Income Tax Severed Letters - 2016-03-30


2015 Ruling 2015-0564981R3 - "cross-statute" amalgamation

deemeed withdrawal from predecessor of Amalco under Plan of Arrangement
amalgamation of 2 corporations in 2 jurisdictions qualified

Principal Issues: Whether the "cross-statute" amalgamation described below meets legislative requirements?

Position: The amalgamation meets legislative requirements.

Reasons: Consistent with law.

Technical Interpretation - External

11 March 2016 External T.I. 2016-0633111E5 - CCA Class of a drone

Words and Phrases

Principal Issues: What is the correct classification of a drone for CCA purposes in Schedule II of the Regulations?

Position: Question of fact but generally Class 9

Reasons: See below

29 February 2016 External T.I. 2015-0613961E5 - Patronage dividends - partnership income

CRA Tags
9, 96(1), 135(2), 135(4)

Principal Issues: In computing the “income of the taxpayer attributable to business done with members” as defined in subsection 135(4), is the taxpayer required to include its share of income from a Canadian limited partnership?

Position: Yes

Reasons: Legislation

17 February 2016 External T.I. 2015-0608261E5 - Splitting of a Multiple Life Insurance Policy

CRA Tags
148(1), 148(9), ITR 306, ITR 307
s. 148(10)(d) does not apply to the exercise of a right to split an insurance policy
disposition where change going to root of policy
Words and Phrases

Principal Issues: Is there a disposition under subsection 148(1) when a policyholder exercises his or her contractual right to split a universal life insurance policy between the two lives insured? How would the exemption test policy, accumulating fund and adjusted cost basis of the two policies be determined?

Position: Question of fact. General comments provided.

Reasons: The Income Tax Act does not provide for the splitting of a multiple life insurance policy into separate policies.

13 January 2016 External T.I. 2015-0604521E5 - ACB increase in paragraph 55(3)(a) reorganization

CRA Tags
55(2), 55(3)(a), 245(2)
GAAR may be applied if the transactions produce an outside basis step-up
objectionable for a s. 55(3)(a) spin-off to result in an increase in the aggregate outside basis
contribution of note by creditor to debtor

Principal Issues: Is GAAR applicable to a situation where a shareholder receives an ACB increase as a result of a corporate reorganization that is exempt under paragraph 55(3)(a)

Position: Yes

Reasons: The ACB increase is facilitated by a redemption of shares that is exempt from tax under paragraph 55(3)(a). The scheme of subsection 55(2), as amended in the July 31, 2015 Legislative Proposals, is to prevent the creation or multiplication of ACB with the use of tax-free intercorporate dividends. Furthermore, paragraph 55(3)(a) is restricted in its application to subsection 84(3) dividends in order to facilitate bona fide internal reorganizations and is not intended to provide taxpayers with a tool to create or multiply ACB.