Income Tax Severed Letters - 2015-07-15


2015 Ruling 2015-0577141R3 - Election to cease to be a public corporation

CRA Tags
ITR 4800, 89(1)
closely-held Amalco can elect following the delisting of shares of a public predecessor
closely-held Amalco can elect following the delisting of shares of a public predecessor

Principal Issues: Whether an election not to be a public corporation can be made when previously listed shares no longer exist.

Position: Yes.

Reasons: Previous positions. Since as a matter of tax policy, a corporation in this situation should not be precluded from electing not to be a public corporation, the condition in Regulation 4800(2)(a) can be read as applying where previously listed shares no longer exist.

2015 Ruling 2014-0563151R3 - Loss consolidation

CRA Tags
55(3)(a), 88(1.1), 20(1)(c)

Principal Issues: Loss consolidation

Position: Favourable rulings issued.

Reasons: Meets statutory and administrative requirements.

2015 Ruling 2014-0563081R3 - Post-mortem pipeline

CRA Tags
84.1(1), 245(2), 84(2)
pipeline for holding company with one year delay before amalgamation

Principal Issues: Post-mortem pipeline planning

Position: See below

Reasons: See below

2015 Ruling 2014-0526431R3 F - Post-Mortem Planning

CRA Tags
84.1(1), 245(2), 84(2)

Principales Questions: Post-mortem pipeline planning.

Position Adoptée: Favourable rulings provided.

Raisons: Meets the requirements of the law.

Technical Interpretation - External

11 June 2015 External T.I. 2014-0522641E5 F - Usufruct

CRA Tags
248(3), 107(2.1), 110.6(1) "qualified farm property", 73(3), 73(3.1), 108(7)
creation of usufruct between father and son, resulting in deemed trust, did not entail property transfer to the deemed trust
termination of usufruct between father and son on farmland, which was a deemed trust, did not entail disposition of qualified farm property
creation of usufruct between father and son entails transfer of trust interest, not farm property

Principales Questions: A father runs a XXXXXXXXXX for a certain period of time and then transfers, for consideration, the bare ownership of the XXXXXXXXXX to his son. The father keeps the usufruct.
1. Does subsections 73(3) and 73(3.1) apply to the transfer of the bare ownership to the son?
2. Is the usufruct a personal trust considering subsection 108(7)?
3. Does subsection 107(2) apply?
4. Is the father's usufruct a qualified farm property as described in subsection 110.6(1)?

Position Adoptée: 1. No
2. No
3. No
4. No

Raisons: 1. Wording of subsections 73(3) and (3.1) and paragraph 13 of IT-268R4 and the nature of an usufruct.
2. Based on the facts, subsection 108(7) is not applicable.
3. Subsection 107(2) is only applicable to personal trust.
4. An interest in a trust is not a property described in the definition of "qualified farm property"

16 March 2015 External T.I. 2014-0521791E5 - Estate Trustee Fees

CRA Tags
6(1)(c), 9(1), 153(1)(a)(g), 159, 248(1) "officer", 248(1) "employer", 248(1) "legal representative", 248(1) "salaries and wages", 248(1) "Office", 248(1) "employment"
trustee fees of a lawyer from office if appointed on personal grounds
trustee fees from a business subject to T4A reporting

Principal Issues: (1) Are the fees earned by the estate trustee, for the administration of the estate, treated as income from an office or income from a business? (2) What are the estate's and estate trustee's obligations under the Income Tax Act (the Act)? (3) Is the estate trustee liable if the estate has insufficient resources to cover its liability under the Act?

Position: (1) Depends on the facts. (2) If the fees are treated as income from the office, the estate must withhold income tax and Canada Pension Plan contributions and prepare a T4 to report the amount as income from an office or employment. Fees earned in the course of a business form part of the business income of the taxpayer under subsection 9(1) of the Act and the estate should issue a T4A. (3) Yes, to the extent of the value of the distributed property.

Reasons: (1) The correct treatment of the estate trustee fees is to be determined by the taxpayer. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office; (2) See details in the reply. (3) Subsection 159(1) provides that the legal representative of a taxpayer is jointly liable with the taxpayer to pay any amount payable and to perform any duty or obligation under the Act.

Technical Interpretation - Internal

27 February 2015 Internal T.I. 2014-0521941I7 - Ontario Transitional Tax Debit/Credit

CRA Tags
Ontario Taxation Act 46(1), Ontario Corporations Tax Act 34(1.0.1), Ontario Taxation Act 50(2), Ontario Taxation Act 46(2)

Principal Issues: Whether the increase to the Ontario transitional tax credit balance as a result of changes to reserves in pre-harmonized years is a tainting transaction.

Position: The increase to the transitional tax credit balance is tainting.

Reasons: The taxpayer can accomplish their stated objectives by not adjusting discretionary deductions in pre-harmonized years and without increasing the transitional tax credit.