Income Tax Severed Letters - 2015-04-15

Ministerial Correspondence

25 November 2014 Ministerial Correspondence 2014-0551781M4 - 118.2(4)-Pulse electromagnetic technician

CRA Tags
118.4(2)(a)., 118.2(2)(a)
certified pulse electromagnetic technician

Principal Issues: Whether a certified Pulse Electromagnetic Technician in Ontario qualifies as a medical practitioner for purposes of the medical expense tax credit?

Position: No.

Reasons: The practice of pulse electromagnetic therapy is not recognized as a self-governed health profession in the Regulated Health Professions Act in Ontario.

Technical Interpretation - External

20 March 2015 External T.I. 2014-0528311E5 - Mortgage Investment Corporation - RRSP

CRA Tags
130.1(6), 207.01, 248(1), 251, ITR 4900(1)(c)

Principal Issues: Is the brother or sister of a shareholder of a mortgage investment corporation (MIC) a specified shareholder for purposes of the definition of MIC in 130.1(6)? For purposes of determining if an RRSP annuitant has a significant interest in an investment, for purposes of the RRSP prohibited investment rules, is the annuitant's brother or sister a specified shareholder?

Position: No. Yes.

Reasons: Subparagraph 130.1(6)(d)(iv) modifies the meaning of "related persons" for purposes of the meaning of "specified shareholder" used in paragraph 130.1(6)(d). The definition of "specified shareholder" in 248(1) which is used in determining "significant interest" for purposes of the RRSP prohibited investment rules will include the brother or sister of the RRSP annuitant.

20 March 2015 External T.I. 2014-0535971E5 - Meaning of "paid-up capital" in subsection 90(3)

CRA Tags
90(3), 248(1), 89(1), 93.2
LLC with partner capital-account style LLC Agreement does not have PUC
LLC with partner capital-account style LLC Agreement does not have PUC

Principal Issues: 1. Meaning of "paid-up capital" in subsection 90(3) in respect of distributions from a US Limited Liability Company ("LLC") to its Canadian resident member. 2. Whether paid-up capital would be computed differently if the US LLC was previously not a foreign affiliate.

Position: 1. The meaning assigned by subsection 89(1) which would rely upon the relevant foreign law. 2. No.

Reasons: The definition in subsection 89(1) applies to the entire Act by virtue of subsection 248(1).

10 March 2015 External T.I. 2014-0552351E5 - Medical expenses

CRA Tags
100(1)(a), 118.2(2)(b.1), 118.2(2)(b)

Principal Issues: 1. Is the cost of a snow blower eligible for the medical expense tax credit when the purchaser has a disability tax certificate?
2. Is the cost of hiring a maintenance service for snow removal and lawn maintenance for an individual who qualifies for the Disability Tax Credit eligible for the METC?

Position: 1. No 2. No

Reasons: 1. Legislation 2. Previous positions

5 March 2015 External T.I. 2014-0552031E5 - Support home

CRA Tags

Principal Issues: Are amounts paid to a support home provider exempt under paragraph 81(1)(h) of the Act?

Position: If the amounts that the caregiver receives are for the benefit of the care recipient, and providing all other conditions are met, they will likely qualify for the exemption under paragraph 81(1)(h) of the Act.

Reasons: All of the conditions of 81(1)(h) of the Income Tax Act must be met.

11 February 2015 External T.I. 2014-0553301E5 - Medical expense - copy of medical records

CRA Tags

Principal Issues: Is the fee paid to obtain a copy of medical records from a medical records management company an eligible medical expense for purposes of the medical expense tax credit ("METC") under section 118.2 of the Income Tax Act (the "Act")?

Position: No.

Reasons: The services provided are not medical expenses as described under subsection 118.2(2) of the Income Tax Act.

5 February 2015 External T.I. 2014-0548701E5 - Volunteer Firefighters- Income Exemption

CRA Tags
81(4), 81(4)(b)

Principal Issues: 1. Entitlement to the exemption under s.s. 81(4) for employee-volunteers.

