Income Tax Severed Letters - 2015-11-18


2015 Ruling 2014-0554231R3 - Split-up Butterfly

CRA Tags
55(3)(b), 55(2)

Principal Issues: Whether the proposed transaction qualifies for the butterfly exemption found in paragraph 55(3)(b).

Position: Yes.

Reasons: The proposed transaction meets the statutory requirements.

Technical Interpretation - External

20 October 2015 External T.I. 2015-0585231E5 - Business Income of Self-employed Indian Fishers

CRA Tags
81(1)(a), Indian Act 87(1)(b)

Principal Issues: Whether the fishing income of a self-employed Indian who lives on-reserve, keeps his books and records at his residence on-reserve, but fishes off-reserve, would be exempt from tax under section 87 of the Indian Act.

Position: Question of fact, but in the present situation, in the absence of any other connecting factors, the income would not be exempt from tax.

Reasons: The facts that the Indian lives on-reserve and the bookkeeping and accounting activities take place on-reserve are not in and of themselves sufficient to situate the income on-reserve.

Technical Interpretation - Internal

5 November 2015 Internal T.I. 2013-0496401I7 - XXIX-A(3) - Active Trade or Business Exception

CRA Tags
Treaties Article XXIX-A(3)
connection test in XXIX-A(3) of U.S. Treaty satisfied by funding interest to a non-qualifying U.S. parent, on a loan whose use had nothing to do with a connected Canadian business, out of the cash flows generated by that business

Principal Issues: 1) In applying par. XXIX-A(3) of the Canada-US Tax Convention to an interest payment, whether the requirement that the income be derived "from the other Contracting State (Canada) in connection with (…) that (US) trade or business" might be met based on a "funding approach"? 2) In making the determination mentioned in 1), whether the requirement can only be met in respect of Canadian-sourced income?

Position: 1) Possibly, depending on the facts. 2) Yes.

Reasons: Interpretation of the Canada-US Tax Convention.

1 June 2015 Internal T.I. 2014-0544771I7 - Ontario Transitional Tax Debit/Credit

CRA Tags
Ontario Taxation Act 48(6), Ontario Taxation Act 88(1.1)(e)

Principal Issues: Whether non-capital losses incurred by a subsidiary corporation prior to the acquisition by parent corporation and the wind-up of the subsidiary corporation into parent corporation are included in the total Ontario balance of parent corporation for the purposes of the Ontario transitional tax debit/credit calculation.

Position: No

Reasons: Variable "Z" of the definition of "total Ontario balance" specifically excludes the pre-acquisition of control losses of the subsidiary corporation.

28 May 2015 Internal T.I. 2015-0564591I7 - Ontario CMT mark-to-market accounting adjustments

CRA Tags
Ontario Regulation 37/09, Ontario Taxation Act 57(1)

Principal Issues: Whether certain liabilities denominated in a foreign currency are considered specified mark-to-market property for purposes of computing adjusted net income for CMT purposes.

Position: No.

Reasons: Liabilities are not property held by the corporation for purposes of the specified mark-to-market rules under the CMT legislation.