Income Tax Severed Letters - 2016-06-01

Ruling

2015 Ruling 2014-0541951R3 - Foreign Affiliate Debt Dumping

Summary Under
Tax Topics - Income Tax Act - Section 212.3 - Subsection 212.3(9) - Paragraph 212.3(9)(b) - Subparagraph 212.3(9)(b)(ii)
s. 212.3(9)(b)(ii) PUC restoration for upper-tier QSCs on the payment by a U.S. LLP of a proportionate “dividend” to lower tier CRIC partners
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Corporation
proportionate distribution by LLP treated as dividend
Summary Under
Tax Topics - Income Tax Act - Section 90 - Subsection 90(2)
proportionate LLP distribution to three direct or indirect general or limited partners treated as dividend on single class of shares
Summary Under
Tax Topics - Income Tax Act - Section 212.3 - Subsection 212.3(3)
two Canadian corporate partners immediately beneath the U.S. border are QSCs respecting investments made by lower-tier CRICs in a U.S. LLP

Principal Issues: (a) Whether particular entities will be considered "qualifying substitute corporations" for purposes of subsection 212.3(4) of the Act; and (b) Whether the proposed distribution will meet the conditions of clause (B) of the description of A in subparagraph 212.3(9)(b)(ii).

Position: (a) Yes; (b) Yes

Reasons: (a) The requirements in the definition of the term “qualifying substitute corporation" in subsection 212.3(4) are satisfied; and (b) the conditions of Clause (B) of the description of A in subparagraph 212.3(9)(b)(ii) are met.

2015 Ruling 2015-0573141R3 - Subparagraph 95(2)(a)(i)

CRA Tags
95(2)(a)(i)
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(i)
US sub servicing the collection of both its own debt portfolios and that of a U.S. sister was a good mothership to the sister
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1) - Exempt Earnings - Paragraph (d) - Subparagraph (d)(ii) - Clause (d)(ii)(A) - Subclause (d)(ii)(A)(I)
US sub, by servicing both its own debt portfolios and that of a U.S. sister, generated exempt earnings to the sister

Principal Issues: Whether subparagraph 95(2)(a)(i) would apply to recharacterize certain income earned by a foreign affiliate?

Position: Yes

Reasons: Application of the Act.

Technical Interpretation - External

11 April 2016 External T.I. 2015-0620311E5 - Structured Settlement Trust account

CRA Tags
81(1)(g.1), 75(2)

Principal Issues: Whether investment income earned on amounts received under a structured settlement for a minor and deposited in a trust account is taxable.

Position: General comments only. 81(1)(g.1) and (g.2) may apply.

Reasons: 81(1)(g.1), 81(1)(g.2)

8 April 2016 External T.I. 2016-0628941E5 - interest income of a minor

CRA Tags
56(1)(d), 81(1)(g.1)

Principal Issues: Do paragraphs 81(1)(g.1) and (g.2) apply to income earned on an amount paid under a structured settlement for a personal injury award?

Position: If a claimant could not make full use of a structured settlement payment and chose to invest, paragraphs 81(1)(g.1) and 81(1)(g.2) of the Act, as applicable, could apply.

Reasons: The legislation.

20 November 2015 External T.I. 2015-0595091E5 - Polanyi Prizes - Prescribed prize

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

Principal Issues: Whether the Polanyi Prizes are prescribed prizes for the purposes of paragraph 56(1)(n) of the Act and section 7700 of the Regulations.

Position: Likely yes.

Reasons: The prizes seem to meet the criteria set out in paragraph 56(1)(n) of the ITA and section 7700 of the Regulations.

Technical Interpretation - Internal

15 December 2015 Internal T.I. 2014-0560371I7 - Subsection 20(12) deduction

CRA Tags
20(12), 126(7)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(12)
U.S. taxes paid by a Canadian resident individual on business income of LLCs held through a ULC are deductible under s. 20(12)

Principal Issues: Whether a particular taxpayer is entitled to a deduction under subsection 20(12) of the Act in respect of an amount of US taxes paid on income earned through a US LLC.

Position: Yes.

Reasons: The requirements of subsection 20(12) are met in the situation described.