Income Tax Severed Letters - 2021-10-20

Ruling

2020 Ruling 2020-0847681R3 - Loss consolidation arrangement

Unedited CRA Tags
20(1)(c), 55(2)

Principal Issues: Whether the LCA is acceptable.

Position: Yes

Reasons: The proposed transactions fall within CRA's policy position.

Technical Interpretation - External

4 October 2021 External T.I. 2021-0876292E5 - Deduction under subsection 9(1) or 20(1)(hh)

Unedited CRA Tags
9(1); 12(1)(x); 18(1)(a); 20(1)(hh); 125.7(1); 125.7(2); 152(3.4)

Principal Issues: Is a voluntary repayment of the CEWS deductible in computing a taxpayer's profit from a business or property under subsection 9(1)? If so, in which taxation year would the deduction be permitted? If the CEWS was included in income under paragraph 12(1)(x) of the Act, would the voluntary repayment be deductible pursuant to paragraph 20(1)(hh) of the Act?

Position: Where the CEWS was originally included in computing a taxpayer’s profit from a business or property under subsection 9(1) of the Act, if the eligible entity were to complete the necessary steps to cancel the relevant CEWS application(s), a deduction would be permitted in computing a taxpayer's profit from a business or property under subsection 9(1) of the Act, and would not be prohibited by the general limitation in 18(1)(a) of the Act, in the year there is a legal obligation to repay an amount. A deduction would also be permitted under paragraph 20(1)(hh) if an amount is repaid by a taxpayer in the year, pursuant to a legal obligation to repay all or part of a particular amount that was included under paragraph 12(1)(x) of the Act in computing income for the year or a preceding taxation year. A legal obligation, for purposes of subsection 9(1) and paragraph 20(1)(hh), would generally arise at the time the eligible entity completes the necessary steps to cancel the relevant CEWS application(s).

Reasons: See below.

Conference

30 October 2019 TEI Roundtable Q. 2, 2019-0828621C6 - 2019 TEI Conference – Question 2

Principal Issues: Update regarding S2-F3-C2.

Position: See below.
REASON: See below.

Technical Interpretation - Internal

19 October 2021 Internal T.I. 2021-0913751I7 - Eligible educator school supply tax credit

Unedited CRA Tags
122.9

Principal Issues: Whether a teacher can claim the eligible educator school supply tax credit for teaching supplies purchased and used during a period when their classroom was required to temporarily move to an online platform as a result of the COVID-19 pandemic

Position: Likely yes, assuming the remaining requirements for the credit are met.

Reasons: Where a classroom or a school is required to move to a temporary online learning platform as a result of the COVID-19 pandemic, it is our opinion that where all the requirements of section 122.9 have been met, an eligible educator would not be prevented from claiming amounts for the school supply tax credit, even though the classroom is not within the physical structure of an elementary or secondary school or a regulated child care facility. We view the online classroom in this situation as an extension of the physical classroom that is required due to the current pandemic situation.