 90(15) - specified debtor - (b)
foreign JV company is not specified debtor

Principal Issues: Whether a foreign subsidiary of a corporation resident in Canada is a specified debtor in specific circumstances?

Position: No

Reasons: Based on the specific facts.

2014 Ruling 2013-0514191R3 - Debt restructuring, forgiveness and winding-up

CRA Tags
40(2)(e.1), 88(1), 53(1)(f.1), 245(2), 39(2), 80.01(4), 51.1, 248(1), 80(1)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Principal Amount
non-application of s. 39(2) to exchange of U.S.-dollar notes
Summary Under
Tax Topics - Income Tax Act - Section 39 - Subsection 39(2)
s. 51.1 exchange of U.S.-dollar notes
Summary Under
Tax Topics - Income Tax Act - Section 51.1
s. 51.1 exchange of U.S.-dollar notes
Summary Under
Tax Topics - Income Tax Act - Section 53 - Subsection 53(1) - Paragraph 53(1)(f.1)
Summary Under
Tax Topics - Income Tax Act - Section 80.01 - Subsection 80.01(4)
s. 51.1 exchange of U.S.-dollar notes and ATR-66 debt slide

Principal Issues: 1. Whether the amendments to the notes described in the Proposed Transactions will result in a disposition of the notes.
2. Whether section 51.1 will apply with respect to the exchange of the old notes for the new notes.
3. Whether the exchange of the notes and the winding-up will result in a forgiven amount.
4. Whether the exchange of the notes and the winding-up will result in a foreign exchange gain or loss with respect to the debtor.
5. Whether paragraph 53(1)(f.1) will apply with respect to the transfer of the notes in favour of a related corporation.
6. Whether subsection 245(2) will apply.

Position: 1. Provided there is no novation, no.
2. Yes.
3. No.
4. No.
5. Yes.
6. No.

Reasons: 1. Previous positions with respect to minor changes without novation.
2. The conditions to apply section 51.1 are met.
3. Wording of the Act and election filed pursuant to subsection 80.01(4) at the time of winding-up.
4. The debtor will not realize a gain and will not sustain a loss.
5. Previous positions and wording of the Act.
6. Previous positions.

Ministerial Correspondence

23 April 2014 Ministerial Correspondence 2014-0522731M4 - Lottery Commissions

CRA Tags
9
Summary Under
Tax Topics - Income Tax Act - Section 9 - Exempt Receipts/Business
prizes of lottery ticket retailers

Principal Issues: Change in position.

Position: Since January 1, 2014, lottery ticket retailers must include in their income the amount or value of any prize they receive in a year from a provincial lottery corporation for selling a winning ticket, because these amounts are received as part of their normal business activity.

Reasons: See below.

Technical Interpretation - External

25 April 2014 External T.I. 2013-0515621E5 F - Frais de voyage / Travelling expenses

CRA Tags
6(1)(a)
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)
benefit where employer pays costs of friend to accompany employee on training trip

Principales Questions: Quel est le traitement fiscal à accorder à un voyage offert par l'employeur à un ami de l'employé ? / What is the tax treatment of a trip paid by the employer to a friend of the employee?

Position Adoptée: La valeur du voyage doit être ajoutée au revenu de l'employé en vertu de l'alinéa 6(1)a). / The value of the trip must be added to the employee's income pursuant to paragraph 6 (1)a).

Raisons: Il s'agit d'un avantage que l'employé a reçu ou dont il a joui au titre, dans l'occupation ou en vertu de son emploi. / There is a benefit received or enjoyed by the employee in respect of, in the course of, or by virtue of employment.

16 April 2014 External T.I. 2014-0525071E5 - Part XIII tax on interest payments

CRA Tags
251(2), 212(1)(b), 251(1), 251(6)
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(b)
note issued by nephewco to uncles

Principal Issues: Whether Part XIII withholding tax applies on interest payments from a Canadian resident corporation to non-resident individuals who are uncles of the individual that is the sole shareholder of the corporation.

Position: No

Reasons: The creditors who are uncles of the individual that is the sole shareholder of the corporation are deemed to deal at arm's length with the corporation, unless the facts indicate otherwise.

14 April 2014 External T.I. 2014-0521341E5 - Unclaimed interest expense

CRA Tags
164(1), 20(1)(c), 111(1)(a)
Summary Under
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4)
amending return

Principal Issues: Whether a taxpayer can claim an interest expense in a taxation year subsequent to the taxation year in which the interest was paid?

Position: No, but the taxpayer may attempt to file an amended return to claim the interest expense in the year in which it was paid.

Reasons: Paragraph 20(1)(c) requires that the deduction be claimed in the year in which the interest was paid or in respect of which the interest was payable.

4 April 2014 External T.I. 2014-0522501E5 - Cancellation of ATR-66

CRA Tags
80.01(4), 40(2)(3.1), 53(1)(f.1)
Summary Under
Tax Topics - Income Tax Act - Section 80.01 - Subsection 80.01(4)
positive ATR-66 GAAR approach continues

Principal Issues: Whether cancellation of ATR-66 indicates a change of CRA policy regarding debt slides.

Position: No.

Reasons: Cancellation was part of CRA project to purge outdated information from CRA website.

