Income Tax Severed Letters - 2018-02-28

Technical Interpretation - External

7 February 2018 External T.I. 2016-0637221E5 - Rollover of Mineral Rights

Unedited CRA Tags
s. 39(1)(a)(ii), 59(3.2)(c), 66(15), 66.2(5), 66.4(5); 85(1), 85(1.1)(c)
Summary Under
Tax Topics - Income Tax Act - Section 66.2 - Subsection 66.2(5) - Canadian development expense
cost of property added to CCDE or COGPE
Summary Under
Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) - Paragraph 85(1)(a)
nil amount can be elected

Principal Issues: What are the tax consequences if mineral subsurface rights are transferred to a taxable Canadian corporation on a tax deferred basis?

Position: Where the Taxpayer transfers the Property to a corporation pursuant to subsection 85(1), the agreed amount can be any amount up to the fair market value of the Property. The deemed proceeds of disposition will reduce the Taxpayer’s CCOGPE balance if any. If the Taxpayer’s CCOGPE balance becomes negative, the amount is deducted from the CCDE. If the Taxpayer's CCDE balance becomes negative, the negative amount will be included in the Taxpayer’s income for that taxation year.

Reasons: Application of the law.

29 January 2018 External T.I. 2017-0702731E5 - Patronage dividends and partnerships

Unedited CRA Tags
ss. 135(1), (4)
Summary Under
Tax Topics - Income Tax Act - Section 135 - Subsection 135(4) - Customer
a partnership is not fiscally transparent for patronage dividend purposes
Summary Under
Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(a)
partnership rather than member was taxpayer for patronage dividend purposes

Principal Issues: Can a taxpayer that is a cooperative corporation and a member of a partnership deduct, under subsection 135(1), patronage dividends based on business the members have conducted with the partnership?

Position: A taxpayer may deduct patronage dividends payments that are computed in relation to business it has done with or on behalf of its customers. Where a partnership has customers for purposes of section 135, the deduction under that section must be made at the partnership level.

Reasons: Subsection 135(1) sets out the conditions under which a taxpayer may deduct payments it makes to its customers pursuant to allocations in proportion to patronage, which are defined as amounts computed in relation to business done with or on behalf of the taxpayer’s customers. Subsection 96(1) of the Act applies to treat the partnership as a separate person for purposes of section 135 of the Act.

25 January 2018 External T.I. 2017-0717561E5 - specified small business corporation

Unedited CRA Tags
248(1) "active business", Reg 4901(2), Reg 4900(14), Reg 4900(15)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 4901 - Subsection 4901(2) - Specified Small Business Corporation
guidelines on when cash is used in an active business
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Small Business Corporation
excess cash not an active business asset

Principal Issues: Whether a particular corporation would be considered to be a “specified small business corporation” as defined in subsection 4901(2) of the Income Tax Regulations (“Regulations”) such that its shares would be qualified investments for an RRSP in accordance with subparagraph 4900(14)(a)(i) of the Regulations?

Position: Question of fact. General views provided to assist in determination.

Reasons: Question of fact.

22 December 2017 External T.I. 2017-0699941E5 - medical expense tax credit

Unedited CRA Tags
118.2

Principal Issues: Provide information regarding the measure on reproductive technologies (the “Technologies”) announced in the 2017 Federal Budget regarding the application of the medical expense tax credit to individuals that require medical intervention to conceive a child.

Position: The measure clarified the METC to also apply to individuals who claim expenses paid for Technologies even where such treatment is not medically indicated because of the medical condition of infertility.

Reasons: The measure clarified the legislation so individuals who are patients (as defined for the purpose of the METC) and require medical intervention in order to conceive a child will be eligible to claim the same expenses that would generally only be eligible for individuals to claim who require the Technologies on account of medical infertility.

Technical Interpretation - Internal

7 February 2018 Internal T.I. 2017-0711961I7 - Withholding on RCA payment to partnership

Unedited CRA Tags
ITA 153(1)(q); 96(1); ITR 106(1)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 103 - Subsection 103(6)
withdrawal of RCA surplus was not a lump sum payment
Summary Under
Tax Topics - Income Tax Act - Section 153 - Subsection 153(1) - Paragraph 153(1)(q)
members of a partnership treated as the payers of RCA withdrawals made to the partnership employees for source deduction purposes
Summary Under
Tax Topics - Income Tax Regulations - Regulation 106 - Subsection 106(1)
members of partnership were respective payers of RCA withdrawal

Principal Issues: In applying subsection 106(1) of the Income Tax Regulations with respect to a payment to a recipient that is a partnership, how does one determine the amount to be withheld under that subsection?

Position: The amount to be withheld should be equal to the amount of tax that the members of the partnership would, in aggregate, be expected to pay under the Income Tax Act with respect to the payment.

Reasons: Application of the Regulation.