Income Tax Severed Letters - 2022-04-13

Ruling

2021 Ruling 2019-0827591R3 - Split-up butterfly

Unedited CRA Tags
subsections 55(2), (3.1)

Principal Issues: Whether the proposed split-up butterfly transactions described below meet legislative and administrative requirements?

Position: Transactions meet requirements.

Reasons: Consistent with law and administrative requirements.

Technical Interpretation - External

12 January 2022 External T.I. 2021-0894121E5 - Retrofit loans for homeowners

Unedited CRA Tags
9, 12(1)(x), 20(1)(c), 20(1)(e), 20(1)(e.1), 80.4(1)

Principal Issues: What are the tax implications to Canadian homeowners who receive a loan under stream 1 of the Canada Greener Homes Loan Initiative?

Position: The amount of the loan received will not be included in the income of the recipient for income tax purposes. Interest expense, default charges, customary costs, and expenses for administration, monitoring and enforcement will not be deductible for income tax purposes.

Reasons: The loans under stream 1 of the Canada Greener Homes Loan Initiative are obtained for personal use, for purposes of acquiring retrofits to improve the primary residence of the homeowner.

2 November 2021 External T.I. 2021-0898151E5 - GST/HST Quick Method of Accounting

Unedited CRA Tags
9(1), 12(1)(x),12(2.2), 13(7.1), 18(1)(a), 53(2)(k), 248(16)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(16)
GST/HST Quick Method generally results in a s. 12(1)(x) inclusions, but also increases expense deductions since no s. 248(16) inclusion
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x)
use of the GST/HST Quick Method generally results in s. 12(1)(x) inclusions, but also increases expense deductions

Principal Issues: 1. What is the correct treatment under the Income Tax Act for the GST/HST differential under the Quick Method of accounting when GST/HST registrants remit a lower amount of GST/HST without claiming input tax credits on amounts paid. 2. Is the T2125 correct as it pertains to the calculation of government assistance when the Quick Method is used. 3. Are instructions on the T2125 correct for taxpayers who are using the Quick method.

Position: 1. The amount is taxable. 2. The calculation of government assistance on the T2125 when using the Quick method is correct. 3. The note that provides instructions on how to expense amounts when using the Quick Method is misleading and needs to be clarified.

Reasons: The difference between the GST/HST collectible or collected on taxable supplies and the amount of net GST/HST remitted in accordance with the Quick method is deemed to be government assistance by subsection 248(16) and included in income, since this difference is to be retained by the registrant in lieu of claiming ITCs for the GST/HST paid or payable on current expenses and inventory.

Conference

23 January 2022 TEI Roundtable, 2021-0913421C6 - CEWS - Foreign exchange as qualifying revenue

Unedited CRA Tags
125.7
Summary Under
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Qualifying Revenue
annual balance sheet translation adjustments to FX-denominated balances are not included in qualifying revenue for CEWS purposes

Principal Issues: Questions submitted by the TEI: (1) would unrealized foreign exchange gain and losses be qualifying revenue? (2) would realized foreign exchange gain and losses be qualifying revenue?

Position: (1) No. (2) Possibly.

Reasons: (1) Unrealized foreign exchange gains and losses do not result in an inflow of cash, receivables, or other consideration. (2) While realized foreign exchange gains and losses likely result in an inflow, whether they arise in the course of the ordinary activities of the entity is a question of fact.