Income Tax Severed Letters - 2018-02-07

Ruling

2016 Ruling 2015-0606141R3 - XXXXXXXXXX

Unedited CRA Tags
215, Part XIII of the Act
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1)
a foreign common contractual fund is a co-ownership arrangement rather than a unit trust
Summary Under
Tax Topics - Income Tax Act - Section 96
common contractual fund was fiscally transparent

Principal Issues: What is the characterization of the particular XXXXXXXXXX for the purposes of the Income Tax Act (Act)?

Position: The XXXXXXXXXX is a contractual arrangement that is not a person or a taxpayer for the purposes of the Act and the Canada-XXXXXXXXXX Treaty.

Reasons: The XXXXXXXXXX is an unincorporated contractual arrangement that has no legal personality and is being established such that each investor has an undivided co-ownership interest in the underlying properties of the subfunds.

Ministerial Correspondence

13 July 2017 Ministerial Correspondence 2017-0697311M4 F - Publicité sur des plateformes Web étrangères

Unedited CRA Tags
Articles 19, 19.01 et 19.1
Summary Under
Tax Topics - Income Tax Act - Section 19 - Subsection 19(1)
ss. 19, 19.01 and 19.1 do not apply to advertising on foreign websites

Principales Questions: Courrier ministériel - un de plusieurs courriels reçus concernant la déductibilité des frais de publicité effectuée sur des plateformes Web étrangères. / Ministerial correspondance - One of several emails received regarding the deductibility of fees for advertising on foreign web platforms.

Position Adoptée: Les articles 19, 19.01 et 19.1 ne s'appliquent pas pour restreindre ou limiter la déductibilité des frais de publicité sur des plateformes Web étrangères. / Sections 19, 19.01 and 19.1 do not apply to restrict or limit the deductibility of advertising expenses on foreign web platforms.

Raisons: Ces articles ne visent que les frais pour de la publicité faite dans les journaux, les périodiques ou par le biais de la radiodiffusion. Un renvoi au ministère des Finances a été fait. /These sections of the Act only apply to advertising expenses made in newspapers, periodicals or through broadcasting. A reference was made to the Department of Finance.

12 July 2017 Ministerial Correspondence 2017-0695331M4 F - Publicité sur des plateformes Web étrangères

Unedited CRA Tags
Articles 19, 19.01 et 19.1
Summary Under
Tax Topics - Income Tax Act - Section 19.01 - Subsection 19.01(2)
ss. 19, 19.01 and 19.1 do not limit deductibility of ads on foreign websites

Principales Questions: Courrier ministériel - un de plusieurs courriels reçus concernant la déductibilité des frais de publicité effectuée sur des plateformes Web étrangères. / Ministerial correspondance - One of several emails received regarding the deductibility of fees for advertising on foreign web platforms.

Position Adoptée: Les articles 19, 19.01 et 19.1 ne s'appliquent pas pour restreindre ou limiter la déductibilité des frais de publicité sur des plateformes Web étrangères. / Sections 19, 19.01 and 19.1 do not apply to restrict or limit the deductibility of advertising expenses on foreign web platforms.

Raisons: Ces articles ne visent que les frais pour de la publicité faite dans les journaux, les périodiques ou par le biais de la radiodiffusion. Un renvoi au ministère des Finances a été fait. /These sections of the Act only apply to advertising expenses made in newspapers, periodicals or through broadcasting. A reference was made to the Department of Finance.

Technical Interpretation - External

25 January 2018 External T.I. 2017-0709241E5 - Subsections 125(3.2) & 125(5.1)

Unedited CRA Tags
125
Summary Under
Tax Topics - Income Tax Act - Section 125 - Subsection 125(5.1)
business limit is ground first based on taxable capital before it can be assigned

Principal Issues: Whether the business limit that can be assigned under subsection 125(3.2) is before or after the application of subsection 125(5.1).

Position: After.

Reasons: See below.

Technical Interpretation - Internal

27 October 2017 Internal T.I. 2017-0694231I7 - Subsection 247(2), surplus, and FAPI

Unedited CRA Tags
247; definition of "earnings" under 5907(1); 5907(2); 95(2)(f); 53(1)(c)
Summary Under
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2)
s. 247(2) transfer pricing adjustment for sales undercharges to a CFA does not decrease the ES of the CFA
Summary Under
Tax Topics - Income Tax Act - Section 53 - Subsection 53(1) - Paragraph 53(1)(c)
sale of goods at undervalue to sub does not imply a contribution of capital
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(2)
effect on surplus balances of foreign transfer-pricing adjustment might be reversed under Reg. 5907(2)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1) - Earnings - Paragraph (a)
surplus could be adjusted by transfer-pricing adjustment

Principal Issues: Where, as a result of a transfer pricing adjustment made under subsection 247(2) with respect to a transaction between a taxpayer that is a corporation resident in Canada and its directly held wholly owned controlled foreign affiliate for the sale of goods or provision of services, an amount is included in computing the taxpayer’s income, (1) whether subsection 247(2) could apply to reduce the surplus or FAPI of the foreign affiliate in respect of the taxpayer, and (2) whether there would be an increase in the taxpayer’s adjusted cost base in the shares of the foreign affiliate as a result of the application of paragraph 53(1)(c).

Position: (1) No. (2) No.

Reasons: (1) A reduction of surplus or FAPI of the foreign affiliate in the situation described is not a type of transfer pricing adjustment contemplated by subsection 247(2). (2) A conferral of benefit resulting from an incorrect transfer price cannot be considered a contribution of capital for purposes of paragraph 53(1)(c).

11 May 2017 Internal T.I. 2016-0665931I7 - Related to participating employer

Unedited CRA Tags
251(2)(b), 251(5)(b)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 8000 - Subsection 8300(1) - Individual Pension PLan
two unrelated 50% shareholders potentially could both be related to the corporation based on Duha USA rights and s. 251(5)(b) rights
Summary Under
Tax Topics - Income Tax Act - Section 251 - Subsection 251(2) - Paragraph 251(2)(b) - Subparagraph 251(2)(b)(i)
under Duha, a 50% shareholder potentially can have de jure control
Words and Phrases
de jure control
Summary Under
Tax Topics - Income Tax Act - Section 251 - Subsection 251(5) - Paragraph 251(5)(b)
s. 251(5)(b) deemed control does not undercut actual de jure control

Principal Issues: Whether an individual is related to a participating employer for purposes of the definition of an “individual pension plan” under subsection 8300(1) of the Income Tax Regulations in two different hypothetical scenarios?

Position: Question of fact.

Reasons: The statutory rules for determining when a corporation and a person will be considered related persons for purpose of the Act are set out in paragraph 251(2)(b). As such there could be circumstances that arise where a shareholder of a corporation who is not related to any other shareholder of the corporation and holds 50% or less of the voting shares of the capital stock of the corporation and does exercise de jure or effective control of the corporation. In addition, the corporation and persons may be related pursuant to the application of paragraph 251(5)(b).