Income Tax Severed Letters - 2017-11-29

Ruling

2016 Ruling 2016-0635051R3 - rollout property to beneficiary non-resident trust

Unedited CRA Tags
20(1)(c), 75(2), 94(8.1), 94(8.2), 107(2), 107(4.1), 108(1), 248(1)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(2)
s. 107(2) rollout of taxable Canadian property by a non-resident former s. 75(2) trust to its corporate beneficiary
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(4.1)
rollout under s. 107(2) available following dissolution of settlor of s. 94(8.2) trust
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(ii)
secured and intergroup debt assumed on s. 107(2) rollout of property qualified under s. 20(1)(c)(ii)

Principal Issues: 1. whether 107(2) will apply to the distribution from the trust of real property to the beneficiary 2. whether the debt assumed as a condition of receiving the distribution from the trust will be an eligible offset 3. whether the debt assumed is an amount payable for property acquired for the purpose of 20(1)(c) 4. whether the assumption of the debt will cause the trust to cease to meet the definition of “personal trust”

Position: 1. yes 2. yes 3. yes 4. no

Reasons: 1. all four of the conditions of 107(4.1) are not met; conditions of 107(2) are met 2. based on the facts, debt assumed meets the definition of eligible offset in 108(1) 3. based on the facts, amounts meet the requirement of 20(1)(c) 4. based on the facts, trust meets the definition of personal trust in 248(1)

2016 Ruling 2016-0651621R3 - Partnership carried on by sole proprietor

Unedited CRA Tags
98(5); 20(1)(c); 80(1); 53(1)(e)(iv)
Summary Under
Tax Topics - Income Tax Act - Section 98 - Subsection 98(5)
the assumption by a partner of a debt owing to it by a partnership bumped the partner’s ACB
Summary Under
Tax Topics - Income Tax Act - Section 53 - Subsection 53(1) - Paragraph 53(1)(e) - Subparagraph 53(1)(e)(iv)
ACB increased by assumption of debt owing to partner by partnership
Summary Under
Tax Topics - Income Tax Act - Section 80 - Subsection 80(1) - Forgiven Amount - Element B - Paragraph B(a)
no forgiven amount where partner assumed debt owing to it by partnership

Principal Issues: Whether (i) subsection 98(5) would apply; (ii) whether subparagraph 53(1)(e)(iv) would apply; (iii) whether subsection 80(1) would apply; and (iv) whether paragraph 20(1)(c) would apply?

Position: (i) Yes. (ii) Yes. (iii) Yes. (iv) Yes.

Reasons: Pursuant to the provisions of the particular provisions.

Ministerial Correspondence

3 November 2017 Ministerial Correspondence 2017-0724701M4 - IRS Disabled Access Credit

Principal Issues: Is there a similar Canadian program or tax credit for small business administered by the CRA?

Position: No

Reasons: No legislative provision

19 May 2017 Ministerial Correspondence 2017-0695891M4 - Taxation of XXXXXXXXXX Nation individuals

Unedited CRA Tags
2(1) & 81(1)(a) of the Income Tax Act and 2(1) and 87(1)(b) of the Indian Act

Principal Issues: Are XXXXXXXXXX Nation individuals required to pay taxes under the Income Tax Act?

Position: Please see the response.

Technical Interpretation - External

28 June 2017 External T.I. 2017-0709461E5 - Receipt of Retroactive CPP Lump Sum after death

Unedited CRA Tags
70(2)

Principal Issues: Tax treatment of CPP Lump Sum Payment correcting previous error received after death.

Position: Most likely a rights or thing - as taxpayer had a clear right to payments before death.

Reasons: Opinion given in line with previous technical interpretations.

Technical Interpretation - Internal

11 October 2017 Internal T.I. 2017-0719181I7 F - Agreement in writing

Unedited CRA Tags
66(15), 66.1(6)(g), (g.3),(g.4)
Summary Under
Tax Topics - Income Tax Act - Section 66.1 - Subsection 66.1(6) - Canadian exploration expense - Paragraph (g.4)
pre-production mine development expenses that qualify under CEE – (g.4) need not qualify under (g.3)
Summary Under
Tax Topics - Income Tax Act - Section 66.1 - Subsection 66.1(6) - Canadian exploration expense - Paragraph (g.3)
unresolved ambiguity re whether agreement can refer to a subcontracting agreement

Principal Issues: Given that the term "Agreement" is used in the definition of FTS in 66(15) and in the definition of CEE in 66.1(6)(g.3), whether the expenses incurred will be CEE or CDE in a given scenario.

Position: If the expenses are incurred pursuant to an agreement in writing and the expenses are incurred prior to 2015, 100% of the expenses will be CEE. If the expenses are incurred in 2015, 2016 or 2017, a portion of the expenses will be CEE and a portion will be CDE, in accordance with the percentages set out in paragraph 66.1(6)(g.4).

Reasons: See below.

5 October 2017 Internal T.I. 2015-0614021I7 - 214(16) deemed dividend

Unedited CRA Tags
214(16), 212(2), 248(1), 89(1)
Summary Under
Tax Topics - Income Tax Act - Section 214 - Subsection 214(16)
Interest that is denied under the thin cap rules and recharacterized as dividends is still interest for FAPI and LRIP/GRIP purposes
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Property Income - A - Paragraph (b)
s. 214(16) does not recharacterize interest as dividends for FAPI purposes

Principal Issues: Is a deemed dividend under ss. 214(16) considered to be a “taxable dividend” for all purposes of the Act?

Position: No

Reasons: Ss. 214(16) applies only for purposes of Part XIII of the Act.