Income Tax Severed Letters - 2021-02-24

Ruling

2020 Ruling 2018-0772291R3 F - Multi-wings split-up net asset butterfly 55(3)(b)

Unedited CRA Tags
55(2), 55(3)b), 55(3.1), 80, 186(4), 191.1, 245(2)
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution
split-up butterfly of investment co (DC) between three siblings' transferees (TCs) with extinguishment of TC notes on DC wind-up
Summary Under
Tax Topics - Income Tax Act - Section 186 - Subsection 186(1) - Paragraph 186(1)(b)
split-up butterfly that avoids Pt IV tax circularity by a subsequent wind-up of the distributing corporation
Summary Under
Tax Topics - Income Tax Act - Section 80 - Subsection 80(1) - Forgiven Amount
no application of s. 80 where notes owing by corporation to its shareholders are distributed to them on its winding-up

Principales Questions: Whether the proposed transactions meet the requirements of paragraph 55(3)(b).

Position Adoptée: Yes.

Raisons: Based on the Act, CRA publications and taxpayer representations.

Technical Interpretation - External

22 February 2021 External T.I. 2020-0874991E5 - Proration during COVID-19 workplace restrictions

Unedited CRA Tags
81(1)(a)

Principal Issues: How to calculate the prorated exemption under Guideline 1 when a First Nation individual is no longer performing a portion of their employment duties on a reserve as a result of the COVID-19 pandemic and workplace restrictions.

Position: A First Nation individual can continue to calculate the prorated exemption based on the number of days or hours during which the individual would normally have worked on a reserve but was forced to work off reserve because of the COVID-19 pandemic.

Reasons: As an administrative matter and under the extraordinary circumstances, the CRA will consider the number of days or hours, as the case may be, during which a First Nation individual was forced to work off reserve only because of the workplace restrictions, to count towards the prorated exemption under Guideline 1.

26 January 2021 External T.I. 2020-0857841E5 - HCSA

Unedited CRA Tags
6(1)(a), 248(1) - PHSP definition
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Private Health Services Plan
further COVID-related extension of the period for carrying forward unused HCSA credits
Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) - Subparagraph 6(1)(a)(i)
extension during COVID of the period for carrying forward unused HCSA credits

Principal Issues: Whether the CRA administrative relief provided in document 2020-084675 for health care spending accounts (“HCSA”) should be revised to allow a HCSA which has unused credits expiring between March 15, 2020 and March 16, 2021

Position: Yes, in these extraordinary circumstances (due to the COVID -19 pandemic), a HCSA that qualifies as a PHSP and which has unused credits expiring between March 15, 2020 and March 16, 2021, could allow a one-time carry forward of those unused credits for a reasonable period to allow members to access services that were otherwise restricted during the COVID-19 outbreak. A period of up to 12 months would generally be considered reasonable and would not, in and of itself, disqualify the HCSA from being a PHSP.

8 December 2020 External T.I. 2020-0869961E5 - DSLP and voluntary exit program

Unedited CRA Tags
Regulation 6801(a)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 6801 - Paragraph 6801(a) - Subparagraph 6801(a)(v)
DSLP cannot be used as a pre-retirement vehicle

Principal Issues: 1. Will taking a paid leave under a Voluntary Exit Option program immediately after the DSLP leave period meet the condition under subparagraph 6801(a)(v)? 2. If not, what are the tax consequences?

Position: 1. No. 2. Once the employee or employer becomes aware that the DSLP rules will not be met, the arrangement ceases to be a DSLP. The arrangement should be terminated and all deferred amounts plus any unpaid interest paid to the employee within a reasonable timeframe. The amounts would be included in the employee's income for the year of receipt. If the amounts are not paid within a reasonable timeframe, the SDA rules will apply to include the amounts in the employee's income for the year the arrangement ceases to be a DSLP.

Reasons: 1. A paid leave does not constitute a return to regular employment. 2. To avoid the SDA rules, all amounts must be paid from the arrangement within a reasonable timeframe.

30 November 2020 External T.I. 2019-0832681E5 - Indian's employment income

Unedited CRA Tags
81(1)(a) of the Income Tax Act and 87(1)(b) of the Indian Act

Principal Issues: Is the employment income earned by the Employees of an Indian organization in connection with the Employer’s non-commercial activities performed exclusively for the benefit of Indians who live both on and off reserve exempt from tax under section 87 of the Indian Act regardless of where their office is located?

Position: Unlikely.

Reasons: The decisions held in court cases confirm that benefiting a reserve is not, in and of itself, sufficient to situate the income on a reserve.