Income Tax Severed Letters - 2019-08-21


2019 Ruling 2018-0762581R3 - Foreign Affiliate Reorganization

Unedited CRA Tags
15(1), 56(2), 246(1), 95(1); Reg. 5907(5.1) and 5907(2)(f)
Reg. 5907(2)(f) does not apply where inventory is transferred on a foreign rollover basis
Reg. 5907(5.1) applicable to pre-wind-up transfer on a foreign tax law rollover basis
no s. 15(1) application to sale of assets of CFA2 to CFA1 at NBV preliminarily to wind-up

Principal Issues: 1) Does subsection 5907(5.1) of the Regulations apply to the transfer of capital (active business) assets in the course of the proposed foreign affiliate reorganization? 2) Does paragraph 5907(2)(f) apply in respect of the transfer of non-capital (active business) assets in the course of the proposed foreign affiliate reorganization? 3) Do subsections 15(1), 56(2) or 246(1) apply to the proposed foreign affiliate reorganization?

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

Reasons: 1) No gain or loss is recognized on the transfer of the capital assets under the relevant foreign income tax law, and the other conditions provided in subsection 5907(5.1) of the Regulations are met. 2) Since the transfer of the non-capital assets is done on a rollover basis under the relevant foreign income tax law, the conditions of paragraph 5907(2)(f) are not met. 3) No benefit is being conferred.

Technical Interpretation - External

29 July 2019 External T.I. 2018-0784701E5 - Rent from real/immovable properties - furnishings

Unedited CRA Tags

Principal Issues: Whether the inclusion of furnishings in a rental unit, for which a single rental payment is charged, requires that the rental payment be allocated as between real property and furnishings for purposes of the definition of "rent from real or immovable properties" in subsection 122.1(1).

Position: No. Provided that the furnishings are of a type typically or usually found in a residence, there is no need to allocate a portion of the rental payments to the furnishings; the entire amount of rent can be treated as "rent from real or immovable properties".

Reasons: Other CRA positions regarding the rental of furnished premises.

17 July 2019 External T.I. 2018-0777951E5 F - Avantage automobile

Unedited CRA Tags
6(1)e), 6(1)k), 6(2); 200(2) et (3) RIR
where 2 related employers, only a single benefit under the formula is calculated for each automobile
where 2 related employer, ss. 6(1)(e) or (k) benefit can be reported by either employer
two related joint employers should agree on which of them will T4 an employee for the single s. 6(1)(e) or (k) benefit for the car provided by one of them to him

Principales Questions: Comment calculer les avantages provenant d’une automobile mise à la disposition d’un employé qui occupe deux emplois distincts.

Position Adoptée: Le calcul doit se faire en fonction de chaque automobile.

Raisons: Libellé de la Loi et existence d’un seul avantage.

14 June 2019 External T.I. 2019-0808411E5 - Application of 15(2.4) to home purchase loan

Unedited CRA Tags
“qua employee” status where the individual also acquires 3% of the shares

Principal Issues: Whether paragraph 15(2.4)(b) applies to preclude the application of subsection 15(2) where a housing loan is made to an incoming employee whom is a minority shareholder.

Position: Depends on the particular facts.

Reasons: If the shareholder (or a spouse or common law partner) received the housing loan from the corporation in an employment capacity, and not in a shareholder capacity, and if the housing loan repayment is within a reasonable time then the exception provided in subsection 15(2.4) should apply to preclude the application of subsection 15(2). More information is required to make a determination.

Technical Interpretation - Internal

8 August 2019 Internal T.I. 2018-0776661I7 - Bitcoin Mining

Unedited CRA Tags
3, 9(1)
bitcoin mining income generally recognized on basis of value of Bitcoins received

Principal Issues: Whether a Bitcoin "miner" should include the value of a Bitcoin in income when it is mined.

Position: Yes.

Reasons: The Bitcoin is received by the "miner" as consideration for services rendered.

30 April 2019 Internal T.I. 2019-0793481I7 - Application of Paragraph 40(3.4)(b)

Unedited CRA Tags
40(3.4), 40(3.5)
loss was de-suspended when CFA-formed-on-merger for purposes of s. 40(3.5)(c)(i) was wound-up
a loss that was suspended under s. 40(3.5)(c)(i), can be de-suspended by winding-up the CFA referenced under s. 40(3.5)(c)(i)

Principal Issues: Whether the transactions noted would result in a previously suspended capital loss becoming available.

Position: Yes.

Reasons: Application of paragraph 40(3.4)(b).