Income Tax Severed Letters - 2014-05-21

Ruling

2014 Ruling 2013-0503611R3 - Post-Mortem Planning

CRA Tags
84.1(1), 245(2), 84(2)
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2)
pipeline following death of spouse for a spousal trust where company holds mostly marketable securities
Summary Under
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(c) - Subparagraph 88(1)(c)(vi)
bump of marketable securities (no ruling) occurring as part of post-mortem pipeline transactions

Principal Issues: Post-Mortem Pipeline Planning

Position: Favourable rulings provided.

Reasons: In accordance with the provisions of the Act and our previous positions.

Technical Interpretation - External

8 May 2014 External T.I. 2014-0522771E5 - Whether a partnership has ceased to exist

CRA Tags
85(2), 98(1), 85(3)
Summary Under
Tax Topics - Income Tax Act - Section 85 - Subsection 85(3)
winding-up of affairs of partnership with one partner when constructive distribution
Summary Under
Tax Topics - Income Tax Act - Section 98 - Subsection 98(1)
continuation of partnership with one partner

Principal Issues: i) Whether a partnership has ceased to exist when there is only one partner left? ii) Does 98(1) apply to extend the existence of the partnership?

Position: i) Question of fact. ii) Question of fact.

Reasons: i) It depends on the partnership agreement and provincial law, but generally a partnership requires at least two partners. ii) Generally, subsection 98(1) applies to deem a partnership not to have ceased to exist until such time as all of the partnership's property has been distributed to persons entitled by law to receive them.

2 May 2014 External T.I. 2014-0528241E5 - Cabin - capital gain

CRA Tags
54, 39, 40

Principal Issues: Could a capital gain on the sale of a cabin be sheltered from tax?

Position: Question of fact.

Reasons: See below.

1 May 2014 External T.I. 2013-0494981E5 F - De Jure Control

Summary Under
Tax Topics - Income Tax Act - Section 251 - Subsection 251(2) - Paragraph 251(2)(b) - Subparagraph 251(2)(b)(i)
potential de jure control, if right to replace trustees is coupled with advance notice of major decisions

Principales Questions: In a particular situation, a trust has one beneficiary and two trustees who are not related to the beneficiary. The trust is the sole shareholder of a corporation. Under the terms of the trust indenture, the beneficiary is not entitled to receive the shares of the corporation in satisfaction of his income nor his capital interest in the trust. Whether the trustees or the beneficiary have de jure control of the corporation, considering the powers provided to the beneficiary in the trust indenture with respect to three different scenarios: 1) the beneficiary has the power to revoke the trustees; 2) the beneficiary has the power to revoke the trustees and to appoint new trustees; and 3) the beneficiary has the power to revoke the trustees and to appoint new trustees, and the trust indenture provides that a XXXXXXXXXX-day notice must be given to the beneficiary before the implementation of important decisions by the trustees (sale or transfer of the shares of the corporation, redemption, replacement or conversion by the corporation of its shares, winding-up or amalgamation of the corporation). However the exercise of the voting rights of the shares of the corporation by the trustees is not subject to the XXXXXXXXXX-day notice.

Position Adoptée: Scenarios 1) and 2): generally, the trustees would have de jure control of the corporation; scenario 3): general comments provided.

Raisons: See below.

29 April 2014 External T.I. 2014-0518951E5 F - Taxable capital gain designation from a trust

CRA Tags
110.6(1), 249(1)(c), 249(5)., 110.6(2.3), 110.6(2)(a), 104(21) 104(21.2), 110.6(2.1)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(21.2)
deemed receipt of QSBC gain in year in which trust allocation year ends

Principales Questions: When will a net taxable capital gain designated in respect of a beneficiary of a testamentary trust pursuant to subsections 104(21) and 104(21.2) be considered a taxable capital gain from the disposition of a small business corporation (SBC) share and a disposition of a SBC share?

Position Adoptée: At the time that is the end of taxation year of the testamentary trust in which the trust realized the net capital gain.

Raisons: Wording of subsections 104(21) and 104(21.2).

17 April 2014 External T.I. 2012-0461151E5 F - pension fund real estate

CRA Tags
149(1)(o.2)(iii)(B)
Summary Under
Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(o.2) - Subparagraph 149(1)(o.2)(iii)
advance from RPP shareholder is permitted if not evidenced by issuance of debenture etc.
Words and Phrases
bonds, notes, debentures or similar obligations

Principales Questions: Does an advance made by a pension fund or plan to a pension fund real estate corporation meet clause 149(1)(o.2)(iii)(B)?

Position Adoptée: Possible. It depends whether or not the advance is recognized by the issuance of a bond, note, debenture or a similar obligation.

Raisons: Legislation

Technical Interpretation - Internal

7 May 2014 Internal T.I. 2014-0528251I7 - Surface Rentals for Wind Farms

CRA Tags
248(1) - "farming", 9(1)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Farming
wind farm not a farm
Summary Under
Tax Topics - Income Tax Act - Section 4 - Subsection 4(1) - Paragraph 4(1)(a)
wind farm rentals as incidental to farming business

Principal Issues: Whether income received from a wind farm developer by a self-employed farmer for the lease of the farmer's land is considered incidental farming income or a separate source of income.

Position: Question of fact.

Reasons: Whether or not income from non-farming activities could be regarded as farming income would generally depend on whether the other activities are incidental to the farming operations or are, in fact, a separate business.