Income Tax Severed Letters - 2018-07-25


2018 Ruling 2017-0723421R3 - Creation of a new Mutual Fund Trust

Unedited CRA Tags
108(2)(a)(i); 132(6)(b) and 253.1
an open-end non-listed mutual fund trust could suspend redemption rights for up to one year without ceasing to qualify as a unit trust
MFT investing directly in subsidiary LP

Principal Issues: 1) Will the redemption features of the proposed Trust satisfy subparagraph 108(2)(a)(i)? 2) Will section 253.1 apply in regard to the proposed acquisition of an LP interest by Trust? 3) Will the proposed transactions cause Trust to fail to meet 132(6)(b)?

Position: 1) Yes. 2) Yes. 3) No.

Reasons: 1) Requirements will be met. 2) Requirements to apply 253.1 will be met. 3) Requirements will be met.

Technical Interpretation - External

6 July 2018 External T.I. 2018-0759521E5 - Tax on split income & preferred beneficiary

Unedited CRA Tags
104(14); 120.4
income to preferred beneficiary is not split income
split income rules do not apply to preferred beneficiary income

Principal Issues: Is tax on split income applicable to income designated under 104(14) - preferred beneficiary election?

Position: No - unless a 104(19) designation is made in respect of the 104 (14) elected amount.

Reasons: If no 104(19) designation is made, 104(14) income does not fall within the definition of split income. If a designation under 104(19) is made in respect of the 104(14) elected amount-- the amount is deemed to be a taxable dividend of the recipient-- and would therefore get picked up under paragraph (a) of the definition of split income.

11 June 2018 External T.I. 2017-0733221E5 - Income Inclusion for Prospectors

Unedited CRA Tags
section 35, subsection 230(1)

Principal Issues: (1) Whether a prospector is required to declare the shares received on a transfer of mining property to which section 35 applies before they are sold; (2) If so, how the receipt of shares is declared; and (3) Whether there are any prescribed forms for the declaration of the shares received.

Position: (1) No; (2) Not applicable; and (3) No.

Reasons: (1) There is no provision in the Income Tax Act or the Income Tax Regulations that requires the declaration of shares received on a transfer of mining property to which section 35 applies; (2) Not applicable; and (3) There is no prescribed form. Nevertheless, taxpayers are required by subsection 230(1) of the Act to maintain books and records in such form and containing such information as will enable the taxes payable under the Act to be determined.

1 June 2018 External T.I. 2017-0706471E5 - business expenses

Unedited CRA Tags
9, 12(1)(x), 12(2.2), 18(1)(h), 56(1)(n) and (o), 67

Principal Issues: Whether certain expenses incurred to attend residencies, to produce art to earn business income are deductible for income tax purposes?

Position: It depends on the facts.

Reasons: A taxpayer carrying on business may deduct, from income, expenses incurred to earn income from their business, but not personal or living expenses.