Income Tax Severed Letters - 2018-08-15

Ruling

2018 Ruling 2017-0683941R3 - Split-up transactions

Unedited CRA Tags
Subsection 55(2), paragraph 55(3)(a)
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a) - Subparagraph 55(3)(a)(ii)
split-up to resolve business differences between daughter and mother, with relevant significant investment of arm's length investor in further transferee company
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(10)
arm's length investment in proposed purchaser of spinco assets not part of spin-off series
Summary Under
Tax Topics - Income Tax Act - Section 186 - Subsection 186(1) - Paragraph 186(1)(b)
year-end established in middle of cross-redemptions to avoid circularity

Principal Issues: Whether the proposed split-up transactions meet legislative and administrative requirements?

Position: Transactions meet requirements.

Reasons: Consistent with law and administrative requirements.

Technical Interpretation - External

17 July 2018 External T.I. 2018-0753051E5 - Treatment of losses and investment income

Unedited CRA Tags
9, 12(1)(i), 20(1)(p), 38(c), 39(1)(b), 39(1)(c), 40(2)(g)(ii), 50(1), 111(1)(a), 111(1)(b), 54 capital property, 111(8) non-capital loss, 125(7) Canadian-controlled private corporation.

Principal Issues: Tax implications of losses incurred as a result of a fraudulent investment scheme.

Position: Various implications discussed.

Reasons: See below.

25 May 2018 External T.I. 2018-0761601E5 - Correspondence with XXXXXXXXXX re Tax on Split Income

Unedited CRA Tags
Proposed Amendments to Section 120.4
Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Shares - Paragraph (b)
no excluded share exception where interposition of family trust or holdco
Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Amount - Paragraph (e) - Subparagraph (e)(ii)
where spouse works in only one of two businesses, excluded amount determination requires “separate accounting for each business and a tracing of funds”
Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1.1) - Paragraph 120.4(1.1)(a)
keeping time logs will “ensure that businesses are able to comply with the new rules”
Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Shares - Paragraph (a) - Subparagraph (a)(i)
shares of pizzeria but not hair salon were excluded

Principal Issues: How the proposed changes to the tax on split income under section 120.4 apply in certain circumstances.

Position: General comments provided on certain issues related to the definition of excluded shares and excluded business.

Reasons: Wording of proposed legislation.