Income Tax Severed Letters - 2014-07-02

Ruling

2014 Ruling 2013-0509251R3 F - Post-Mortem Planning

CRA Tags

84.1(1), 245(2), 84(2)

Principales Questions: Post-mortem pipeline planning.

Position Adoptée: Favourable rulings provided.

Raisons: Meets the requirements of the law.

2014 Ruling 2013-0510911R3 - Extension of time of loss consolidation mechanism

Principal Issues: Extension of the duration of the loss consolidation mechanism for which a favourable ruling was given under 2009-033257.

Position: Extension granted.

Reasons: There was no change with respect to the Act, to our previous positions or to case law. Therefore the mechanism described in ruling 2009-033257 is still acceptable.

Technical Interpretation - External

19 June 2014 External T.I. 2014-0519881E5 - T5 reporting requirements

CRA Tags

ITR 201(4), 12(11) "anniversary day", ITR 201(1)(b), 12(4), 12(11) investment contract

Summary Under

Tax Topics - Income Tax Act - Section 12 - Subsection 12(11) - Investment Contract

debenture with interest payable on 1-year maturity not an investment contract

Summary Under

Tax Topics - Income Tax Regulations - Regulation 201 - Subsection 201(4)

debenture with interest payable on 1-year maturity not an investment contract

Principal Issues: Whether a T5 need be issued for a convertible debenture prior to an interest payment date.

Position: Depends on the terms of the debenture.

Reasons: A T5 need be issued in respect of accrued but unpaid interest only if the debenture is an "investment contract".

18 June 2014 External T.I. 2013-0516251E5 - Paragraph 16.1(1)(b) - the particular time

CRA Tags

16.1(1)(b)

Summary Under

Tax Topics - Income Tax Act - Section 16.1 - Subsection 16.1(1)

"particular time" means lease commencement

Principal Issues: What time does the "particular time" refer to in paragraph 16.1(1)(b).

Position: The time the lease began.

Reasons: The particular time is described in subsection 16.1(1).

18 June 2014 External T.I. 2014-0534261E5 - Restricted Farm Losses

CRA Tags

31(2), 31(1)

Principal Issues: Whether losses under various scenarios would be considered restricted farm losses?

Position: Question of fact.

Reasons: See below.

17 June 2014 External T.I. 2014-0533561E5 - Beneficial ownership

CRA Tags

73(1), 69(1), 54, 40(1), 40(2)(g), 248(1), 251

Principal Issues: Whether the change in legal title of the property will trigger a disposition resulting in a capital gain to the taxpayer under the Income Tax Act ("the Act")?

Position: Question of fact and law.

Reasons: The law.

17 June 2014 External T.I. 2013-0506731E5 - Immigration

CRA Tags

22, 90(2), 90(1), 114, 128.1(1)

Summary Under

Tax Topics - General Concepts - Payment & Receipt

note satisfied dividend

Summary Under

Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(1)

dividend receivable acquired on immigration

Summary Under

Tax Topics - Income Tax Act - Section 90 - Subsection 90(2)

dividend not recognized until paid

Principal Issues: (1) Whether 90(1) and 90(2) apply to an amount in respect of a dividend declared and payable to a shareholder before her immigration to Canada, but received after the immigration in two hypothetical Scenarios (2) Whether 128.1(1) applies to a dividend receivable (3) Whether a loss on the settlement of the dividend receivable will arise in Scenario 1 (4) Whether the GAAR applies in Scenario 2

Position: (1) "Yes" in Scenario 1 and "No" in Scenario 2 (2) Yes (3) No (4) Can only be decided based on specific facts

Reasons: (1) Scenario 1 - the amount received is a deemed dividend under 90(2); Scenario 2 - dividend is received before the shareholder becomes resident in Canada (2) Dividend receivable is property (3) Proceeds equal to the cost of property (4) Can only be decided based on specific facts

16 June 2014 External T.I. 2014-0516451E5 - Application of Canada-Israel Tax Convention

CRA Tags

250(4), Treaties Article III, Small Business Venture Capital Act 3(1)(a)

Summary Under

Tax Topics - Treaties - Income Tax Conventions - Article 4

Canadian corporation a Canadian "national" under Canada-Israel tie-breaker

Principal Issues: Whether a B.C. Venture Capital Corporation qualifies as a Canadian resident company for the purposes of the Canada-Israel Tax Convention

Position: Yes

Reasons: A B.C. Venture Capital is liable to tax under the Act by reason of domicile, residence or any other criterion of a similar nature. If the corporation is a resident of Canada and Israel then it shall be deemed to be a resident of the State of which it is a national.

