Income Tax Severed Letters - 2018-06-27


2017 Ruling 2017-0715951R3 - Subsequent Reorganization and 2015-0623731R3

Unedited CRA Tags
15(1), 55(2), 55(3)(a), 80.01(4), 88(1)

Principal Issues: Whether winding-up of subsidiary results in the denial of the paragraph 55(3)(a) exemption.

Position: No.

Reasons: Accepted representation from taxpayer that subsequent reorganization is not part of the same series of transactions as the paragraph 55(3)(a) reorganization.

Technical Interpretation - External

6 April 2018 External T.I. 2018-0738871E5 F - Shareholder

Unedited CRA Tags
15(2), 15(2.6), 80.4(2), 80.4(3), 152(4)a)(i), 152(4.3), 163(1), 163(2)
s. 15(2) held in suspense until time period passes/s. 80.4(2) inclusion until s. 15(2) inclusion reverses such inclusion
previous s. 80.4(2) inclusion is reversed when loan is included under s. 15(2)

Principal Issues: Application of subsections 15(2) and 15(2.6) to particular hypothetical situations.

Position: Refer to answers below.

Reasons: Application of the Act.

21 March 2018 External T.I. 2017-0736291E5 - Interest calculation - loss substitutions

Unedited CRA Tags
interest not assessed on loss substitutions
net capital loss carried back from Year 3 replaces non-capital loss carryforward from Year 1 without interest cost

Principal Issues: Whether subsections 161(1) and (7) of the Act apply, such that interest is applicable where there is a substitution of losses for a particular taxation year that does not result in a change in tax payable.

Position: Yes. It is the longstanding administrative position of the CRA to not assess interest when there is a substitution of losses for a particular taxation year that does not result in a change in tax payable.

Reasons: Generally, subsections 161(1) and (7) apply such that where a loss carry forward has been applied to a taxation year to reduce tax payable to nil, and is later substituted with a loss carry back, the calculation of interest would result in an assessment of interest from the balance due date of the taxation year to which the loss is applied, until 30 days after the date the subsequent taxation year’s return (the year of the loss) was filed. Nevertheless, the CRA has historically taken the administrative position to not assess interest in these particular loss substitution situations.

11 October 2017 External T.I. 2016-0673171E5 - Foreign tax credit - former resident

Unedited CRA Tags
152(3.1), 152(4)(b)(i), 152(4.2), 152(6), 126(2.21)
emigration-year return generally cannot be opened up more than 6 years later to allow a FTC for foreign tax imposed on a subsequent sale
waiver generally not granted to extend 6-year period to permit s. 126(2.21) credit

Principal Issues: Whether the Minister can reassess an individual's return for an emigration year to allow a claim for a foreign tax credit under subsection 126(2.21) where the actual disposition and related foreign taxes occur beyond the extended reassessment period referred to in paragraph 152(4)(b) in respect of the emigration year?

Position: The reassessment of a return of income for the emigration year to claim a foreign tax credit under subsection 126(2.21) is restricted to the statutory assessment period referred to in paragraph 152(4)(b). In addition, subsection 152(4.2) does not provide for an extension of the aforementioned statutory reassessment period for a taxpayer’s emigration year with respect to the deduction under subsection 126(2.21). However, in the situation described herein, a waiver request filed by a taxpayer to keep the emigration year open may be considered appropriate to allow a reassessment beyond the statutory assessment period referred to in paragraph 152(4)(b) where the circumstances to support this foreign tax credit (e.g., disposition and/or foreign taxes paid) are present within this period.

Reasons: The legislation.