Income Tax Severed Letters - 2016-03-30

Ruling

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

Summary Under
Tax Topics - Income Tax Act - Section 135.1 - Subsection 135.1(1) - Allowable Disposition
deemeed withdrawal from predecessor of Amalco under Plan of Arrangement
Summary Under
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1)
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

Summary Under
Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 9
aerial drone likely an aircraft
Words and Phrases
aircraft

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)
Summary Under
Tax Topics - Income Tax Act - Section 135 - Subsection 135(4) - Income of the Taxpayer Attributable to Business Done With Members
flow-through of partnership income to cooperative
Summary Under
Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(f)
flow-thrugh of LP income for s. 135 purposes

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
Summary Under
Tax Topics - Income Tax Act - Section 148 - Subsection 148(10) - Paragraph 148(10)(d)
s. 148(10)(d) does not apply to the exercise of a right to split an insurance policy
Summary Under
Tax Topics - Income Tax Act - Section 148 - Subsection 148(9) - Disposition
disposition where change going to root of policy
Words and Phrases
disposition

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)
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a)
GAAR may be applied if the transactions produce an outside basis step-up
Summary Under
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4)
objectionable for a s. 55(3)(a) spin-off to result in an increase in the aggregate outside basis
Summary Under
Tax Topics - Income Tax Act - Section 80 - Subsection 80(1) - Forgiven Amount - Element B - Paragraph B(a)
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.