16 June 2014 External T.I. 2013-0515431E5 - International traffic and airline enterprise

CRA Tags

Treaties Article XV, 81(1)(c), 115(3), 248(1) "international traffic", ITR 102, 153(1)

Summary Under

Tax Topics - Income Tax Act - Section 115 - Subsection 115(1) - Paragraph 115(1)(a) - Subparagraph 115(1)(a)(i)

application of Sutcliffe/Price allocation approach were s. 115(3) not applicable

Summary Under

Tax Topics - Income Tax Act - Section 115 - Subsection 115(4)

non-resident's provision of crew and aircraft to Canadian airline

Summary Under

Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - International Traffic

non-resident's provision of crew and aircraft to Canadian airline

Summary Under

Tax Topics - Income Tax Act - Section 81 - Subsection 81(1) - Paragraph 81(1)(c)

non-resident's provision of crew and aircraft to Canadian airline

Summary Under

Tax Topics - Income Tax Regulations - Regulation 102 - Subsection 102(1)

Reg. 102 withholding or waiver notwithstanding Treaty exemption

Summary Under

Tax Topics - Treaties - Income Tax Conventions - Article 15

U.K company's provision of crew to Canadian airline/Reg. 102 withholding or waiver notwithstanding Treaty exemption

Principal Issues: (1) Whether a non-resident airline corporation acting as a service provider for Canco can be considered as carrying on the business of transporting passengers within the meaning of the term "international traffic" in subsection 248(1) when the passengers are technically Canco's passengers; (2) Whether the non-resident aircraft pilots employed by Forco can be viewed as having been paid indirectly by Canco, as required under subsection 115(3); (3) Whether Forco can be viewed as operating an aircraft in international traffic as per Article 15 of the Canada-UK Convention and if so, whether its crew members must apply for a waiver under section 102 of the Regulations.

Position: (1) Yes. (2) No. (3) Yes, but a waiver under section 102 of the Regulations will only be available if all of the conditions stated in paragraph 2 of Article 15 of the Convention are satisfied.

Reasons: (1) Based on our interpretation of the term "international traffic" in subsection 248(1) and consistent with our positions in previous technical interpretations. (2) Based on our interpretation of subsection 115(3) and consistent with 115(3) explanatory notes; (3) Based on our interpretation of the term "international traffic" in Article 15 of the Canada-UK Convention, the definition of "international traffic" in 248(1) and Regulation 102. Application of the administrative policy related to Regulation 102 waiver provided in IC 75-6R2.

13 June 2014 External T.I. 2014-0522251E5 - Independent source of income for loss utilization

CRA Tags

20(1)(c)

Summary Under

Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(a)

independent income source of Lossco

Principal Issues: Whether a reasonable expectation of an independent source of income to fund dividends is sufficient for a loss utilization transaction.

Position: Question of fact as to whether a reasonable expectation of income exists.

Reasons: Application of case law.

3 June 2014 External T.I. 2013-0503511E5 F - Discretionary Dividend Shares

CRA Tags

55(2), 110.6 ITA

Summary Under

Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(7)

discretionary dividend prefs used to extract excess cash

Principales Questions: Mr. X is the sole shareholder of OpCo. After an internal reorganization, Mr. X transfers on a rollover basis pursuant to subsection 85(1) discretionary dividend shares of the capital stock of OpCo to GesCo, a corporation wholly-owned by Mr. X, in consideration for common shares of the capital stock of GesCo. Discretionary dividends are paid to GesCo. Finally, Mr. X and GesCo would sell all of their shares of the capital stock of OpCo to an unrelated corporation (« AcquisiCo »). Whether paragraph 110.6(7)b) could apply in the particular situation?

Position Adoptée: General comments

Raisons: Question of fact.

