Income Tax Severed Letters - 2017-11-01


2016 Ruling 2015-0569561R3 - Split-up butterfly

Unedited CRA Tags
55(2), 55(3.1)

Principal Issues: Whether the proposed split-up butterfly transactions described in the Ruling meet legislative and administrative requirements.

Position: Transactions meet requirements.

Reasons: Consistent with law and administrative requirements.

Technical Interpretation - External

14 September 2017 External T.I. 2017-0685121E5 F - Associated corporations

Unedited CRA Tags
256(2), 125, 125(5.1)
Childco associated with Parent-controlled corp whose non-voting equity is held by family trust
election under s. 256(2)(b)(ii) busts s. 256(2)(a) transitivity but not association with 3rd corporation
making s. 256(2)(b)(ii) election, by eliminating s. 256(2)(a) transitivity, reduces the reduction for taxable capital employed in Canada

Principales Questions: Whether in a factual situation the four corporations would be associated with each other.

Position Adoptée: Yes. However, some corporations may be disassociated for the purposes of the Act if an election is made under subparagraph 256(2)(b)(ii) by the "third corporation".

Raisons: See below.

18 August 2017 External T.I. 2016-0672931E5 - Election

Unedited CRA Tags
7(3)(b), 110(1)(d), 110(1.1)
s. 110(1.1) election is available even if, absent the election, no employer deduction would be claimable

Principal Issues: Whether the mechanism in subsection 110(1.1) is available in a situation where paragraph 7(3)(b) already applies to deny the employer a deduction for the stock option expense, and thus there is no deduction for the employer to “give up” as contemplated by subsection 110(1.1)?

Position: Yes

Reasons: There is nothing in subsection 110(1.1) that restricts its application to situations in which the employer is otherwise entitled to a deduction.

12 May 2016 External T.I. 2016-0641771E5 - Income Tax Refund

Unedited CRA Tags
164(1), 164(1.5) and 164(7)

Principal Issues: Treatment of an income tax refund.

Position: Not a source of income.

Reasons: The law.

21 April 2016 External T.I. 2015-0607451E5 F - Use of capital of a trust by a spouse

Unedited CRA Tags
occupation of trust property (a residence) by individual’s spouse does not breach the capital-use requirement "under" the trust

Principal Issues: Does the fact that the spouse of the settlor/beneficiary of a trust inhabit the principal residence of the trust taint the trust for the purpose of subparagraph 73(1.01)(c)(ii)?

Position: Question of law and fact. However, if the terms of the trust satisfies the conditions of subparagraph 73(1.01)(c)(ii), the fact that the settlor/beneficiary of the trust permits his/her spouse after the transfer to continue to inhabit the principal residence with him or her will not in and by itself taint the trust.

Reasons: The use of the principal residence of a trust by the spouse of the settlor is granted by the settlor/beneficiary not under the trust.

Technical Interpretation - Internal

9 May 2016 Internal T.I. 2016-0638461I7 - Vehicle provided to subcontractor

Unedited CRA Tags
6(1); 9(1); 15(1); 56(2); 246(1)
the value of a free automobile to be included in s. 9 income should reflect what the recipient would normally charge for its services

Principal Issues: In a situation where a corporation provides the use of an automobile to an incorporated consultant who is a PSB, how is the benefit reported to the PSB?

Position: Question of fact, likely section 9.

Reasons: See below.