Income Tax Severed Letters - 2018-01-24

Technical Interpretation - External

12 January 2018 External T.I. 2016-0669431E5 - Mortgage Investment Corporation Definition

Unedited CRA Tags
ITA 130.1
Summary Under
Tax Topics - Income Tax Act - Section 130.1 - Subsection 130.1(6) - Paragraph 130.1(6)(f)
commercial portion of a “housing project” can be up to 20%

Principal Issues: 1) Where is the legislative requirement that a MIC is required to invest in 50% residential and 50% commercial properties?
2) Whether a MIC may invest funds in debts owing to the corporation that are secured by agricultural properties?

Position: 1) Paragraph 130.1(6)(f) of the Act requires that at least 50% of the cost amount of all of the property of a MIC must generally consist of debts owing to the corporation that were secured inter alia by mortgages on houses as defined in section 2 of the National Housing Act, deposits standing to the credit of the MIC in the records of a bank or credit union and money. This condition must be met throughout the taxation year.
2) This is a question of fact to be determined on a case by case basis. Generally, commercial facilities that form part of a housing project should not normally exceed 20% of the gross floor area of the housing project.

Reasons: 1) The legislation 2) The legislation, including the National Housing Act.

11 December 2017 External T.I. 2017-0699781E5 - Refund - provincial tax credits

Unedited CRA Tags
164(1.5); Manitoba Income Tax Act; British Columbia Income Tax Act

Principal Issues: Whether subsection 164(1.5) of the Income Tax Act allows a refund of the refundable tax credits under subsection 5(1) of the Manitoba Income Tax Act or the refundable sales tax credit under subsection 8(1) of the British Columbia Income Tax Act for a particular taxation year, where an individual’s return of income is filed three years after the end of the particular taxation year.

Position: No.

Reasons: Subsection 8(2) of the British Columbia Income Tax Act requires that the individual file his/her return of income and the form to claim the credit within three years after the end of the taxation year. Similarly, in order for an individual to be eligible for the refundable tax credits under subsection 5(1) of the Manitoba Income Tax Act, subsection 5(4) requires that the amount is claimed in the individual’s return for the year and the return for the year is filed within three years after the end of the taxation year. The specific filing requirements provided by the provincial legislation are not overridden by the federal provisions.

27 November 2017 External T.I. 2017-0726891E5 - Eligibility of Wind Turbines for ITC

Unedited CRA Tags
Definition of "qualified property," "investment tax credit," "specified percentage" in s. 127(9), ss. 4600(3) of the Regulations, Classes 43.1 and 43.2

Principal Issues: Is a wind turbine that is described in Class 43.1 or 43.2 eligible for an investment tax credit pursuant to ss. 127(5) of the Act?

Position: Yes, if it otherwise meets all the conditions.

Reasons: Text of the law following legislative amendments adopted pursuant to Budget 2012, Second Bill.

22 September 2017 External T.I. 2016-0668041E5 - TCP and Article 13(5) of Canada-UK Treaty

Unedited CRA Tags
248(1) "taxable Canadian property"; paragraph 5 of Article 13 of the Canada-UK Treaty
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Taxable Canadian Property - Paragraph (d)
proportionate value approach to determining whether shares of a foreign holding company are derived more than 50% from Canadian immovable property for Treaty purposes
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 13
proportionate value approach to determining whether shares of a foreign holding company are derived more than 50% from Canadian immovable property for Treaty purposes

Principal Issues: In the scenario described, do shares derive their value indirectly from immovable property?

Position: Yes.

Reasons: The gross asset value method should be used in determining whether more than 50% of the value of the shares of a corporation is derived from immovable property and the proportionate value approach should be used to determine the value of the shares of a subsidiary that is derived from immovable property for the purpose of applying the gross asset value method at its parent level.

Technical Interpretation - Internal

3 January 2018 Internal T.I. 2017-0709811I7 - Withholding on CCPC stock option benefit

Unedited CRA Tags
7(1)(a); 7(1.1); 153(1)(a); 153(1.01)(b)
Summary Under
Tax Topics - Income Tax Act - Section 153 - Subsection 153(1.01) - Paragraph 153(1.01)(b)
withholding does not apply to s. 7(1.1) stock option benefits
Summary Under
Tax Topics - Income Tax Act - Section 7 - Subsection 7(1.1)
no withholding if benefit deferred under s. 7(1.1)

Principal Issues: Whether subsection 153(1.01) applies to a stock option benefit under paragraph 7(1)(a) in circumstances where that paragraph is required to be read in accordance with subsection 7(1.1)

Position: No.

Reasons: Exception in paragraph 153(1.01)(b).

22 August 2017 Internal T.I. 2017-0688301I7 - Restrictive Covenant

Unedited CRA Tags
56.4, 5, 6, 68
Summary Under
Tax Topics - Income Tax Act - Section 56.4 - Subsection 56.4(7) - Paragraph 56.4(7)(b)
non-solicitation covenant included in non-compete
Summary Under
Tax Topics - Income Tax Act - Section 56.4 - Subsection 56.4(3) - Paragraph 56.4(3)(c)
agreement not to solicit employees not assimilated

Principal Issues: Will the rules in subsection 56.4 apply in a specific fact situation such that the amount or a portion of the amount that is granted in respect of a restrictive covenant will be included in income by virtue of subsection 56.4(2) or another provision of the Act? Would the exception to income treatment in either subsection 56.4(7) or 56.4(3) apply?

Position: see analysis

Reasons: see analysis