Income Tax Severed Letters - 2017-12-13

Ruling

2016 Ruling 2016-0661071R3 - Whether s. 80 or s. 143.4 applies

Unedited CRA Tags
s.143.4(4); s. 80
Summary Under
Tax Topics - Income Tax Act - Section 143.4 - Subsection 143.4(4)
s. 80 rules prevailed in a CCAA compromise over the contingent amount (s. 143.4) rules
Summary Under
Tax Topics - Income Tax Act - Section 143.4 - Subsection 143.4(2)
s. 80 prevailed over s. 143.4
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(28)
presumption against double taxation applied to oust s. 143.4

Principal Issues: Where a plan of compromise and arrangement under the CCAA is approved by XXXXXXXXXX in a particular taxation year and, in the same taxation year, interest on a commercial debt is forgiven, will section 80 or section 143.4 apply?

Position: Section 80 will apply.

Reasons: According to the rules that govern the application of a "forgiven amount," such as subsection 80(3), if a commercial debt obligation is forgiven at any time, the forgiven amount is applied to reduce the particular balance "at that time." On the other hand, under subsection 143.4(4), the "subsequent contingent amount" is deemed to be an amount received under subparagraph 12(1)(x)(i) at that time, but under section 12, an amount is included in income "for a taxation year," which is only accounted for at the end of a taxation year. Further, although there is no carve out under section 143.4 for forgiven amounts, section 143.4 would not apply by virtue of the prohibition against double taxation under subsection 248(28) and the rule that a more specific provision takes precedence over a more general provision.

2016 Ruling 2015-0586831R3 - Settlement - Pension Payments

Unedited CRA Tags
248(1), 56(1)(a)(i), 153(1)

Principal Issues: Will settlement payments made to employees and former employees pursuant to the terms of a settlement agreement between an employer and the employees/former employees of the employer constitute a salary deferral arrangement, as defined in subsection 248(1) of the Act? How will the settlement payments, which will either be paid as periodic payments or as a lump sum payment, be treated for income tax purposes?

Position: No. The payments will be pension or superannuation benefits as defined in 248(1).

Reasons: The settlement payments will be pension or superannuation benefits and included in income in the year received, in accordance with subparagraph 56(1)(a)(i). The settlement payments will not be in respect of "salary or wages” and deferred for the purpose of deferring the payment of tax as required by the definition of salary deferral arrangement in subsection 248(1) of the Act.

Technical Interpretation - External

21 November 2017 External T.I. 2017-0690651E5 - Net Capital Losses - Year of Death

Unedited CRA Tags
2(2), 3, 111(1)(b), 111(2), 111(8)
Summary Under
Tax Topics - Income Tax Act - Section 111 - Subsection 111(2)
unrestricted net capital loss deductibility under s. 111(2) applies only in the terminal year and the immediately preceding year

Principal Issues: Whether a taxpayer can use a full deduction of the remaining $100,000 of net capital losses in the year of death to create a non-capital loss in the year of death.

Position: No.

Reasons: Wording of the legislation.

24 October 2017 External T.I. 2016-0653441E5 - U.S. Dividend Equivalent Amounts

Unedited CRA Tags
Regulation 201(1) & (2)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 201 - Subsection 201(1) - Paragraph 201(1)(a)
the U.S. (s. 871(m)) characterization, as a dividend, of a principal or derivative payment by a Canadian issuer to a Canadian investor, is irrelevant to T5 reporting

Principal Issues: What are the Canadian tax reporting requirements for payments under certain financial contracts that reference U.S. equity securities?

Position: Canadian tax reporting is based on the legal nature of the payment under the contract.

Reasons: U.S. tax treatment is irrelevant in determining the nature of the income for Canadian tax purposes.

17 July 2017 External T.I. 2017-0691361E5 - Reporting obligations – T4A and T5018

Unedited CRA Tags
153(1), Regulation 200 and 238

Principal Issues: In the situation described, are the amounts paid by a corporation to an arm’s length contractor for XXXXXXXXXX reported on Form T4A or T5018.

Position: In the situation described, if the corporation’s business activities are primarily derived from construction activities, payments made by the corporation for goods or services rendered on behalf of the corporation in the course of those activities would be reported on Form T5018. Otherwise, payments made by the corporation for services rendered would be reported on Form T4A.

Reasons: Question of fact.