Income Tax Severed Letters - 2018-11-28

Ministerial Correspondence

18 October 2018 Ministerial Correspondence 2018-0767261M4 - Medical expenses - whether they include HST or GST

Unedited CRA Tags

Principal Issues: Whether the harmonized sales tax (HST) or the goods and services tax (GST) that is required to be added to the cost of certain medical services can be included as part of the eligible medical expense for the purpose of claiming the medical expense tax credit (METC).

Position: Yes.

Reasons: See response.

Technical Interpretation - External

29 October 2018 External T.I. 2018-0750411E5 - Transfer from an IRA to a RRSP

Unedited CRA Tags
56(1)(a)(i)(C.1), 56(12), 60(j), 60.01
a departing U.S. resident who has a deemed inclusion for his IRA cannot then obtain a s. 60(j) deduction for contributing actual IRA withdrawals to his RRSP
failure to qualify for 60(j) deduction where deemed withdrawal from IRA followed by actual withdrawal
deemed withdrawal from IRA rather than subsequent actual withdrawal included in income per s. 56(12)

Principal Issues: Whether, in a scenario involving the U.S. expatriation rules, funds withdrawn from an IRA and transferred to a RRSP would be deductible under paragraph 60(j).

Position: No.

Reasons: Neither the deemed distribution, nor the withdrawal, is an “eligible amount” within the meaning of section 60.01.

17 September 2018 External T.I. 2018-0751571E5 F - Adjusted cost base of property

Unedited CRA Tags
85(2), 85(3), 53(1), 53(2), 66.3(3), 66(16)
s. 66.3(3) does not apply to the cost of shares received on a ss. 85(2) and (3) wind-up of a flow-through share partnership
operation of s. 85(3)(f) on wind-up of flow-through LP not affected by s. 63.3(3)

Principales Questions: Whether the ACB of shares of the corporation distributed on the winding-up of the partnership can be greater than zero considering that the corporation is holding flow-through shares deemed to have an ACB of nil.

Position Adoptée: Yes.

Raisons: Under 85(3)(f), the ACB of the partner's interest in the partnership could be, depending of the facts, greater than zero.

17 July 2018 External T.I. 2018-0747311E5 - Geothermal Energy Project

Unedited CRA Tags
s. 1219 of the Regulations; Class 43.1(d)(vii); Classes 13, 14, 14.1
completing an exploratory geothermal well ultimately used in production generates Class 43.1 costs, not CRCE
inclusion of cost of completing geothermal exploratory wells in fact used in production
if renegotiation, further permit fees may generate Class 14 property

Principal Issues: What is the tax treatment of certain expenses incurred as part of a typical geothermal energy project?

Position: Different conclusions depending on the type of expenses incurred.

Reasons: Depends on the type of expenses incurred and the particular circumstances of the project.