Income Tax Severed Letters - 2018-11-14

Ruling

2017 Ruling 2016-0680761R3 - CEE under paragraph (f) of the definition

Unedited CRA Tags
s. 66.1(6) definition of CEE

Principal Issues: Are exploration expenses to be incurred reasonably related to an existing mine or a potential extension of a mine?

Position: No, based on the favourable opinion of the NRCan.

Reasons: The fault lines running through the property make the existence of a mineral resource uncertain and likely of a different nature.

Technical Interpretation - External

2 November 2018 External T.I. 2018-0771851E5 - TOSI: Meaning of Reasonable Return

Unedited CRA Tags
Subparagraph 120.4(1)(g)(ii) of definition of Excluded Amount and definition of Reasonable Return in subsection 120.4(1)
Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Reasonable Return
subsequently eliminated start-up risk can be taken into account/retained earnings irrelevant/CRA does not substitute its judgment

Principal Issues: 1. Does the reasonable return exception to the tax on split income (TOSI) rules apply in a particular scenario? 2. Can the specified individual in the particular scenario look to the undistributed retained earnings of the corporation as capital that is at risk, for purposes of the reasonable return exception?

Position: 1. Insufficient facts to conclude, however general comments have been provided. 2. No.

2 November 2018 External T.I. 2018-0771861E5 - TOSI: Second generation income

Unedited CRA Tags
Subparagraph 120.4(1)(e)(i) of definition of Excluded Amount
Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Amount - Paragraph (e) - Subparagraph (e)(i)
dividends generated from the investment of dividends received from a related business (or gains from such investments) are not themselves derived from that business
Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1.1) - Paragraph 120.4(1.1)(d)
amounts derived from a related business do not include capital gains from the passive investment of the dividends therefrom

Principal Issues: 1. Is the second generation income earned by a holding company on dividends it received from its shares in an operating company, which is then paid out to one of its shareholders, derived directly or indirectly from a related business in respect of the particular individual shareholder, in a specific scenario? 2. Is the payment of the entire investment portfolio to a shareholder as a dividend-in-kind by the holding company derived directly or indirectly from a related business in respect of the particular individual shareholder, in a specific scenario? 3. Would our conclusions change if the dividends from the operating company to the holding company were all paid prior to 2018?

Position: 1. The conclusion depends on whether or not the holding company in the scenario has a business, such that it is a related business in respect of the particular individual shareholder receiving the dividend. 2. The conclusion depends on whether or not the holding company in the scenario has a business, such that it is a related business in respect of the particular individual shareholder receiving the dividend. Numerical example provided. 3. No.

18 October 2018 External T.I. 2017-0700781E5 - Medical marihuana

Unedited CRA Tags
118.2(2)(u) and (v)

Principal Issues: Is the cost for the following considered as eligible costs under Medical expense tax credit (i) the purchase of marihuana; (ii) the annual [block fee] cost of monitoring, counselling and assistance for the use of the marihuana, and (iii) the purchase of a vaporizer.

Position: (i) Yes, if they meet the requirements of 118.2(2)(u) or (v); (ii) Question of fact, but likely no based on the facts provided; (iii) Question of fact but likely no.

Reasons: The legislation and previous positions.