Income Tax Severed Letters - 2016-05-18

Technical Interpretation - External

30 March 2016 External T.I. 2016-0629701E5 F - bump-up 88(1)(d)

Summary Under
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(d)
land developer can bump the cost amount of land (for use by it as land inventory) which was held by a target as capital property when its control was acquired
Summary Under
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Real Estate
land developer accesses capital property status of land held in acquired subsidiary

Principales Questions: Whether or not the cost of the land can be bumped either immediately after the acquisition of control or at some time later even though the land, being capital property to the subsidiary, will be distributed to the parent that is a land developer?

Position Adoptée: Yes.

Raisons: Assuming that the land was a capital property of the subsidiary at the time that the parent last acquired control of the subsidiary and was owned by the subsidiary thereafter without interruption until such time as it was distributed to the parent on the winding-up, and assuming that subparagraphs 88(1)(c)(iv) to (vi) would be inapplicable, the cost of land could be bumped within the limits established under 88(1)(d), even if the land is not a capital property to the parent.

21 March 2016 External T.I. 2015-0588521E5 - Widowed Parent's Allowance

CRA Tags
56(1)(a), 248(1)

Principal Issues: 1. Is the Widowed Parent's Allowance taxable in Canada?
2. Is a lump-sum amount received from a UK private pension scheme taxable in Canada?
3. Are there any treaty benefits or exemptions that would apply so as to reduce the tax payable?

Position: An amount received as a superannuation or pension benefit is included in income pursuant to subparagraph 56(1)(a)(i) of the Act. The amount would be included in income by the taxpayer who is legally entitled to receive and is paid the respective amount. The Canada-U.K. Income Tax Convention (the "Treaty") does not prevent Canada from taxing pension receipts.

Reasons: Subparagraph 56(1)(a)(i) and Article 17 of the Treaty.

25 February 2016 External T.I. 2015-0613001E5 - Payments received for work-related travel expenses

CRA Tags
6(1)(a), 6(1)(b), 6(1)(b)(vii), 9(1), 18(1)(a), 18(1)(p), 67, 67.1, 125(7), 248(1)

Principal Issues: Where a payment received for work-related travel expenses exceeds the costs incurred, is the excess amount included in income under the Act.

Position: It is a question of fact, in this case most likely yes.

Reasons: See response.

27 January 2016 External T.I. 2015-0599581E5 - Taxation of a lump-sum from a former employer

CRA Tags
5(1), 6(3.1), 56(1)(a)(ii)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Retiring Allowance
employee received a retiring allowance under a “non-compete” if it compensated for a loss on an investment sale occurring because of his termination

Principal Issues: Whether a lump-sum amount provided in connection with a non-competition agreement is taxable?

Position: Question of fact.

Reasons: See response.

27 October 2015 External T.I. 2015-0593921E5 - Donation of property and amount of tax receipt

CRA Tags
118.1(6), 248(35)

Principal Issues: Can an official receipt issued for property donated in kind include an amount less than the fair market value of the property?

Position: The official receipt should include the amount of the fair market value or the deemed fair market value of the property, depending on the circumstances.

Reasons: Required by section 3501 of the Regulations.

Technical Interpretation - Internal

22 March 2016 Internal T.I. 2013-0506561I7 - Property acquired on a return of capital

CRA Tags
69(4), 52(2), 14(5), 90(2), 90(3)
Summary Under
Tax Topics - Income Tax Act - Section 69 - Subsection 69(4)
FMV cost of property acquired on QROC distribution
Summary Under
Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(c)
FMV cost of property acquired on contribution of capital
Summary Under
Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base
FMV cost of contributed or distributed property
Summary Under
Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Eligible Capital Expenditure
QROC distribution by a foreign affiliate to its Canadian shareholder of ECP results in ECE to the shareholder of the property’s FMV
Summary Under
Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Cumulative Eligible Capital - Variable A - Variable A.1
no gain to FA transferor of ECP

Principal Issues: Whether property acquired on a return of capital "in kind" has a cost to the shareholder and whether the shareholder makes or incurs an outlay or expense.

Position: The shareholder has a cost and an outlay equal to the FMV of the property at the time of the distribution.

Reasons: Based on a textual, contextual and purposive interpretation of the Act.

8 February 2016 Internal T.I. 2015-0610461I7 - Prescribed Prize

CRA Tags
56(1)(n), ITR 7700

Principal Issues: Does a particular prize [XXXXXXXXXX] meet the definition of a prescribed prize under Regulation 7700?

Position: Likely

Reasons: Legislation and previous positions

3 February 2016 Internal T.I. 2015-0588791I7 - Meaning of substituted property

CRA Tags
40(3.3), 40(3.4)
Summary Under
Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.3)
accrued loss on LLC shares recognized by conversion to an LP

Principal Issues: Whether partnership units in a Delaware limited partnership can be considered to be identical property to the shares of a Delaware limited liability company.

Position: No.

Reasons: The inherent qualities and elements of the units in a Delaware limited partnership are not the same as those in a Delaware limited liability company.

29 January 2016 Internal T.I. 2015-0621401I7 - interest deductibility and share repurchases

CRA Tags
20(1)(c)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c)
interest deductible on borrowing funding a normal course issuer bid based on accumulated profits and stated capital

Principal Issues: Whether interest on funds borrowed to finance a share repurchase for cancellation is deductible under the "fill-the-hole" theory.

Position: Yes.

Reasons: Long-standing Rulings position.

15 October 2015 Internal T.I. 2014-0527041I7 F - Disposition de biens

Summary Under
Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(i)
merely facilitative expenses not deducible
Words and Phrases
for the purpose

Principales Questions: What is the appropriate tax treatment regarding the sale of properties in a specific situation?

Position Adoptée: For one property, the proceed of disposition is not a source of income under section 3 and, for the other property, 69(1)c) applies.

Raisons: Question of fact.