Income Tax Severed Letters - 2019-07-10


2019 Ruling 2019-0792771R3 - Supplemental Ruling

Unedited CRA Tags
107.4(2.1) and 107.4(2)(a)

Principal Issues: Additional ruling in respect of our letter 2018-077896 requested regarding how subsection 107.4(2.1) will apply.

Position: Ruling 1.5.1 in the original ruling letter is revised to incorporate the request.

Reasons: The law is clear.

2018 Ruling 2018-0778961R3 - Partial transfer to new funds

Ruling 1.5.1 modified by 2019-0792771R3.
Unedited CRA Tags
107.4(1); 107.4(2.1); 107.4(3); 132(6); 132(6.1); 132.2(3); 132.2(4); 132.2(6) and 245(2)
use of s. 107.4 transfers to split up ETFs
use of s. 107.4(2.1) in transfer of portion of MFT to a new MFT

Principal Issues: 1) Will the proposed transfers of the Transfer Percentages to the corresponding New Funds be qualifying dispositions as described in subsection 107.4(1)? 2) Will certain proposed transfers of all of the property of a Transferor to a Tranferee be qualifying exchanges as described in section 132.2? 3) Will GAAR apply?

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

Reasons: 1) Meets the requirements. 2) Meets the requirements. 3) There is no abuse or misuse.

Ministerial Correspondence

10 May 2019 Ministerial Correspondence 2019-0805901M4 - Contract Drivers - Personal Services Business

Unedited CRA Tags
125(7) ("personal services business")

Principal Issues: Factors to consider in determining whether incorporated contract truck drivers are personal services businesses.

Position: Depends on the facts of each circumstance.

Reasons: The legislation.

Technical Interpretation - External

24 May 2019 External T.I. 2019-0802331E5 - TOSI and excluded shares

Unedited CRA Tags
“income” references inter alia taxable capital gains of the corporation without deduction for allowable capital losses

Principal Issues: 1. Whether capital gains are to be included in the determination of "income" for purposes of paragraph (c) of the "excluded shares" definition in subsection 120.4(1). 2. If capital gains are to be included, what would constitute a corporation's gross income with respect to those gains?

Position: 1. Taxable capital gains are to be included in determining the income of a corporation under paragraph (c) of the "excluded shares" definition. 2. Only the amount of a corporation's taxable capital gains for the year, without considering offsetting allowable capital losses, if any, is to be included.

Reasons: See below.

Technical Interpretation - Internal

4 June 2019 Internal T.I. 2018-0783441I7 F - Sale of land by a resident of Hong Kong

Unedited CRA Tags
248(1) "taxable Canadian property"
Canadian land was not Treaty-exempt even where it did not generate income

Principal Issues: Is a Hong Kong resident who disposes of non-income producing land situated in Canada exempt from tax under paragraph 5 of Article 13 of the Canada-Hong Kong Tax Convention (the “Convention”)?

Position: No.

Reasons: Canada is allowed to tax the capital gain under paragraph 1 of Article 13 of the Convention since land is considered to be immovable property, as defined under paragraph 2 of Article 6 of the Convention. The fact that the land was not producing any income from business or property is not relevant in determining if paragraph 1 of Article 13 of the Convention applies.