Income Tax Severed Letters - 2014-10-08

Ruling

2014 Ruling 2013-0479701R3 - Transfer of US dollar loan

CRA Tags
40(2)(g)(ii), 53(1)(f.1), 40(2)(e.1)
amendment of non-interest bearing loan to be interest-bearing
s. 40(2)(e.1) trumped s. 40(2)(g)(ii) so that US Loan ACB preserved
s. 40(2)(e.1) trumped s. 40(2)(g)(ii) so that US Loan ACB preserved
S. 40(2)(e.1) trumped s. 40(2)(g)(ii) so that US Loan ACB preserved

Principal Issues: The application of the loss denial rules to the foreign exchange loss incurred on the transfer of a US dollar loan.

Position: Where paragraph 40(2)(e.1) and subparagraph 40(2)(g)(ii) both apply to deny the foreign exchange loss, the ACB adjustment under paragraph 53(1)(f.1) is applicable.

Reasons: See below.

Ministerial Correspondence

7 May 2014 Ministerial Correspondence 2014-0525991M4 - Tax Treatment of Monetary Inheritances

Principal Issues: Whether the Income Tax Act contains any provision stating that inheritances are not taxable?

Position: No. However, the Canada Revenue Agency's general position, as set out in paragraph 4 of IT-334R2, Miscellaneous Receipts, and on page 10 of the T1 General Income Tax and Benefit Guide, is that most gifts and inheritances (i.e., voluntary transfers of real or personal property without consideration) are not subject to tax in the hands of the recipients.

Reasons: See below.

Technical Interpretation - External

11 September 2014 External T.I. 2013-0495091E5 - Reimbursement of employee's foreign tax

CRA Tags
ITR 100, 6(1)(a), 115, 5(1), ITR 102
non-creditable foreign income taxes levied on sources outside that country
taxable benefit from foreign tax reimbursement

Principal Issues: Whether the reimbursement of an employee's foreign tax liability is a taxable benefit.

Position: Yes.

Reasons: Wording of the Act confirmed by case law, an employee's tax burden is a personal expense.

9 September 2014 External T.I. 2014-0530631E5 F - Alinéa 1100(1)a.1) du Règlement

CRA Tags
248(1) "scientific research & experimental development", ITR 5202 "qualified activities"., ITR 1100(1)(a.1), ITR 1101(5b.1)
SR&ED respecting pharmaceuticals was manufacturing or processing

Principales Questions: 1. Les activités de RS&DE constituent-elles de la fabrication et transformation aux fins du calcul du 90 % de l'aire de plancher du bâtiment à l'alinéa 1100(1)a.1)? / Does the SR&ED activities constitute manufacturing or processing for the purposes of the 90 % of the floor space of the building calculation at paragraph 1100(1)(a.1)?
2. Sinon, que signifie le terme « utilisée » à l'alinéa 1100(1)a.1)? / Otherwise, what does the term « used » at paragraph 1100(1)(a.1) mean?

Position Adoptée: 1. Probablement, à condition que le contribuable qui fait la RS&DE fabrique également le produit commercial./ Probably, provided that the taxpayer who performs the SR&ED also produces the commercial product.
2. Aucune./ None.

Raisons: 1. La Loi et les positions antérieures. / The Law and the previous positions.
2. Sans objet. / Not applicable.

27 August 2014 External T.I. 2014-0529221E5 F - Changement de méthode pour déclarer un gain

CRA Tags
12(1)(g), 220(3.2), 152(4), ITR 600, 40(1)
no reassessment to retroactively adopt a different earn-out recognition
administrative policy on earnout calculation was not an election
Words and Phrases
determinable

Principales Questions: Est-ce qu'un contribuable, qui n'a pas utilisé la méthode de recouvrement du coût pour déclarer le gain en capital sur une vente d'actions soumises à des clauses d' « indexation des bénéfices futurs » dans une année d'imposition antérieure, peut demander une correction de ses déclarations de revenus antérieures pour utiliser cette méthode? / Can a taxpayer, who did not use the cost recovery method to declare the capital gain on the disposition of shares subject to an earnout agreement in a previous taxation year, request a correction of its previous years income tax returns in order to use this method?

