Income Tax Severed Letters - 2018-10-17

Ruling

2018 Ruling 2017-0711071R3 - Use of subsidiary losses & ITCs after wind-up

Unedited CRA Tags
Subsections 88(1) & (1.1)
Summary Under
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1.1) - Paragraph 88(1.1)(b)
streamed losses of empty-shell Lossco flowed through on its dissolution as Lossco LP business had been acquired years earlier through sub LP
Summary Under
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(e.3)
purchaser could acquire Lossco’s business through a sub LP and then acquire Lossco, accessing s. 88(1)(e.3)

Principal Issues: Can losses and ITCs of a subsidiary be claimed by a parent on a winding-up as a result of a two-step loss acquisition where the loss business carried on by the subsidiary and the shares of the subsidiary are acquired in separate transactions.

Position: Yes.

Reasons: Consistent with prior positions.

2017 Ruling 2017-0681451R3 - Split-up butterfly

Unedited CRA Tags
55(2); 55(3)(b); 84(3); 85; 87(1); 88(1); 245(2)

Principal Issues: Whether the proposed split-up butterfly transactions described in the Ruling meet legislative and administrative requirements.

Position: Transactions meet requirements.

Reasons: Consistent with law and administrative requirements.

Ministerial Correspondence

22 June 2018 Ministerial Correspondence 2018-0759891M4 - Artists grants

Principal Issues: Taxpayer's comments regarding a CBC article that discusses the tax treatment of amounts received by an artist.

Position: General comments provided. CRA cannot comment on a specific taxpayer's file without consent.

Technical Interpretation - External

25 September 2018 External T.I. 2016-0636871E5 - private health services plans

Unedited CRA Tags
6(1)(a); 248(1); Taxation Act (Quebec)

Principal Issues: 1. Does non-eligible medical expense tax credit coverage under a plan need to meet any specific criteria? 2. If a plan meets the new PHSP criteria, are employer contributions to the plan excluded from the employee’s income? 3. If an employer has a number of plans under their group benefits program, can the plans be combined for purposes of determining PHSP eligibility?

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

Reasons: See response.

12 September 2018 External T.I. 2018-0760751E5 - Treatment of investment income

Unedited CRA Tags
9, 12(1)(i), 20(1)(p)

Principal Issues: Whether interest income received and reported in income in a particular tax year can be reversed.

Position: No, however, paragraph 20(1)(p) of the Act may apply.

Reasons: See below.

27 June 2018 External T.I. 2018-0745681E5 F - Wind-up of a partnership

Unedited CRA Tags
28(1), 53(1)e), 53(2)c), 84(3), 84(9), 96(1), 96(1.01), 97(2), 98(5), 99(1), 102(1), 103, 2230 C.c.Q, 2232 C.c.Q.
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(3)
no s. 84(3) dividend on cancellation of preferred shares of Opco held by partnership on its wind-up into Opco
Summary Under
Tax Topics - Income Tax Act - Section 98 - Subsection 98(5)
s. 98(5) inapplicable on simultaneous dissolving transfer of partnership interests
Summary Under
Tax Topics - Income Tax Act - Section 28 - Subsection 28(1) - Paragraph 28(1)(f)
application of s. 28(1)(f) on partnership wind-up

Principal Issues: (1) Whether a partnership is deemed to have received a dividend under subsection 84(3) when shares of a corporation are cancelled for no consideration. (2) Whether a partnership is entitled to deduct an amount by virtue of paragraph 28(1)(f) in the computation of its income.

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

Reasons: (1) Application of the Act. (2) Application of the Act.