Income Tax Severed Letters - 2017-07-19


2016 Ruling 2015-0612931R3 - Variation of trust indenture

Unedited CRA Tags
104(7.1), 108(2)(a), 122.1(1), 132(6), 248(1).
creation of new MFT units to indirectly bear trailer fees
CRA income tax ruling describes a structure for MFT trailer fees to be funded out of increased management fees to an indirect real estate subsidiary LP of the MFT

Principal Issues: Whether the variation of a trust indenture to create and issue units in one or more classes and the re-designation of the existing units into units of a given class would result in (1) a disposition by the trust of its property or in the creation of a new trust for purposes of the Act, (2) a disposition by the existing unitholders of their existing units, and/or (3) the application of subsection 104(7.1).

Position: (1) No. (2) No. (3) No.

Reasons: (1) The changes are not considered sufficiently material or significant to result in the creation of a new trust for purposes of the Act and it is submitted that a new trust will not be created under the applicable provincial law. (2) No cash consideration or other proceeds of disposition will be received by the existing unitholders in respect of the re-designation and the attributes of the existing units and the new class F units will be substantially the same. Furthermore, the changes to the trust indenture in the given instance, when viewed as a whole, do not support the conclusion that there would be a disposition. (3) Consistent with previous rulings.

Ministerial Correspondence

15 June 2017 Ministerial Correspondence 2017-0698561M4 - Listed personal property and registered charities

Unedited CRA Tags
40, 149

Principal Issues: General questions on the sale of art and registered charities and non-profit organizations.

Position: See below.

Reasons: See below.

9 June 2017 Ministerial Correspondence 2017-0694741M4 - Campground businesses

Principal Issues: Campgrounds, farming and the small business deduction.

Position: General comments provided.

Technical Interpretation - External

16 June 2017 External T.I. 2016-0673551E5 - Certification of Mineral Resource

Unedited CRA Tags
Definition of mineral resource under subparagraph (d)(i) of ss. 248(1)
nephrite (type of jade) deposit not a mineral resource

Principal Issues: Whether the nephrite deposits at issue meet the definition of mineral resource as per subparagraph (d)(i) of the definition of this term in ss. 248(1)

Position: No.

Reasons: Opinion of NRCan - the nephrite to be extracted from the properties is not an industrial mineral contained in non-bedded deposits as it will be used as a construction material.

Technical Interpretation - Internal

11 April 2017 Internal T.I. 2016-0670541I7 - Foreign affiliate share redemption

Unedited CRA Tags
portion of proceeds paid on a redemption might be respected as a dividend (subject to s. 95(6)) if this is clearly indicated in accordance with Barbados law
redemption proceeds might in part be a dividend under Barbados law
skewing exempt surplus to Canco could engage s. 95(6)

Principal Issues: Whether some amounts received on the redemption of shares of a foreign affiliate can, in a specific fact situation, be treated as a dividend rather than proceeds of disposition.

Position: It depends whether legally there is, in part, a dividend. If not, the entire amount received is to be treated as proceeds of disposition.

Reasons: The Canadian tax treatment of proceeds received on a redemption of shares of a foreign corporation does not depend on foreign law.

30 March 2017 Internal T.I. 2016-0636721I7 - Consent fees and withholdings

Unedited CRA Tags
212(1)(a), 212(1)(b), 214(15), 153(1)(g) and section 105 of the Regulations.
consent fee was not for “advice or direction pertaining to the operation or administration of a company”
whether consent fee was deemed to be interest under s. 212(15)(b) was moot
non-resident dealer who attended at Canadian board meetings was rendering services in Canada

Principal Issues: (1) Whether the consent fees paid to arm's length non-resident financial lenders are subject to withholding under Part XIII. (2) Whether fees in respect of certain financial services paid to a non-resident are subject to withholdings under section 105 of the Regulations.

Position: (1) No. (2) Yes, to the extent that the services are provided in Canada.

Reasons: (1) Amounts not interest. Also, paid to arm's length party and not participating debt interest. (2) Payments or portions thereof for services performed outside Canada are not subject to withholdings pursuant to paragraph 153(1)(g) and section 105 of the Regulations.