Income Tax Severed Letters - 2018-09-12


2018 Ruling 2017-0738021R3 - Addition of a series of preferred units

Unedited CRA Tags
104(6)(b); 104(7.1); 122.1(1) and 132(6)

Principal Issues: Whether the creation and issuance of XXXXXXXXXX Preferred Units of a mutual fund trust would result in (1) a disposition by the trust of its assets or in a resettlement of the trust, (2) a disposition by the existing unitholders of their units, (3) the application of 104(7.1).

Position: (1) no (2) no (3) no

Reasons: (1) The changes are not considered material or significant to result in a resettlement of the trust and it is submitted that there will be no resettlement as a matter of provincial law. (2) No cash consideration or other proceeds of disposition will be received by the unitholders in respect of the diminishment of their rights as a consequence of the amendments. (3) Consistent with previous rulings.

Ministerial Correspondence

23 July 2018 Ministerial Correspondence 2018-0762381M4 - Impact of WSIB benefits on OAS clawback

Unedited CRA Tags
56(1)(v); 110(1)(f)(ii); definition of "adjusted income" in 180.2(1); 180.2(2)

Principal Issues: Whether WSIB benefits should be included in income, and therefore, impact the calculation of the OAS clawback.

Position: Yes.

Reasons: The law - the wording in paragraph 56(1)(v), subsection 180.2(2), and the definition of "adjusted income" for the purpose of Part I.2 (tax on OAS benefits).

Technical Interpretation - External

17 July 2018 External T.I. 2018-0753011E5 - 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.

12 July 2018 External T.I. 2018-0755471E5 - Half-brothers and related persons

Unedited CRA Tags
251(2)(a), 251(6)(a)
half-brothers were connected by blood relationship
Words and Phrases
brother sibling

Principal Issues: Are half-siblings brothers or sisters that are connected by blood relationship so that they are "related persons" within the meaning of s. 251(2)(a)?

Position: Yes.

Reasons: Previous opinion and jurisprudence. Half-siblings are children that are born to at least one common parent such that they are brothers or sisters that are connected by blood relationship within the meaning of s. 251(6)(a).

Technical Interpretation - Internal

26 July 2018 Internal T.I. 2018-0768281I7 - Section 94 and pre-June 23, 2000 contributions

Unedited CRA Tags
94(1) and 94(3)(a)
modified connected contributor rules applicable to pre-2000 non-resident contributions to a mooted s. 94 trust

Principal Issues: Would section 94 apply for years after 2006 to the factually non-resident trusts in a given fact scenario?

Position: Not in this case, given the facts and assumptions as stated.

Reasons: The coming-into-force rule in Bill C-48 relating to the definition of "non-resident time".

5 April 2018 Internal T.I. 2017-0728581I7 - Ss 125(3.2) & 125(8) amending the business limit

Unedited CRA Tags
125(1), 125(2), 125(3), 125(3.2)
business limit allocation may be amended within statute-barring period
partner assignment of its SPBL may be amended within the statute-barring period – and can be sliced and diced

Principal Issues: Whether corporations can amend the assignment of the business limit under subsection 125(3.2) and the assignment of the specified partnership business limit under subsection 125(8).

Position: Yes.

Reasons: The prescribed forms required by both CCPCs detailing the assignment of the business limit under subsection 125(3.2) may be amended provided the amended business limit does not change the amount assigned for a taxation year of any taxpayer for which a reassessment is statute-barred. Similarly, the assignment of the specified partnership business limit under subsection 125(8) may be amended provided the particular year is not statute-barred.