Position: 1. Employee-volunteers are not entitled to the exemption if their employment position is related to firefighting.

Reasons: 1. Paragraph 81(4)(b) of the legislation.

30 January 2015 External T.I. 2012-0440351E5 - In home care of a person with a disability

CRA Tags
56(1)(u), 251(6)(a), 251(2)(a), 81(1)(h), 110(1)(f)

Principal Issues: 1. Are payments taxable when paid to an independent contractor from a government where the contractor is providing family care for a person with a disability?
2. Are additional payments received by the same contractor from the person with a disability, taxable?

Position: Depends

Reasons: Must meet the requirements to be exempt under paragraph 81(1)(h).

16 January 2015 External T.I. 2014-0548121E5 - social assistance

CRA Tags

Principal Issues: What is the proper income tax treatment of per diem amounts paid to a family home provider under a government program by an Agency?

Position: The amounts paid may not be taxable to the extent that the amounts that are paid are for the benefit of the care recipient.

Reasons: All of the conditions of 81(1)(h) of the Income Tax Act must be met.

12 January 2015 External T.I. 2014-0555071E5 - POD subject to earn-out

CRA Tags
ITR 1219, 66.1, 59(3.2), 66(12.1)(a), 20(1)(n), 20(4.2), 14
proceeds of goodwill on sale of wind turbine development project
proceeds of goodwill on sale of wind turbine development project

Principal Issues: 1.What is the tax treatment of POD of CRCE and goodwill? 2. Are there any reserves in regards to the sale proceeds payable in future?

Position: 1. See the response. 2. No.

Reasons: Facts and law.

29 December 2014 External T.I. 2014-0547911E5 - FTS renunciations

CRA Tags
66.2, ITR 1219, 66.1, ITR Schedule II - Class 43.2, 6(6), ITR Schedule II - Class 43.1, ITR 8200.1

Principal Issues: Whether the heat recovery application could be eligible for CRCE treatment and, if the project stops after feasibility study, whether the resource expenses will still remain eligible for renunciation to the FTS investors.

Position: Maybe.

Reasons: Law and fact.

23 December 2014 External T.I. 2014-0543311E5 - Reporting marital status

CRA Tags
118(4)(a.1)., 122.6 "cohabiting spouse or common-law partner", 118(1)(a)

Principal Issues: Where a legally married couple is separated indefinitely for medical reasons, should the spouses' marital status be reported as "separated" on their tax return?

Position: In general, spouses are not considered to be living separate and apart where the separation is solely for medical reasons. It is a question of fact whether two spouses are living separate and apart because of a breakdown of their marriage.

Reasons: Previous positions

1 December 2014 External T.I. 2014-0559451E5 - Deduction pursuant to paragraph 20(1)(v)

CRA Tags
ITR 3900, 20(1)(v)
Quebec mining tax not deductible for portion of year ending with federal s. 249(4) year end

Principal Issues: Timing of deductibility under paragraph 20(1)(v) of amounts payable pursuant to the Quebec Mining Tax Act in an acquisition of control scenario.

Position: Amounts payable pursuant to the Quebec Mining Tax Act would be deductible in the taxation year for purposes of the Income Tax Act that includes the fiscal year end for purposes of the Quebec Mining Tax Act if all other requirements for such deductibility are met.

Reasons: See below.

22 August 2014 External T.I. 2014-0521951E5 - Qualifying Environmental Trusts - Purpose

CRA Tags
211.6(1)(b) "qualifying environmental trust"
required distribution of trust fund to company at end of perpetuity period for purposes of establishing fresh QET trust was permissible

Principal Issues: Whether "principal purpose requirement" is observed in the wording of the Model Trust Agreement proposed by the National Energy Board.

Position: Yes.

Reasons: Wording in accordance with the purpose of the QET rules.