Position Adoptée: Non / No

Raisons: La Loi. Il n'y a pas de provision dans la Loi qui permet ce type de changement. / The Law. There is no provision in the Act that allow this type of change.

19 August 2014 External T.I. 2014-0529741E5 F - Frais afférents à un véhicule à moteur (chantiers)

CRA Tags
8(1)(h.1)
usual places of work of an employee (which can be multiple locations based on where the employee reports for work) is each a place of business of the employer
Words and Phrases
place of business

Principales Questions: 1. Est-ce que la position de l'ARC telle qu'émise dans l'interprétation F9611045 est toujours valide? Is the CRA position issued in the document F9611045 still valid?
2. Si oui, s'applique-t-elle à l'employé de la construction dans la situation décrite ici? If so, is that position applicable to the construction employee in the situation described here?

Position Adoptée: 1. Oui. Yes.
2. Question de fait. Question of facts.

Raisons: 1. Position constante. Voir le document F2013-0495591C6. Constant position. See document F2013-0495591C6.
2. Position antérieure. Previous position.

30 May 2014 External T.I. 2014-0518841E5 - 149(1)(l) - Fundraising

CRA Tags
9, 149(1)(l)

Principal Issues: Whether income from fundraising event would be exempt from tax?

Position: It depends.

Reasons: See below.

Technical Interpretation - Internal

15 September 2014 Internal T.I. 2014-0545001I7 - Grants paid to employers of reservists

CRA Tags
ITR 200(1), 12(1)(x), 9(1), 153(1)
compensation for reservist costs

Principal Issues: What is the income tax treatment of amounts that are received from the Compensation for Employers of Reservists Program by employers of reservists and self-employed individuals where the sole proprietorship is a reservist and is there a requirement by the administrator of this program to prepare an information slip (i.e., T4A)?

Position: This amount would be included in income pursuant to section 9 of the Act XXXXXXXXXX.

Reasons: See analysis.

11 August 2014 Internal T.I. 2014-0528231I7 F - Dépenses en immobilisation en RS&DE

CRA Tags
ITR 1104(9), catégorie 29 de l'annexe II RIR, 125.1, 248(1) "scientific research & experimental development", R5202 "qualified activities", 37(1)b)
R&D of manufacturing company constitutes manufacturing or processing for sale use if a salable product ultimately results

Principales Questions: Aux fins de la déduction pour amortissement de la catégorie 29, est-ce qu'une immobilisation utilisée en RS&DE (machine ou matériel servant à créer un prototype), constitue un bien utilisé surtout pour la fabrication ou la transformation de marchandises en vue de la vente ou de la location? For capital cost allowance purposes under Class 29, does a capital asset (machinery or equipment used to create a prototype), constitute property to be used primarily in the manufacturing or processing of goods for sale or lease?

Position Adoptée: Oui, à condition que le contribuable qui effectue la RS&DE fabrique également le produit commercial. Yes, provided that the taxpayer who does the SR&ED also manufactures the commercial product.

Raisons: L'activité de RS&DE est une opération intégrée au processus de fabrication ou de transformation qui débute avec la RS&DE et qui se termine par la vente du produit final qui en résulte. SR&ED activity is an operation integrated to M&P process starting with SR&ED and ending with the sale of the resulting final product.

11 June 2014 Internal T.I. 2014-0521411I7 - 149(1)(c)

CRA Tags
149(1)(d.6), 149(1.3), 149(1.2), 149(1)(c), 149(1)(d.5)

Principal Issues: Whether certain agencies and boards are 149(1)(c) entities.

Position: Will need to be reviewed on a case by case basis.

Reasons: As outlined below.

13 May 2014 Internal T.I. 2013-0499041I7 - Subparagraph 149(5)(e)(ii)

CRA Tags
149(5)(e), 149(1)(l)
sale of largely vacant land

Principal Issues: Was the capital gain realized by the Club on the sale of vacant land taxable?

Position: Yes

Reasons: The land was not used exclusively for and directly in the course of providing the sporting facilities to its members.