Income Tax Severed Letters - 2022-10-26

Ruling

2021 Ruling 2021-0877011R3 - Post-mortem Hybrid Pipeline

Unedited CRA Tags
84.1, 84(2), 245(2)
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2)
note issued on post-mortem pipeline effected on portfolio company paid off over 3 years commencing 1 year after transfer by estate to Newco

Principal Issues: 1) Whether section 84.1 applies to deem the Estate to have received a dividend on the disposition of shares to the new corporation or to reduce the PUC of the share of the new corporation received as.

Position: Favourable rulings provided.

Reasons: In accordance with the provisions of the Act and our previous positions.

Technical Interpretation - External

5 August 2022 External T.I. 2021-0877051E5 F - TOSI and excluded amount

Unedited CRA Tags
120.4
Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Related Business
2nd generation income not derived from business/ interest received from company employing sibling a related business/ ownership test in (c) may be satisfied through a family trust
Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Shares - Paragraph (c)
test not satisfied due to interest from company employing a sibling

Principal Issues: Opco carries on a business. Sibling 3 is the general manager and works more than 20 hours per week in the business of Opco. Sibling 1 and Sibling 2 are not involved in the business of Opco. Investco carries on an investment business. The investment portfolio of Investco was acquired using historical dividends received from Opco and is managed by a third party. In 2019, all the shares of the capital stock of Opco held by Investco were redeemed and payable by the issuance of an interest-bearing promissory note. The income of Investco for the relevant years are comprised of income from its investment portfolio and interest income on the promissory note. Sibling 1, Sibling 2, Sibling 3 hold the preferred shares of the capital stock of Investco. Trust 1, Trust 2 et Trust 3 hold the common shares of the capital stock of Investco. 1) Whether dividends paid by Investco on the common shares of its capital stock to the trusts and attributed by the trusts to Sibling 1, Sibling 2 and Sibling 3 pursuant to subsection 104(19) are subject to TOSI? 2) Whether the common shares of the capital stock of Investco would qualify as excluded shares if they were held personally by Sibling 1, Sibling 2 and Sibling 3? 3) Whether dividends deemed to have been received by Sibling 1, Sibling 2 and Sibling 3 on the redemption of the preferred shares of the capital stock of Investco are subject to TOSI?

Position: General comments provided.

Reasons: According to the law and previous positions.

10 January 2022 External T.I. 2020-0873921E5 F - SUCL- Assurance responsabilité civile

Unedited CRA Tags
125.7(1) Dépenses de loyer admissibles
Summary Under
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Qualifying Rent Expense - Variable A - Paragraph (b) - Subparagraph (b)(ii)
qualifying rent expense did not include third-party liability insurance premiums

Principales Questions: Est-ce que le montant payé à titre d’assurance responsabilité civile est inclus au sous-alinéa 125.7(1)b)(ii) de la définition de « dépenses de loyer admissibles » aux fins de la SUCL? / Is the amount paid for liability insurance included in subparagraph 125.7(1)(b)(ii) of the definition of the “qualifying rent expense” for the purpose of the CERS?

Position Adoptée: Généralement non. / Generally no.

Raisons: Le droit d’un contribuable à la SULC est calculé en fonction de ses dépenses de loyer admissibles. Bien que la définition de dépenses de loyer admissibles comprenne le terme « assurance », l’assurance responsabilité civile devrait en être exclue. Cependant, la question de savoir si une assurance particulière doit être incluse aux fins du calcul de la SUCL demeure une question de fait. / A taxpayer’s entitlement to the CERS is calculated in reference to the taxpayer’s qualifying rent expense. Although the definition of qualifying rent expense includes “insurance”, liability insurance should generally be excluded. However, it is still a question of fact as to whether particular insurance should be included when calculating a taxpayer’s entitlement under the CERS.