Income Tax Severed Letters - 2020-06-30

Ruling

2020 Ruling 2019-0819971R3 - Loss Consolidation Ruling

Unedited CRA Tags
20(1)(c), 9, 12(1)(c), 12(1)(x), 112, 245
creation of New Lossco beneath Lossco public parent followed by its drop-down and wind-up into sub SFI Profitco

Principal Issues: Whether a particular loss consolidation arrangement is acceptable. In this arrangement, Lossco obtains a daylight loan from a third party bank and uses the proceeds to make an interest bearing loan to NewLossco, which uses the proceeds to invest in preferred shares of Newco. NewLossco will incur a loss carryforward balance which will be made available to Profitco when NewLossco is wound-up into Profitco. The main issues are whether Lossco would be entitled to apply existing non-capital losses against the interest income received on the loan; and whether NewLossco would be entitled to deduct the interest expense paid on the loan and the dividends received on the Newco preferred shares.

Position: Yes.

Reasons: The proposed transactions conform to our requirements for these types of loss consolidation rulings, in this case on the basis that the entities involved are related and affiliated. The proposed transactions would be legally effective and commercially plausible.

Technical Interpretation - External

8 April 2020 External T.I. 2020-0839581E5 - TOSI - "Excluded Shares"

Unedited CRA Tags
120.4

Principal Issues: Clarification of our comments in Technical Interpretation 2019-081943 in respect of paragraph (c) of the definition of "excluded shares" found in subsection 120.4(1).

Position: See below.

Reasons: See below.

12 March 2020 External T.I. 2019-0823261E5 - Specified educational program & T2202

Unedited CRA Tags
118.6; Reg. 203

Principal Issues: (i) Whether XXXXXXXXXX's PD Program catalogue is considered a specified educational program as defined in subsection 118.6(1); and
(ii) Can the institution only issue T2202's when specifically requested by a student?

Position: (i) No; and (ii) No.

Reasons: (i) The definitions of qualifying and specified educational program refer to a program of study. The PD Program offered is more akin to a catalogue or inventory of courses and seminars available to members.
(ii) A designated educational institution is required to issue a T2202 for each qualifying student.