Income Tax Severed Letters - 2020-01-22

Ruling

2018 Ruling 2018-0771891R3 - Standard Loss Consolidation

Unedited CRA Tags
245; 20(1)(c); 112(1); 55(2); 88(1.1)

Principal Issues: Whether Lossco would be entitled to apply existing non-capital losses against the interest income that would be generated as part of particular loan that would be made under the loss consolidation transaction and whether the accompanying interest expense would be deductible by Profitco.

Position: Yes.

Reasons: The proposed transactions conform to our requirements for these types of loss consolidation rulings. The proposed transactions would be legally effective and commercially realistic.

Technical Interpretation - External

1 August 2019 External T.I. 2018-0768561E5 - Application Administrative Position on US LLPs & LLLP

Unedited CRA Tags
248(1) "corporation"
Summary Under
Tax Topics - Income Tax Act - Section 96
no ability for an otherwise grandfathered LLLP to treat itself prospectively as a corporation
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Corporation
LLLPs cannot be viewed as corporations solely on a prospective basis

Principal Issues: Further to the CRA's administrative position that a LLP or LLLP formed before April 26, 2017 that would otherwise be viewed as a corporation by the CRA may in certain circumstances continue to be viewed as a partnership, what are the Canadian tax implications of the LLLP described in this letter subsequently taking the position that it is a corporation for Canadian tax purposes?

Position: A grandfathered LLLP that subsequently takes the position that it is a corporation for Canadian tax purposes should be considered to have taken inconsistent filing positions between partnership and corporate treatment. As a result, the CRA may issue assessments or reassessments to the particular entity and/or any member of the entity in respect of one or more taxation years, on the basis that the entity was a corporation. We relayed this request to audit for response because it is of an administrative nature.

Reasons: Consistent with prior public announcements (IFA 2017 and 2018).

Technical Interpretation - Internal

5 December 2019 Internal T.I. 2017-0683831I7 - Prescribed Rates and Undue Benefits

Unedited CRA Tags
149.1(1), 188.1(4), (5), 189(1), (3)-(4), Regulation 4301
Summary Under
Tax Topics - Income Tax Act - Section 188.1 - Subsection 188.1(4)
the making of a loan at the prescribed rate under s. 189(1) does not prelude a penalty under s. 188.1(4)
Summary Under
Tax Topics - Income Tax Act - Section 189 - Subsection 189(1)
use of prescribed rate does not insulate lender foundation from undue benefit rules

Principal Issues: Can a loan advanced by a charity to a person at prescribed rates result in an undue benefit?

Position: Possibly, it is a question of fact.

Reasons: The definition of undue benefits is broad. All factors must be considered when determining whether an undue benefit exists.