Income Tax Severed Letters - 2018-03-07

Ruling

2017 Ruling 2016-0629511R3 - Post-Mortem Planning and Extraction of "Hard ACB"

Unedited CRA Tags
84.1, 84(2), 245(2)
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2)
pipeline transfers of shares with both “soft” and “hard” ACB
Summary Under
Tax Topics - Income Tax Act - Section 84.1 - Subsection 84.1(2) - Paragraph 84.1(2)(a.1)
pipeline transfer of inherited shares for their "hard" ACB (excluding CGD and V-Day step-up by deceased)

Principal Issues: Post-Mortem Planning and Extraction of "Hard ACB" that mainly resulted from the application of subsection 70(5) or is attributable to properties rolled into a corporation.

Position: Favourable rulings given.

Reasons: In accordance with the Act, jurisprudence and our published positions.

Technical Interpretation - External

6 February 2018 External T.I. 2017-0732151E5 - Timber Resource Property

Unedited CRA Tags
ss. 13(21); repealed s.14; 20(1)(a); 39(1)(a); 1100(1)(e); Class 33 of Schedule II, Schedule VI of the Regulations
Summary Under
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Timber Resource Property
an Alberta coniferous tree-harvesting right was a timber resource property

Principal Issues: Does a coniferous timber quota originally acquired in 1967 fall within the definition of timber resource property?

Position: Yes, based on the facts, in Alberta coniferous timber quota are typically issued for a 20 year tenure and under regular circumstances renewed thereafter. Hence, the original quota was likely renewed in 1987 and subsequently in 2004 combined with additional quota to form a new and enlarged timber quota.

Reasons: Application of the law.

19 January 2018 External T.I. 2017-0683501E5 - Flow-Through Shares

Unedited CRA Tags
38(a.1), 38.1, 40(12), 54, 66(15), 149.1(1)
Summary Under
Tax Topics - Income Tax Act - Section 40 - Subsection 40(12)
non-flow through shares can be part of a flow-through share class
Summary Under
Tax Topics - Income Tax Act - Section 54 - Exemption Threshold
taxpayer with no flow-through shares has no exemption threshold
Summary Under
Tax Topics - Income Tax Act - Section 38.1
general paraphrase

Principal Issues: Does subsection 40(12) or section 38.1 apply where a taxpayer donates a share that is part of a "flow-through share class of property" to a qualified donee?

Position: General comments provided.

Reasons: Legislation.

24 July 2017 External T.I. 2017-0698191E5 - Gift of securities by executors of a will

Unedited CRA Tags
38(a.1); 70(5); 118.1(1); 118.1(4.1); 118.1(5); 118.1(5.1)
Summary Under
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(5) - Paragraph 118.1(5)(b)
an estate gift of sales proceeds of s. 70(5) property can be carried back to the terminal return
Summary Under
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts - Paragraph (c) - Subparagraph (c)(i) - Clause (c)(i)(C)
estate gift of cash proceeds of s. 70(5) securities can be carried back to terminal return
Summary Under
Tax Topics - Income Tax Act - Section 38 - Paragraph 38(a.1) - Subparagraph 38(a.1)(ii)
s. 38(a.1)(ii) zeroes post-death appreciation on estate-donated shares

Principal Issues: Various scenarios presented whereby executors donate estate assets to a Canadian charitable organization.

Position: Tax consequences confirmed.

Reasons: New legislation dealing with donations made by graduated rate estates.

Technical Interpretation - Internal

16 August 2017 Internal T.I. 2017-0701291I7 - Exclusive Distributorship Rights

Unedited CRA Tags
212(1)(d); 212(1)(i); Articles VII and XII of the Canada-XXXXXXXXXX Income Tax Convention.
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(d) - Subparagraph 212(1)(d)(i)
Farmparts likely excluded application to product distributorship right/product name on product not a valuable use of trademark
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(d)
lump sum non-contingent payment for distributorship right was not a royalty
Words and Phrases
royalty
Summary Under
Tax Topics - Income Tax Act - Section 56.4 - Subsection 56.4(1) - Restrictive Covenant
a lump sum paid to a non-resident for granting an exclusive right to distribute its product in Canada was for a restrictive covenant
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(i)
a lump sum paid to a non-resident for granting an exclusive right to distribute its product in Canada was subject to s. 212(1)(i) withholding
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 12
lump sum paid for distributorship rights was not a royalty
Words and Phrases
royalty

Principal Issues: Whether a lump sum upfront payment for exclusive distributorship rights and/or subsequent supply payments made for the product itself are subject to Canadian withholding tax under the Act and if yes, whether they are exempt from the Canadian withholding tax under the Canada-XXXXXXXXXX Income Tax Convention.

Position: Unless any portion of any payment is allocated to the use of a trade-mark or a patent, the payments are either not subject to the Canadian withholding tax under the Act or exempt under the Canada-XXXXXXXXXX Income Tax Convention.

Reasons: In our view, to the extent the lump sum payment is subject to Canadian withholding tax under subparagraph 212(1)(d)(i) or 212(1)(d)(iv), or paragraph 212(1)(i) of the Act, it should be exempt under Article VII of the Canada-XXXXXXXXXX Income Tax Convention as a business profit from a business that is not carried on through a permanent establishment in Canada, unless any portion of that payment is allocated to the use of a trade-mark or a patent. The subsequent supply payments are, in our view, payments on account of the purchase price and are not subject to the Canadian withholding tax under the Act.