Income Tax Severed Letters - 2015-03-04


2014 Ruling 2014-0537161R3 - Reduction of stated capital

CRA Tags
40(3), 84(2), 53(2), 84(4.1)
distribution of warrants and common shares of holdco for foreign exploration subs

Principal Issues: Whether subsection 84(2) applies to a reduction of capital.

Position: Yes

Reasons: Complies with law and CRA administrative positions.

Technical Interpretation - External

2 February 2015 External T.I. 2014-0563251E5 - Employer paid course - requirement of employment

CRA Tags

Principal Issues: Is an employer paid course a taxable benefit to an employee?

Position: Question of fact.

Reasons: See response.

15 January 2015 External T.I. 2014-0546581E5 - Partnership interest excluded property

CRA Tags
95(1) "excluded property", 95(1) "foreign affiliate"
foreign LP did not qualify as deemed NR corp where part of 10% interest held directly by related Canadian

Principal Issues: Whether a partnership would be considered to be a foreign affiliate of a taxpayer for the purposes of the definition "excluded property" in subsection 95(1), in a particular fact pattern?

Position: No.

Reasons: Paragraph (e) of the definition "excluded property" does not deem a person that is not a foreign affiliate of a taxpayer to hold shares of the deemed non-resident corporation.

30 December 2014 External T.I. 2014-0544501E5 - Employment expenses – driver training

CRA Tags
118.5(1), 8(10), 8(1)

Principal Issues: Whether a taxpayer may deduct an amount incurred for a driver training course in computing income from an office or employment?

Position: Question of fact.

Reasons: See response.

12 December 2014 External T.I. 2013-0511391E5 F - Deemed disposition of capital interest in personal trust

CRA Tags
107(1.1), cost amount, 107(2), 108(1) trust, income interest, 248(1) "cost amount", 107.4(4), 107(1), 70(5), 108(1)(g), capital interest
full step-up of properties distributed in satisfaction of an estate's capital interest in an inter vivos personal trust
push-down onto property distributed by inter vivos personal trust of s. 70(5)(b) cost of indefeasibly vested capital interest in the trust

Principales Questions: 1. Does paragraph 70(5)(b) apply to determine the cost, to the estate of a deceased beneficiary, of a capital interest in a personal trust, where the estate acquired the interest from the sole beneficiary of the trust upon his death?
2. Does the cost, determined under paragraph 107(2)b), of a capital property acquired from a personal trust by the estate of a deceased beneficiary, reflect the cost to the estate of the capital interest in the trust, as determined under paragraph 70(5)b)?
3. When does the capital interest, not vested indefeasibly, of the sole beneficiary in a personal trust cease to exist?
4. What is the fair market value, immediately before a beneficiary's death, of an interest in a personal trust that is not vested indefeasibly to the beneficiary?

Position Adoptée: 1. Yes, if the interest in the trust was capital property of the beneficiary immediately before his death and if the estate acquired the interest in the trust as consequence of the death of the beneficiary.
2. Yes, provided that all the conditions are satisfied.
3. Depends on the trust indenture and applicable private law.
4. Question of fact. We cannot comment on the valuation of such interest.

Raisons: 1. Previous position.
2. Wording of subsection 107(2), of subparagraph 107(1.1)(b)(i), of the definition of cost amount of subsection 108(1) and of the definition of cost amount of paragraph 248(1)(b).
3. Previous positions.
4. Previous positions.

Technical Interpretation - Internal

4 December 2014 Internal T.I. 2014-0526451I7 F - Assessment beyond the normal reassessment period

CRA Tags
152(7), 150(2), 152(4), 150(1)(d), 152(3.1)

Principales Questions: Whether the Minister can issue a reassessment beyond the normal reassessment period where a taxpayer fails to file a return of income as required by subsection 150(1), an initial assessment is issued under subsection 152(7) following non-compliance with a demand issued by the Minister under subsection 150(2), and it is subsequently determined that taxable income for the relevant taxation year is higher?

Position Adoptée: Yes

Raisons: In these circumstances, the taxpayer would be considered to have made a misrepresentation that is attributable to wilful default (in French "omission volontaire").

20 November 2014 Internal T.I. 2014-0539631I7 - Restrictive Covenants-Part XIII (Luxembourg)

CRA Tags
Treaties Article XXII, Treaties Article VII, 56.4(1) "restrictive covenant", 212(1)(i)
restrictive covenant payment not eligible for relief under Lux Treaty
restrictive covenant payment not eligible for relief under Lux Treaty

Principal Issues: Whether the Convention Between the Government of Canada and the Government of the Grand Duchy of Luxembourg provides for a reduction of the rate imposed under Part XIII of the Act, for a payment made to a resident of Luxembourg, in respect of a "restrictive covenant" as defined by subsection 56.4(1) of the Act.

Position: No

Reasons: In our view, provided that the payment meets the definition of "restrictive covenant" as defined under subsection 56.4(1) of the Act, the income would be subject to Part XIII tax under paragraph 212(1)(i) of the Act. The Convention Between the Government of Canada and the Government of the Grand Duchy of Luxembourg indicates in Article 21 that "other income" is taxable only in Luxembourg unless that income is derived from sources within Canada, in which case, the payment may also be taxed in Canada. The income, in this fact pattern, is derived from a source in Canada and is therefore subject to Part XIII tax at a rate of 25% with no relief available under the Treaty.

27 October 2014 Internal T.I. 2014-0534981I7 F - Subsection 40(3.4)

CRA Tags
capital loss on partnership interest continues suspended following partnership dissolution

Principales Questions: Whether the deeming rule contained in the postamble of subsection 40(3.4) of the Act applies where the property transferred is an interest in a partnership and the partnership is subsequently wound-up?

Position Adoptée: Yes.

Raisons: Based on a textual, contextual and purposive analysis of the relevant provisions.