Income Tax Severed Letters - 2021-10-06

Ruling

2021 Ruling 2020-0869161R3 - Loss Carryforwards and 88(1.1)

Unedited CRA Tags
54(2)(a)(ii), 88(1) and 88(1.1)
Summary Under
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1.1)
accessing the losses under s. 88(1.1) of a Lossco with nominal assets
Summary Under
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(b)
pre-wind-up PUC reduction to no less than the subsidiary's asset cost amount

Principal Issues: Can non-capital losses of a subsidiary be claimed by a parent on a winding-up as a result of a two-step loss acquisition where the loss business carried on by the subsidiary and the shares of the subsidiary are acquired in separate transactions.

Position: Yes.

Reasons: Consistent with prior positions.

Technical Interpretation - External

26 February 2021 External T.I. 2019-0825751E5 - Whether a NPO has a profit purpose

Unedited CRA Tags
149(1)(l)

Principal Issues: 1. Can a NPO add a secondary source of income? 2.Can an NPO fund a secondary business from a reserve accumulated from excess member contributions? 3. Can an NPO provide services to non-members?

Position: 1No, a NPO cannot have a secondary source of income. 2 No, a NPO cannot fund a secondary business. 3. Yes.

Reasons: 1 This would indicate a profit purpose. 2. The accumulation of a reserve large enough to fund a secondary business is an indication of a profit purpose. 3. There is nothing in the legislation that would prevent a NPO from providing services to non-members, provided it does not have a profit purpose.

22 February 2021 External T.I. 2019-0811621E5 - Exempt Employment income and Pension Buyback

Unedited CRA Tags
81(1)(a); Indian Act s.87

Principal Issues: An individual was exempt from tax on their employment income by virtue of section 87 of the Indian Act and paragraph 81(1)(a) of the Income Tax Act. The individual terminated their employment, and transferred the cumulative value of their registered pension plan (RPP) to a registered retirement savings plan / locked in retirement account (RRSP/LIRA). The individual then re-purchased this period of service using the tax exempt funds held in the RRSP/LIRA. Would the RPP payments from the pension buyback be tax exempt?

Position: Yes.

Reasons: In our opinion, since the funds used to repurchase the past service were from the RRSP/LIRA from the original RPP, that portion of the RPP payments relating to the exempt period would remain tax exempt.