Income Tax Severed Letters - 2017-11-15

Ruling

2017 Ruling 2017-0706671R3 - Limited partnership financing arrangement

Unedited CRA Tags
96(2.2), 237.1

Principal Issues: Ruling request involving the application of subsection 96(2.2) in the context of a tax shelter.

Position: No ruling issued.

Reasons: Policy is to not rule on such arrangements.

2016 Ruling 2015-0602711R3 - Interest on Notes to Non-Residents

Unedited CRA Tags
20(1)(c), 143.4, 212(1), 212(3)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i)
deductible interest on subordinated debt with mandatory insolvency conversion
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(3) - Participating debt interest
interest ceasing after insolvency event not problematic

Principal Issues: 1. Whether ordinary interest on the Notes will be deductible under subparagraph 20(1)(c)(i). 2. Whether the interest will be participating debt interest for the purposes of Part XIII tax.

Position: 1. The ordinary interest under the notes will be deductible under 20(1)(c). 2. No.

Reasons: 1. The borrower-lender relationship will continue to exist until such time as a XXXXXXXXXX occurs or until such time as it is or it became apparent the XXXXXXXXXX would occur. 2. The interest will not be based on the profit participation features described in the definition of participating debt interest.

2016 Ruling 2015-0623731R3 - Subsections 55(2) and (2.1)

Unedited CRA Tags
55(2); 55(2.1); 55(3)(a); 80
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a)
requirement to pro-rate PUC
Summary Under
Tax Topics - Income Tax Act - Section 80 - Subsection 80(1) - Forgiven Amount
policy on set-off of unequal redemption notes does not extend beyond a butterfly reorg
Summary Under
Tax Topics - Income Tax Act - Section 86 - Subsection 86(1)
stated capital of old shares required to be prorated amongst new classes based on relative FMV

Principal Issues: Issue 1: Whether paragraph 55(3)(a) exception to subsection 55(2) applies? Issue 2: Whether administrative position in respect of section 80 applies?

Position: Issue 1: Yes. Issue 2: No.

Reasons: Issue 1: Exception in paragraph 55(3)(a) applies. Issue 2: Set-off and cancellation of debts not occurring in context of a distribution as defined in subsection 55(1).

2015 Ruling 2015-0601441R3 - XXXXXXXXXX Partnership - winding up

Unedited CRA Tags
98(5); 20(1)(c); 20(1)(m); 20(1)(n)
Summary Under
Tax Topics - Income Tax Act - Section 98 - Subsection 98(5)
98(5) wind-up through s. 85 transfer of partnership interest of one partner to the other and preceded by debt assumptions
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(ii)
interest deductible following assumption of interest-bearing internal debt on s. 98(5) wind-up
Summary Under
Tax Topics - Income Tax Act - Section 34.2 - Subsection 34.2(11)
continuation of s. 34.2(11) reserve following partnership wind-up
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(m)
continued availability of s. 20(1)(m) reserve following s. 98(5) wind-up
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(n)
flow-through of s. 20(1)(n) reserve on s. 98(5) wind-up
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(24)
s. 20(24) election on s. 98(5) wind-up
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(9)
s. 18(9) deduction claimable by transferee former partner following s. 98(5) wind-up
Summary Under
Tax Topics - Income Tax Act - Section 147.2 - Subsection 147.2(8)
s. 147.2 continuity following s. 98(5) wind-up
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(i)
no income inclusion on assumption on s. 98(5) wind-up of DSUs and RSUs
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Salary Deferral Arrangement - Paragraph (k)
no income on RSU/DSU assumption

Principal Issues: i. Whether subsection 98(5) will apply? ii. Whether “proprietor” can claim interest under paragraph 20(1)(c)? iii. Whether proprietor is entitled to a reserve under paragraph 20(1)(m) and (n) for proportionate interest? iv. Whether QTI reserves affected by dissolution of partnership?

Position: i. Yes ii. Yes. iii. Yes. iv. Yes v. No.

Reasons: i. Conforms to legislation. ii. Conforms to policy in Folio S3-F6-C1. iii. Conforms to previous position in 2003-0033545. iv. Exception in 34.2(14) applies.

Technical Interpretation - External

18 August 2017 External T.I. 2017-0682691E5 - NFLD Community Relocation Program

Unedited CRA Tags
54 "proceeds of disposition", 13(4.1), 40(2)(b), 40(2)(c), 12(1)(x), 9(1)

Principal Issues: What would the income tax implications be of financial assistance that is received from the government of NFLD where both residential and commercial property owners retain title to their property in return for individuals relocating and giving up their rights to all provincial services? That is, all provincial services in these communities will be discontinued.

Position: Depends on what the financial assistance amount is intended to replace. If the financial assistance is intended to replace/compensate individuals for the diminishing value of commercial and residential properties the amount would be considered proceeds of disposition for compensation for property injuriously affected pursuant to paragraph 54(e) of the definition of "proceeds of disposition". Financial assistance received by Residential Property Owners that is intended to compensate for moving / relocation expenses would not be taxable as this is compensation for personal expenses and would not be considered income from a source. The additional financial assistance that is received by Commercial Property Owners would be taxable pursuant to subsection 9(1) or paragraph 12(1)(x).

Reasons: Question of fact.