Income Tax Severed Letters - 2019-11-20

Ruling

2019 Ruling 2018-0789911R3 F - Post-mortem Pipeline

Unedited CRA Tags
20(1)(c), 84(2), 84.1, 245(2)
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2)
pipeline where immediate receipt of cash to pay taxes payable under s. 70(5)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i)
deductibility of interest on loan used to redeem shares that had distributed accumulated profits

Principales Questions: 1) Whether subsection 84(2) applies to the proposed transactions. 2) Whether section 84.1 will apply to deem the Estate to have received a dividend upon the disposition of shares to the new company. 3) Whether subsection 84.1 will apply to reduce the PUC on the shares of the new company received as consideration for the disposition of the shares. 4) Whether interests on various loans will be deductible pursuant to paragraph 20(1)(c). 5) Whether subsection 245(2) applies to the proposed transactions.

Position Adoptée: 1) No. Favorable ruling given. 2) No. Favorable ruling given. 3) No. Favorable ruling given. 4) Yes. Favorable ruling given. 5) No. Favorable ruling given.

Raisons: In accordance with the provisions of the Act and our previous positions.

Technical Interpretation - External

3 October 2019 External T.I. 2019-0809641E5 - Transfer of benefits to a UK SIPP

Principal Issues: (1) Whether a transfer from a workplace pension plan located in the UK to a UK SIPP established by a Canadian resident individual would be taxable under subparagraph 56(1)(a)(i) of the Act. (2) Whether a transfer from a UK SIPP to another UK SIPP established by the individual would be taxable. (3) Whether income and capital gains earned in the two SIPPs would be taxable.

Position: (1) Yes. (2) No. (3) Yes. Any income or capital gain earned in connection with the SIPP would be generally taxable in Canada on a current, annual basis.

Reasons: (1) The individual would be considered to have constructively received the transferred amount. (2) The SIPP is not a pension plan for the purposes of the Act, nor an employee benefit plan under the Act. (3) There is no exemption under the Canada-UK Income Tax Convention. However, to the extent the individual would be subject to tax in the UK in connection with the SIPP, a foreign tax credit may be available.

6 August 2019 External T.I. 2019-0792001E5 F - Tax on split income and excluded business

Unedited CRA Tags
120.4
Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Amount - Paragraph (e) - Subparagraph (e)(ii)
no excluded amount where excluded business had ceased in prior year
Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1.1) - Paragraph 120.4(1.1)(a)
paid but non-worked days do not count
Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1.1) - Paragraph 120.4(1.1)(d) - Subparagraph 120.4(1.1)(d)(ii)
same-year limitation of the exclusion for income derived from the proceeds of an excluded business

Principal Issues: 1) Whether the "excluded business" exception will apply in relation to two hypothetical fact scenarios that involve (a) the disposition of the business assets in a previous taxation year or (b) the disposition of the shares of a corporation in a previous taxation year, which corporation carried on the relevant business; 2) Whether the 20 hour per week threshold test in paragraph 120.4(1.1)(a) can take into account the time period for which the employee received remuneration while on paid leave.

Position: 1) No, in both instances; 2) No.

Reasons: 1) In each scenario, the amount would not be derived from an excluded business of the individual for the year; 2) The test in paragraph 120.4(1.1)(a) specifically refers to the average number of hours worked per week.