Conference

26 November 2013 Annual CTF Roundtable, 2013-0509061C6 - Part XIII Tax & Standard Convertible Debentures

CRA Tags

212(3), 212(1)(b), 214(7)

Summary Under

Tax Topics - Income Tax Act - Section 212 - Subsection 212(3) - Participating debt interest

interest and premium on standard convertible debenture not participating

Summary Under

Tax Topics - Income Tax Act - Section 214 - Subsection 214(8) - Paragraph 214(8)(c)

interest and premium on standard convertible debenture not participating

Principal Issues: 1. Whether regular periodic interest payments on standard convertible debentures constitute "participating debt interest"? 1. Whether the deemed payment of interest under subsection 214(7) for standard convertible debentures constitutes "participating debt interest"?

Position: 1. & 2. Generally no.

Reasons: 1. & 2. See below.

Technical Interpretation - Internal

18 June 2014 Internal T.I. 2014-0534541I7 - PLOI Elections

CRA Tags

212.3(11), 212.3(25)(a), 15(2.11), 212.3(10)(c), 15(2.11)(d)(ii)

Summary Under

Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.11)

deadline where multiple CRIC members of partnership

Principal Issues: 1. Where a single written communication is used by a taxpayer to elect under subsection 15(2.11) or 212.3(11) of the Act in respect of various amounts owing, has the taxpayer made one election or one election per amount owing? 2. Whether partnerships may file an election pursuant to subsection 15(2.11) or 212.3(11) of the Act, and if so, does each member of the partnership have to file the election, or can the partnership file the election on behalf of all the partners?

Position: 1. One election per amount owing. 2. It would not be the qualifying Canadian partnership in respect of the foreign controlled CRIC that would file the election pursuant to subsection 15(2.11) of the Act. Rather, a joint election would be filed by all the members of the qualifying Canadian partnership and a non-resident corporation that controls the CRIC; A partnership would not file a subsection 212.3(11) PLOI election with respect to an amount owing. Rather, a joint election would be filed by the CRIC and the non-resident corporation which controlled the CRIC, and the election would be in respect of the amount owing deemed to be owing to the CRIC in proportion to the FMV of the CRIC's direct and indirect interests in the partnership.

Reasons: 1. Notwithstanding that a taxpayer may prepare and file a single written communication containing a PLOI election for various particular amounts owing, that single written communication would constitute a unique election for each particular amount owing described therein. 2. Subparagraph 15(2.11)(d)(ii) of the Act; Paragraph 212.3(25)(a) of the Act.

16 June 2014 Internal T.I. 2014-0525961I7 - ON Tax and Brazilian Tax Sparing

CRA Tags

126(7), Treaties Article XXIV, Ontario Taxation Act 1(8), Ontario Taxation Act 1(8) 34

Summary Under

Tax Topics - Other Legislation/Constitution - Ontario - Taxation Act 2007 - Section 34 - Subsection 34(1)

Brazilian tax-sparing rules operate independently of s. 126 so that they do not generate an Ontario FTC

Summary Under

Tax Topics - Treaties - Income Tax Conventions - Article 24

Brazilian tax-sparing rules operate independently of s. 126

Principal Issues: Are Ontario taxpayers entitled to a provincial foreign tax credit in respect of tax spared amounts under Article 22 of the Canada-Brazil treaty?

Position: No.

Reasons: Ontario is not a party to the Treaty and has not incorporated the Treaty into the provincial foreign tax credit system.

14 April 2014 Internal T.I. 2013-0516151I7 F - Article XIII(4) of the Canada-XXXXXXXXXX Convention

CRA Tags

Treaties Article XIII(4)

Summary Under

Tax Topics - Treaties - Income Tax Conventions - Article 13

partnerships holding Quebec real estate were transparent for purposes of Treaty "consists of" test

Principales Questions: A corporation resident in XXXXXXXXXX disposed of shares of Canco, a Canadian corporation. Canco owns an interest in two Canadian partnerships that own commercial immovable property located in Canada. Canco shares deriving their value principally from immovable property situated in Canada, is the gain on the disposition of such shares taxable in Canada by virtue of Article XIII of the Canada-XXXXXXXXXX Convention?

Position Adoptée: Yes. The gain on the disposition of Canco shares may be taxed in Canada as the property of the shares consists principally of immovable property.

Raisons: The look-through provision used in paragraph 3 of Article XIII of the Canada-XXXXXXXXXX Convention only refers to the assets held directly by the corporation. For purposes of interpreting the Canada-XXXXXXXXXX Convention, the better view is to consider that the two Canadian partnerships are not separate persons with respect to the partners and the immovable property held by the intermediary of such partnerships should be considered as included in Canco's assets, according to its percentage of partnership interest.