Income Tax Severed Letters - 2019-10-23

Ruling

2018 Ruling 2018-0761771R3 - Structured settlement

Unedited CRA Tags
56(1)(d)

Principal Issues: Will the lump-sum payments along with the payments to be received pursuant to the structured settlement be taxable in the claimant's hands under the circumstances described?

Position: No.

Reasons: The lump sum payments are general damages as described in Interpretation Bulletin IT-365R2, and the terms of the structured settlement are consistent with the CRA's position as set out in paragraph 5 of IT-365R2.

Technical Interpretation - External

12 September 2019 External T.I. 2019-0802301E5 - Annuity purchased from foreign pension

Unedited CRA Tags
56(1)(a); 56(1)(d); 60(a); 12.2(1)
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(a) - Subparagraph 56(1)(a)(i)
no rollover treatment when an annuity is purchased out of a foreign pension plan
Summary Under
Tax Topics - Income Tax Act - Section 147.4 - Subsection 147.4(1)
s. 147.4(1) permits non-inclusion where annuity is purchased out of RPP

Principal Issues: What are the tax consequences to a Canadian resident taxpayer who acquires an annuity contract on the winding up of a foreign pension plan?

Position: The taxpayer is considered to have received a pension benefit equal to the fair market value of the annuity contract at the time it is acquired and is required to include this amount in income under subparagraph 56(1)(a)(i). Depending on the characteristics of the annuity, the annuity will be subject to annual taxation under either section 12.2 or paragraphs 56(1)(d) and 60(a).

Reasons: There is no tax-deferred rollover in the Act for annuities purchased from foreign pension plans. The rollover in section 147.4 applies only to RPPs.

19 August 2019 External T.I. 2019-0814181E5 - TOSI - interpretation of "excluded business"

Unedited CRA Tags
120.4 (1), 120.4 (1.1)
Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Business - Paragraph (b)
drop-down of business does not restart the 5-year count
Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Amount - Paragraph (e) - Subparagraph (e)(ii)
5-year excluded business exception can take into account involvement while business held by predecessor

Principal Issues: Whether the “excluded business” exception would apply in a scenario involving the transfer of a business initially operated as a sole proprietorship to a corporation, and in scenarios involving the amalgamation of corporations.

Position: General comments provided. See below.

Reasons: See below.

Technical Interpretation - Internal

3 July 2019 Internal T.I. 2019-0806021I7 - Automobile Allowance

Unedited CRA Tags
6(1)(b), 6(6), 81(3.1), 7306 ITR

Principal Issues: Whether XXXXXXXXXX assistance provided to authorized employees under the XXXXXXXXXX is taxable and what elements or factors determine whether this kind of benefit is taxable?

Position: Yes.

Reasons: The XXXXXXXXXX assistance paid under the XXXXXXXXXX Directive appears to be an allowance in respect of personal travel that must be included in the employee’s employment income as an allowance in respect of a personal or living expense.