Income Tax Severed Letters - 2022-10-19

Technical Interpretation - External

9 June 2022 External T.I. 2022-0930081E5 - Application of paragraph 251.1(4)(c)

Unedited CRA Tags
104(1), 104(2), 251.1(1) and 251.1(4)
Summary Under
Tax Topics - Income Tax Act - Section 251.1 - Subsection 251.1(4) - Paragraph 251.1(4)(c)
reference to “trust” includes a person that happens to be a trust
Words and Phrases
reference to
Summary Under
Tax Topics - Income Tax Act - Section 251.1 - Subsection 251.1(1) - Paragraph 251.1(1)(c) - Subparagraph 251.1(1)(c)(i)
common or affiliated trustees do not by themselves cause entities to be affiliated

Principal Issues: When interpreting subsection 251.1(1) of the Act does the interpretive rule in paragraph 251.1(4)(c) of the Act apply only when dealing with the word “trust”, as occurs in paragraphs 251.1(1)(g) and (h) of the Act, or does paragraph 251.1(4)(c) of the Act apply in interpreting subsection 251.1(1) of the Act wherever the person described is a trust.

Position: The interpretative rule in paragraph 251.1(4)(c) applies for the purposes of subsection 251.1(1) and not just those paragraphs where there is a reference to a trust.

Reasons: Based on the text of the legislation and the policy objectives of the provision as outlined in the explanatory notes.

26 April 2022 External T.I. 2021-0889121E5 - Pension Income- Indian Act tax exemption

Unedited CRA Tags
81(1)(a) - ITA; 87 - Indian Act

Principal Issues: 1. How to calculate the Indian Act income tax exemption when the pension becomes payable?
2. How to calculate the Indian Act income tax exemption when the public service career includes a period of pensionable leave without pay (LWOP)?

Position: 1. If a portion of the individual’s employment income was exempt, then a similar portion of the related registered pension plan benefits will be exempt from income tax.
2. Where there is no related employment income earned during a period of pensionable LWOP, it is reasonable to consider the tax treatment of the employment income received immediately prior to commencement of the pensionable LWOP to determine the tax-exempt percentage that should be applied to the deemed employment income.

Reasons: 1. According to our general position, income that is ancillary to employment income, such as pension plan benefits, is treated in the same way as the employment income itself.
2. Prior interpretative position.

Technical Interpretation - Internal

3 February 2022 Internal T.I. 2021-0922301I7 - Art. XIII(7) Canada -US Treaty and Trusts

Unedited CRA Tags
Article XIII(7), Article XXIV(2)(a) and Article XXIV(3)(a) of the Canada-United States Income Tax Convention and section 126 Income Tax Act
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 13
CRA lacks jurisdiction to determine whether a trust can elect under Art. XIII(7) of the U.S. Treaty to avoid double taxation of a s. 104(4)(b) gain
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 24
Art. XXIV(2)(a) of the U.S. Treaty does not require s. 126(1) to provide a carryback of US tax

Principal Issues: 1. Whether a Canadian resident Trust that owns real property ("U.S. Real Property") situated in the United States ("U.S.") is eligible to make an election pursuant to paragraph 7 of Article XIII (“Art. XIII(7)”) of the Canada-U.S. Income Tax Convention (“Treaty”) to elect for U.S. federal income tax purposes, a notional sale and repurchase of the U.S. Real Property (in the same year Trust will be subject to the deemed disposition pursuant to paragraph 104(4)(b) of the Act)? 2. Whether the Trust could benefit for relief for double taxation pursuant to paragraph 2 of Article XXIV (“Art. XXIV(2)”) of the Treaty in the event the Trust cannot avail itself of the election in Art. XIII(7) of the Treaty and disposes of the U.S. Real Property in a year that is not the same as the year of the Deemed Disposition (pursuant to paragraph 104(4)(b) of the Act).

Position: 1. Cannot be determined by the Canada Revenue Agency as this issue is within the jurisdiction of the U.S. Internal Revenue Service. 2. Relief from double taxation is not available pursuant to Art. XXIV(2)(a) of the Treaty where the year of the Deemed Disposition by the Trust is not the same as the year where, for U.S. income tax purposes, the Trust is considered to have disposed of the U.S. Real Property.

Reasons: 1. It is not within the jurisdiction of the Canada Revenue Agency or the Canadian Competent Authority to determine whether the Trust is eligible to make an election pursuant to Art XIII(7) of the Treaty under the circumstances. Such determination must be made by the U.S. Internal Revenue Service as it would relate to a notional sale and repurchase of the U.S. Property for U.S. federal income tax purposes. 2. The relief from double taxation provided in Art. XXIV(2) of the Treaty is subject to the limitations imposed by subsection 126(1) of the Act.