3 April 2014 External T.I. 2013-0512371E5 F - Qualification des montants gagnés au jeu de poker

CRA Tags
3
Summary Under
Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) - Business Source/Reasonable Expectation of Profit
on-line poker winnings were from more than a pastime

Principales Questions: Est-ce qu'un contribuable doit inclure les gains réalisés en jouant au poker sur Internet dans le calcul de son revenu pour une année? / Does a taxpayer need to include in his income for a year gains earned from playing poker online?

Position Adoptée: Question de fait / Question of fact.

Raisons: La loi / The law.

2 April 2014 External T.I. 2014-0521041E5 F - Application de 13(7.1)

CRA Tags
13(7.4), 12(1)(x), 13(7.1)
Summary Under
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7.1)
no s. 13(7.4) election required where s. 13(7.1) applies
Summary Under
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7.4)
general requirements for s. 13(7.4) to apply

Principales Questions: 1) Est-ce que le paragraphe 13(7.1) s'applique pour réduire le coût de construction d'une fosse à fumier? 2) Sinon, est-ce que le choix de 13(7.4) peut être fait? / 1) Does paragraph 13(7.1) apply to reduce to construction cost of a manure pit? 2) If not, can the choice at 13(7.4) be made?

Position Adoptée: 1) Oui / Yes 2) Oui / Yes

Raisons: 1) La loi / The law 2) en générale, l'aide gouvernementale reçue est imposable selon le sous-paragraphe 12(1)(x) / in general, the government assistance amount is taxable under paragraph 12(1)(x).

2 April 2014 External T.I. 2012-0473151E5 F - Limitation du coût de location d'un véhicule

CRA Tags
67.3
Summary Under
Tax Topics - Income Tax Act - Section 67.3
GST ITCs included under element E of formula
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(16)
GST ITCs constitute a “reimbursement” for car lease expense limitation purposes

Principales Questions: Est-ce que les montants de taxes à la consommation récupérées relativement au contrat de location du véhicule doivent être considérées comme un remboursement dans l'élément E aux alinéas 67.3a) et 67.3b) pour les fins du calcul de la limite prévue à l'article 67.3 de la Loi? Should the indirect tax input tax credits be considered as a reimbursement within element E of paragraph 67.3(a) and 67.3(b) of the Act concerning the limitation of the cost of leasing a passenger vehicle?

Position Adoptée: Voir lettre ci-dessous. See letter below.

Raisons: Voir lettre ci-dessous. See letter below.

24 March 2014 External T.I. 2014-0519661E5 - Subsection 74.5(11) Attribution

CRA Tags
245, 74.5(11)
Summary Under
Tax Topics - Income Tax Act - Section 74.5 - Subsection 74.5(11)
attribution to income-split with professional's spouse

Principal Issues: Whether a transaction would be subject to subsection 74.5(11)

Position: A question of fact, however it is possible in this situation that subsection 74.5(11) would apply.

Reasons: Intent and wording of subsection 74.5(11).

18 March 2014 External T.I. 2013-0511191E5 - Taxable Benefits – Weight Management Programs

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

Principal Issues: Whether an employer-subsidized weight management program is a taxable employment benefit?

Position: Likely yes.

Reasons: See response.

20 December 2013 External T.I. 2013-0500761E5 - Special worksite

CRA Tags
6(6)(b)(i), 6(1)(b)(vii.1), 6(6), 6(6)(a)(i)

Principal Issues: Whether the special work site provisions under subsection 6(6) of the Act apply to a group of employees employed at a foreign work location?

Position: Question of fact, in this case, likely not.

Reasons: The duties do not appear to be of a temporary nature.

Technical Interpretation - Internal

11 March 2014 Internal T.I. 2013-0513221I7 F - Stock options

CRA Tags
6(1)(a), 56(4), 56(2), 15(1), 52(1)
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1)
double income inclusion under s. 56(2) or (4) to consulting corporation, and under s. 15(1) to its shareholder, where consultant's options issued directly by client to shareholder
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2)
s. 56(2) benefit where corporation implicitly consented to consultant's options being issued by client directly to its shareholder
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(4)
implicit transfer by corporation when stock options earned by it were issued directly by its client to its shareholder
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(28)
s. 248(28) does not prevent a double income inclusion to corporation under s. 56 and shareholder under s. 15
Summary Under
Tax Topics - Income Tax Act - Section 9 - Timing
no s. 9(1) income inclusion from consultant being granted stock options until exercise
Summary Under
Tax Topics - General Concepts - Fair Market Value - Options
stock options with no in-the-money value could have nil FMV
Summary Under
Tax Topics - Income Tax Act - Section 52 - Subsection 52(1)
s. 15 benefit due to shareholder receipt of stock options earned by corporation added to the ACB of the exercised shares

Principales Questions: A private corporation is rendering XXXXXXXXXX services to a public corporation. The public corporation decides to issue stock options to its directors and consultants. Instead of issuing the stock options to the private corporation rendering the services, the stock options are issued to the shareholder of the corporation and to one of its employees. Whether paragraph 6(1)(a) and, subsection 15(1), 56(2) or 56(4) would apply in the circumstances.

Position Adoptée: Subsection 56(4) or 56(2) should apply to the private corporation. Subsection 15(1) should apply to the shareholder of the private corporation. Finally, paragraph 6(1)(a) should apply to the employee.

Raisons: Wording of the Act.