Income Tax Severed Letters - 2022-07-06

Ruling

2021 Ruling 2020-0870761R3 - Standard Loss Consolidation Ruling

Principal Issues: Standard Loss Consolidation Ruling.

Position: See below.

Reasons: See below.

Technical Interpretation - External

17 May 2022 External T.I. 2021-0884651E5 - Cost Recovery Method in IT-426R (Archived)

Unedited CRA Tags
12(1)(g), 39(1)
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(g)
a limited partnership selling shares on an earnout basis cannot utilize the cost-recovery method
Summary Under
Tax Topics - Income Tax Regulations - Regulation 229 - Subsection 229(1)
T5013 return is not a return of income
Words and Phrases
return of income
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Canadian Resident Partnership
“Canadian resident partnership” is not a person “resident in Canada”
Words and Phrases
resident in Canada
Summary Under
Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(a)
“Canadian resident partnership” is not a person “resident in Canada” (although it is resident for income computation purposes)

Principal Issues: Whether the cost recovery method as described in IT-426R (Archived) would be applicable to a limited partnership or the limited partners in the situation described in the letter.

Position: No.

Reasons: Conditions in par. 2 of IT-426R (Archived) are not satisfied. Conditions were not designed for limited partnerships or limited partners in a situation as described in the letter.

25 February 2022 External T.I. 2020-0873761E5 F - Shareholder loan

Unedited CRA Tags
15(2), 15(2.6), 80.4(2), 80.4(3)
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2)
s. 15(2) applies separately to accrued and unpaid interest on shareholder loan
Summary Under
Tax Topics - Income Tax Act - Section 80.4 - Subsection 80.4(3) - Paragraph 80.4(3)(b)
s. 80.4(2) does not apply to accrued and unpaid interest on a loan
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.6)
s. 15(2) applies separately to accrued and unpaid interest on a shareholder loan, but s. 80.4(2) does not apply to such interest

Principal Issues: 1) Whether unpaid accrued interest on a shareholder loan is an independent debt for purposes of subsection15(2). 2) Whether subsection 80.4(2) applies on the unpaid accrued interest in the fact situation described.

Position: 1) Yes. 2) No.

Reasons: Wording of the Act.

28 January 2022 External T.I. 2020-0860211E5 - Principal Residence Exemption –

Unedited CRA Tags
Paragraph 54(e) - definition of principal residence and land in excess of one-half hectare; 40(2)(b)

Principal Issues: Whether the taxpayers are eligible to claim the principal residence exemption on the portion of their land in excess of one-half hectare.

Position: General comments provided.

Reasons: It is a question of fact whether land in excess of one-half hectare will meet the definition of a principal residence in section 54 and whether paragraph 40(2)(b) will apply to exempt all or a portion of the capital gain on disposition from income tax.