18 November 2014 Roundtable, 2014-0550401C6 - 2014 TEI Liaison Meeting, Q. E3

CRA Tags

Principal Issues: Whether subsection 39(3) of the Income Tax Act applies in certain scenarios where bonds are repurchased and whether each constitutes an open market purchase: 1) A debt tender offer where a company makes a public offer to its bondholders to repurchase a predetermined number of bonds at a specified price. 2) In some cases, certain investors will own a significant amount of a particular issuer's bonds. Consider the case where a bond issuer enters into a transaction directly with one or more selected bondholders and agrees to repurchase all or a portion of the issuer's bonds held by the selected investor-holder. 3) Some bonds are callable, with the issuer having a right under certain conditions to redeem the bond prior to its maturity date. Consider an example where an issuer has issued callable bonds and subsequently exercises the call to force the redemption of the bonds.

Position: 1) Generally a tender offer (i.e. an offer which requires an acceptance by the holder in the form of a tender of the relevant obligation by the holder directly to the issuer) is not considered to be an open market repurchase for purposes of subsection 39(3). 2) Generally, a bond repurchase that is negotiated and concluded directly between an issuer and a holder is not considered to be an open market repurchase for purposes of subsection 39(3). 3) Generally, the exercise by the issuer of an early repayment right pursuant to the terms of a bond is not considered to be an open market repurchase for purposes of subsection 39(3).

Reasons: See complete response.

18 November 2014 Roundtable, 2014-0550421C5 - 2014 TEI-CRA Liaison Meeting - Question E6 - Non-Resident Carrying on Business in Canada

CRA Tags

Principal Issues: Whether the issuance of shares from treasury by Forco to a Canadian resident (whether upon incorporation or otherwise) precludes Forco from claiming the benefit of the safe harbour rule in subsection 115.2(2)?

Position: Yes, to the extent the shares remain outstanding and the shareholder remains a “Canadian investor” within the meaning assigned by subsection 115.2(1).

Reasons: By issuing shares from treasury (whether upon incorporation or otherwise), Forco would be considered to have “sold an investment in itself” as the phrase is used in clause 115.2(2)(b)(i)(B).

18 November 2014 TEI Roundtable, 2014-0550381C6 - 2014 TEI Liaison Meeting, Q.E2 - Capital Cost Allowance (CCA) Claimed under Paragraph 20(1)(a)

CCA adjustments before acquisition of control

Principal Issues: Whether the guidelines in IC 84-1 are still valid.

Position: Yes.

Reasons: IC 84-1 operates within the context and legislative framework of the Income Tax Act.

18 November 2014 TEI Roundtable, 2014-0550351C6 - 2014 TEI Liaison Meeting, Q.E1

CRA Tags
no loss determination available on return filing

Principal Issues: Whether the Minister may issue a loss determination under subsection 152(1.1) at the time of filing the income tax return if the Minister accepts the return as filed

Position: No.

Reasons: Subsection 152(1.1) requires that the Minister ascertain that the loss is different from the loss reported by the taxpayer on its return of income.

Technical Interpretation - Internal

4 March 2015 Internal T.I. 2014-0559561I7 - Canada Job Grant

CRA Tags
56(1)(r), 6(1)(a), 118.5 110(1)(g), 118.6, 5(1), 56(3), 63, 56(1)(n)

Principal Issues: Are individuals that receive training as a result of a Canada Job Grant eligible for the tuition, education and textbook tax credit?

Position: It depends on the facts.

Reasons: The individuals must meet the same requirements under the Act as any other individual. Receiving training funded by the grant may affect the ability to claim the credits.

13 January 2015 Internal T.I. 2013-0497361I7 F - Services performed by a foreign affiliate

CRA Tags
95(2)(b), 95(3)(b), ITR 5202, 95(3)(d)
prototype testing services not directly related to sales of improved product
Words and Phrases
in connection with
prototype testing services not manufacturing

Principales Questions: Whether service fees earned from the testing by a foreign affiliate of a Canadian corporation of products manufactured by the Canadian corporation are excluded from paragraph 95(2)(b) by virtue of one of the exceptions found in subsection 95(3).

Position Adoptée: No

Raisons: In these circumstances, the testing of products is not a service rendered in connection with the sale of goods; research and development activities do not qualify as manufacturing and processing activities for the purposes of paragraph 95(3)(d).