Income Tax Severed Letters - 2014-07-09

Technical Interpretation - External

25 June 2014 External T.I. 2012-0469331E5 - Blind Trust

CRA Tags

Principal Issues: Tax implication applicable to a blind trust on death of sole settlor/beneficiary.

Position: Deemed disposition of all trust property.

Reasons: Per 104(4)(a)

25 June 2014 External T.I. 2012-0465221E5 - Trust distributions to non-residents

CRA Tags
107(2), 116(1), 82(1), 108(1), 121, 212(1)(c), 248(1), 116(4), 116(3)
filing a T2062 not a TCP admission

Principal Issues: Does filing form T2062 imply the application of the provisions of section 116 of the Act?

Position: No.

Reasons: TCP determination is a question of fact.

3 June 2014 External T.I. 2014-0524031E5 - Life insurance policy disposition

CRA Tags
12.2(9), 148, ITR 309

Principal Issues: Clarification of the income tax treatment of the disposition of an interest in a grandfathered life insurance policy.

Position: General comments provided

Reasons: The legislation.

Technical Interpretation - Internal

3 July 2014 Internal T.I. 2014-0531171M6 - Fraudulent Investment Schemes

CRA Tags
12(1)(i), 20(1)(p), 39(1)(b), 38(c), 111(1)(b), 3, 111(1)(a), 111(8), 125(7), 9, 248(1), 39(1)(c), 12(1)(c)

Principal Issues: Basic tax rules concerning fraudulent investment schemes.

Position: See letter below.

Reasons: See letter below.

23 June 2014 Internal T.I. 2013-0501521I7 - Collection Limitation Period

CRA Tags
limitation period does not extinguish tax debt

Principal Issues: Whether a tax debt that has been "written off" by the CRA remains payable by the taxpayer?

Position: The debt remains payable unless extinguished by another act (e.g., bankruptcy).

Reasons: There is nothing in the Act that allows the CRA to write off a debt. However, section 222 of the Act provides for a limitation period after which the CRA cannot take collection action to collect the debt.

18 June 2014 Internal T.I. 2014-0531591I7 - Heartbleed Extension and Appeal Deadline

CRA Tags
165(1)(a)(i), 220(3), 150(1)(d), 248(1)

Principal Issues: Whether the extension to file 2013 T1 Returns that was granted following the Heartbleed event would change the deadline to file a notice of objection in relation to a 2013 T1 return?

Position: No.

Reasons: The phrase "filing-due date" is specifically defined in subsection 248(1) of the Act as the day on or before which the taxpayer's return of income under Part I for the year is required to be filed or would be required to be filed if tax under that Part were payable by the taxpayer for the year.
Subsection 220(3) gives the Minister the discretion to extend the time for making a return under the Act. Such an extension could enable a person to avoid or reduce an assessment of interest and penalties. However, subsection 220(3) does not change the original "filing-due date", and as such, the time to serve a notice of objection remains the later of (i) the day that is one year after the taxpayer's filing-due date for the year and (ii) the day that is 90 days after the day of sending the notice of assessment.

16 June 2014 Internal T.I. 2014-0527901I7 - Public Lending Right Payments under Art. 14

CRA Tags
Treaties Article XIV
public lending right payments not royalties

Principal Issues: Characterization of payments from the Public Lending Rights Program under the Canada-Ireland Income Tax Convention.

Position: The Public Lending Right Program payments fall under Article 14 of the Canada-Ireland Income Tax Convention.

Reasons: The payments are in respect of independent literary or artistic activities.

11 June 2014 Internal T.I. 2014-0519701I7 - Filing a NIL return to avoid late-filing penalties

CRA Tags
162(2), 162(1), 163(2), 150(1)
return with substantive missing elements
return with substantive missing elements

Principal Issues: 1. Where a taxpayer files a NIL or an incomplete return of income, whether the Minister can refuse to accept it. 2. Whether the Minister can assess penalties and, if so, which ones.

Position: 1. Yes. 2. Yes. Subsections 162(1) or 162(2) penalties for late-filing a return of income, and subsection 163(2) for gross negligence if applicable.

Reasons: 1. In situations where a taxpayer files a return of income such that the prescribed form is substantially incomplete, whether missing relevant information or required documents, the return of income may be considered to be not a valid return and the Minister can refuse to accept it. 2. Subsection 162(1) and (2) penalties can be assessed because the taxpayer did not file a valid return of income by the filing-due date. Subsection 163(2) penalty can be assessed if the taxpayer was grossly negligent.

5 June 2014 Internal T.I. 2013-0509051I7 - Penalties beyond the Normal Reassessment Period

CRA Tags
162(7), 162(10), 152(4)a)(i), 163(2)
carelessness sufficient to assess beyond normal reassessment period
carelessness sufficient to assess beyond normal reassessment period

Principal Issues: Whether a taxpayer can be assessed after the normal reassessment period if gross negligence penalties have not been assessed.

Position: Yes.

Reasons: The level of culpability required to assess beyond the normal reassessment period pursuant to subparagraph 152(4)(a)(i) (i.e., "neglect, carelessness or wilful default") to apply is lower than that required to assess a penalty for gross negligence such as subsection 163(2) or 162(10) (i.e., "knowingly, or under circumstances amounting to gross negligence").

3 June 2014 Internal T.I. 2013-0489471I7 - Subsection 171(1)

CRA Tags
no power to reassess following order to vacate or vary
appeal from varied assessment
no power to reassess following order to vacate or vary

Principal Issues: 1. Does the Act permit the Minister to issue a reassessment in order to give effect to a Court's order to vacate or vary an assessment pursuant to subsection 171(1)? 2. Would the taxpayer have any rights of objection to the assessment that is restored following the Court vacating a later assessment?

Position: 1. No 2. No

Reasons: 1. Subsection 171(1) provides for three alternatives. The Court only vacated the assessment which had the effect of validating the former assessment. The Minister's power to issue a reassessment must be provided for in the Act. 2. The taxpayer would be able to appeal the decision to the Federal Court of Appeal.

30 May 2014 Internal T.I. 2014-0531371I7 - Reg. 105 withholding follow-up to 2014-052638

CRA Tags
153(1.1), 153(1)(g), ITR 105(1), 227(12)

Principal Issues: 1. Whether the Government of Canada must, in the absence of a tax withholding clause in a contract, withhold 15 percent of the amount to be paid to a non-resident contractor in respect of services provided in Canada pursuant to paragraph 153(1)(g) of the Act and subsection 105(1) of the Regulations.

Position: 1. Yes, provided no waiver is obtained.

Reasons: 1. Subsection 227(12) of the Act, provides that any agreement by a person on whom the Act imposes an obligation to deduct or withhold an amount, not to deduct or withhold that amount, is void.