Income Tax Severed Letters - 2014-08-27

Ruling

2014 Ruling 2014-0520411R3 F - Internal Reorganization

CRA Tags
248(10), 186(1), 187.1, 191(1), 55(3)(a), 55(2)

Principales Questions: Internal reorganizations involving holding corporations.

Position Adoptée: Favourable rulings provided

Raisons: In compliance with law and previous positions.

Technical Interpretation - External

6 August 2014 External T.I. 2014-0519431E5 - Section 15(2.12)

CRA Tags
15(2.11), 15(2.6), 15(2.12), 17.1(1), 15(2), 161(1)
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.11)
amended return not expected/CRA will assess Part XIII tax after 2 years if late election not yet filed
Summary Under
Tax Topics - Income Tax Act - Section 17.1 - Subsection 17.1(1)
amended return not expected

Principal Issues: 1. Whether a CRIC is required to file an amended tax return on filing a late-filed PLOI election under 15(2.12)? 2. When will arrears interest be assessed on the income inclusion under subsection 17.1(1) as a result of the late-filed PLOI election? 3. Where a PLOI election is available but is not yet filed, when will the CRA assess withholding tax on the deemed dividend amount?

Position: 1. No. 2. From the balance-due day of each affected taxation year. 3. Normally when the subsection 15(2.6) period has elapsed without repayment and a determination of whether a deemed dividend is received by the non-resident can be made.

Reasons: 1. A valid late-filed PLOI election gives effect to the tax consequences to be assessed. 2. The late-filed PLOI election deems the loan to be treated as if it were a PLOI from day one. Arrears interest calculated under subsection 161(1) of the Act will accrue on the additional tax owing by the CRIC from the balance-due day of each affected taxation year. 3. The CRA should assess the Part XIII withholding tax on the deemed dividend when the CRA would normally do so. If a late-filed PLOI election is subsequently made, the tax liability would be reassessed at that time.

30 July 2014 External T.I. 2013-0508511E5 - Provincial Residency

CRA Tags
120(1), 2602 of the Regulations

Principal Issues: Request for residency determination

Position: Not provided.

Reasons: Only done in context of audit.

24 July 2014 External T.I. 2014-0522921E5 - Taxation of a settlement payment

CRA Tags
ITA 3, 9(1)

Principal Issues: Whether a settlement amount received is taxable?

Position: Question of fact.

Reasons: Based on the surrogatum principle, a settlement has the same tax treatment as the amount it is intended to replace.

23 July 2014 External T.I. 2013-0514311E5 - Phase out application of the OETC

CRA Tags
122.3

Principal Issues: 1. When is an employer committed, or considered to have committed to an eligible project for OETC purposes?
2. Will the phase-out rules in section 122.3 apply to a contract extension or renewal exercised after March 29, 2012, where the original contract was committed in writing by the employer before March 29, 2012?
3. Is the application of the OETC phase-out rules dependent on whether the original contract is materially modified after March 29, 2012?

Position: 1. The employer is committed at the time the written contract is signed, or when an irrevocable bid in writing has been tendered.
2. Question of fact.
3. Yes.

Reasons: 1. October 2012 Explanatory Notes to section 122.3.
2. Dependent on whether the extension or renewal period is considered to be in connection with the original commitment made by the employer.
3. The OETC phase-out rules apply to contracts committed to after March 29, 2012. A new contract commitment is established at the time the original contract is materially changed.

Conference

11 October 2013 Roundtable, 2014-0537611C6 - Future income tax assets / Actif d'impôts futurs

CRA Tags
SBC and QSBCS definitions in 248 and 110.1(6) / Définition de AAPE et SEPE prévue au paragraphe 248(1) et 110.1(6)

Principal Issues: This is the translation of the response that we gave to question 25 which was asked as part of the Round Table discussion on federal taxation at the 2013 Annual Conference of the Association de planification fiscale et financière. – Is a future income tax asset considered an asset that is used principally in an active business carried on in Canada for the purposes of the definition of "qualified small business corporation share" ("QSBCS") in subsection 110.6(1) and for the purpose of the definition of "small business corporation" ("SBC") in subsection 248(1)? / Il s'agit de la traduction de la réponse que nous avons donnée à la question 25 qui nous a été posée dans le cadre de la Table ronde sur la fiscalité fédérale lors du Congrès annuel de 2013 de l'Association de planification fiscale et financière. - L'actif d'impôt futur peut-il être considéré comme un élément d'actif utilisé dans l'exploitation active d'une entreprise aux fins de la définition d'« action admissible de petite entreprise » (« AAPE ») prévue au paragraphe 110.6(1) et de la définition d'une « société exploitant une petite entreprise » (« SEPE ») prévue au paragraphe 248(1).

Position: In our view, a future income tax asset is not an asset for the purposes of the definition of SBC and of the definition of QSBCS. / Nous sommes d'avis qu'un actif d'impôt futur n'est pas un actif aux fins de la définition d'AAPE et de la définition de SEPE.

Reasons: The Act ; La Loi

Technical Interpretation - Internal

15 July 2014 Internal T.I. 2014-0527761I7 - Macau Wealth Sharing Scheme

CRA Tags
9, 3, 56(1)(u)
Summary Under
Tax Topics - Income Tax Act - Section 9 - Exempt Receipts/Business
government payments not income

Principal Issues: Whether a payment received by a Canadian resident from the Macau Wealth Sharing Scheme should be included in the taxpayer's calculation of taxable income?

Position: No.

Reasons: The Macau Wealth Sharing Scheme payments from the Macau Special Administrative Region are not income from a source, nor are they taxable under a specific provision of the Act. Such payments appear to be a windfall in accordance with the factors listed in IT334R2.