Income Tax Severed Letters - 2016-10-19

Ministerial Correspondence

11 July 2016 Ministerial Correspondence 2016-0645991M4 - Indians and the GST/HST Tax Credit

Unedited CRA Tags
122.5(1) - definition of "adjusted income"; 81(1)(a); secion 87 of the Indian Act

Principal Issues: Is income that is exempt under paragraph 81(1)(a) of the Income Tax Act and section 87 of the Indian Act included in calculating the GST/HST credit?

Position: No.

Reasons: The definition of "adjusted income" under subsection 122.5(1) of the Income Tax Act does not include income that is exempt under paragraph 81(1)(a) of that Act and section 87 of the Indian Act.

Technical Interpretation - External

14 September 2016 External T.I. 2016-0638171E5 - Liability under section 159

Unedited CRA Tags
has potential personal liability for the maximum value of the property under its control from the moment that the taxpayer’s tax debt was assessed
Words and Phrases

Principal Issues: What is the relevant time with respect to a legal representative’s liability under subsection 159(1)?

Position: A legal representative is jointly and severally or solidarily liable, at any time, to pay each amount payable under the Act by a taxpayer that remains unpaid, to the extent that the legal representative is in possession or control of property that belongs to the taxpayer or was held for the benefit of the taxpayer.

Reasons: The preamble to subsection 159(1) establishes a person’s liability to be any time the person is considered a taxpayer’s legal representative.

5 July 2016 External T.I. 2016-0634001E5 - Taxability of free or reduced tuition

Unedited CRA Tags
6(1)(a); 6(1)(a)(vi)

Principal Issues: Whether the value of free or reduced tuition provided to the family member of an employee is taxable to the employee?

Position: Question of fact.

Reasons: Conditions in 6(1)(a)(vi) must be satisfied.

8 June 2016 External T.I. 2015-0604971E5 - Deemed capital gain of a trust

Unedited CRA Tags
48.1, 104(6); 104(13); 104(21); 104(24)
general power to encroach on capital is not sufficient to make a deemed gain payable

Principal Issues: A trust wants to make a section 48.1 election to crystallize a capital gain: 1) if the trustee’s power to encroach on capital is general, and the trustee exercises their discretion pursuant to the general power to make a payment to the beneficiaries before the end of the trust's year of an amount equal to the deemed capital gain, would the deemed capital gain be considered payable under subsection 104(24) of the Act? 2) if the answer to question 1 is yes, is there any reason why it cannot be paid in the form of shares that were the subject of the section 48.1 election?

Position: 1) It depends on the terms of the trust indenture but a general power to encroach on the capital is not sufficient. 2) It depends on the terms of the trust indenture.

Reasons: 1) The terms of the trust must specifically give the trustees the discretion to pay out or make payable an amount equivalent to a deemed capital gain, or the discretion to pay out or make payable an amount that is defined as income under the Act. 2) Where the trust makes the payment in kind, the trust must specify that such payment is in respect of the deemed taxable capital gain and not in satisfaction of a beneficiary's capital interest in the trust.

12 April 2016 External T.I. 2015-0621571E5 - officer - public hospital board appointment

Unedited CRA Tags
248(1): meaning of officer

Principal Issues: Is a physician appointed by a public hospital board considered an officer for purposes of the Act?

Position: Question of fact, in this case, likely yes.

Reasons: The definition of office in 248(1)

Technical Interpretation - Internal

22 June 2016 Internal T.I. 2016-0632821I7 F - 93(2.01) & Capital Contribution

Unedited CRA Tags
93(2), 93(2.01), 248(5)
a contribution of FA1 shares to FA2 causes the FA2 shares to be substituted property for s. 93(2.01) purposes
ordinary meaning of “substituted”
Words and Phrases
inter-affiliate loan generating deemed active business funded out of an interest-free loan from Canco

Principal Issues: Whether the concept of “substituted shares” used in subsection 93(2.01) may be interpreted in such a way as to refer to shares owned by a taxpayer in respect of which the taxpayer made a capital contribution consisting of shares of another foreign affiliate?

Position: Yes.

Reasons: See below.

13 June 2016 Internal T.I. 2016-0629341I7 - Split-pension amount – withholding waivers

Unedited CRA Tags
153(1), (1.1), (1.3) and (2), 60.03, 180.2

Principal Issues: Does subsection 153(1.3) of the Act preclude the Minister from considering any request to reduce withholding of tax where a taxpayer has made/expects to make a joint election to split pension income pursuant to section 60.03 of the Act?

Position: Paragraph 153(1.3) only precludes the Minister from considering the joint election as a basis for determining a lesser amount of withholding under subsection 153(1.1).

Reasons: Paragraph 153(1.3)(a).