Income Tax Severed Letters - 2022-11-16

Ruling

2022 Ruling 2021-0904611R3 F - Corporate reorganization and trust to trust transfer

Unedited CRA Tags
86(2), 129(1.2), 104(1), 191(2)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition - Paragraph (f)
para. (f) applicable to transfer of shares for no consideration to new trust for same incapacitated minor beneficiary
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 108 - Subsection 108(1) - Trust - Paragraph (g)
interests in inter vivos trust were vested indefeasibly in its minor beneficiary with special needs

Principal Issues: See below.

Position: Favourable rulings provided.

Reasons: See below.

2021 Ruling 2021-0907591R3 F - Post-mortem Pipeline

Unedited CRA Tags
84(2), 84.1, 245(2)
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2)
pipeline transactions (coupled with s. 88(1)(d) bump) for which the deceased had claimed a capital gains deduction
Summary Under
Tax Topics - Income Tax Act - Section 84.1 - Subsection 84.1(2) - Paragraph 84.1(2)(a.1) - Subparagraph 84.1(2)(a.1)(ii)
promissory notes issued on pipeline limited by previous s. 110.6(2.1) deduction

Principal Issues: 1) Whether section 84.1 will apply to reduce the PUC on the shares of the new corporation received as consideration for the disposition of the shares. 2) Whether section 84.1 will apply to deem the estate to have received a dividend after the disposition of shares to the new corporation. 3) Whether subsection 84(2) will apply to the proposed transactions. 4) Whether subsection 245(2) will apply to the proposed transactions.

Position: 1) No. Favorable ruling given. 2) No. Favorable ruling given. 3) No. Favorable ruling given. 4) No. Favorable ruling given.

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

Technical Interpretation - External

11 October 2022 External T.I. 2022-0948581E5 - Zero-emission automotive equipment (Class 56)

Unedited CRA Tags
Regulation 1104(4), Class 56 of Schedule II of the Regulations

Principal Issues: Does certain zero-emission compact heavy equipment used in construction qualify for the enhanced first-year CCA rate afforded by Class 56 of Schedule II of the Regulations?

Position: Likely yes, provided that all the conditions are met. General Comments provided.

29 September 2022 External T.I. 2021-0882411E5 - Partnership wind-up - life insurance

Unedited CRA Tags
98(3), 98(5), 148(7)
Summary Under
Tax Topics - Income Tax Act - Section 148 - Subsection 148(7)
the s. 98(3) or (5) rollover provisions can apply to a distribution on the partnership winding-up of a life insurance policy
Summary Under
Tax Topics - Income Tax Act - Section 98 - Subsection 98(3)
s. 98(3) rollover provisions take precedence over s. 148(7)
Summary Under
Tax Topics - Income Tax Act - Section 98 - Subsection 98(5)
s. 98(5) precludes a gain under s. 148(7)

Principal Issues: 1- In the hypothetical scenario provided, where a Canadian partnership that owns an interest in an exempt life insurance policy ceases to exist and the requirements of subsection 98(3) are otherwise met, will subsection 98(3) take precedence over subsection 148(7) such that there would be a tax-deferred rollover of the life insurance policy? 2- In the hypothetical scenario provided, where a Canadian partnership that owns an interest in an exempt life insurance policy ceases to exist and the conditions under subsection 98(5) are otherwise met, will subsection 98(5) take precedence over subsection 148(7) such that there would be a tax-deferred rollover of the life insurance policy?

Position: 1 & 2 – Generally, yes.

Reasons: Based on the legislation.

28 September 2022 External T.I. 2021-0882441E5 - Life insurance Parentco/Subco arrangements

Unedited CRA Tags
9; 12(1)(x); 15(1); 56(2); 246(1)

Principal Issues: In light of the 2016 legislative amendments to paragraph (d) of the definition of "capital dividend account" in subsection 89(1), can we confirm the CRA's position regarding the applicability of subsections 246(1), 56(2), section 9, or paragraph 12(1)(x) to a life insurance arrangement involving a Parentco as the policyholder and a Subco as the beneficiary (either revocable or irrevocable).

Position: Prior positions remain unchanged. We are unable to provide any further comments on the applicability of the aforementioned provisions to the limited circumstances described.

Reasons: The determination of whether these provisions apply to a particular arrangement is a question of fact that can only be ascertained on a case-by-case basis following a review of all the facts and circumstances of the particular arrangement.

2 September 2022 External T.I. 2021-0917491E5 - CPAP - continuous positive airway pressure machine

Unedited CRA Tags
118.2(2)(i); 118.2(2)(m); Regulations 5700(c)

Principal Issues: Whether the cost of distilled water would qualify as an eligible medical expense for the purpose of the medical expense tax credit, when used to operate a continuous positive airway pressure (CPAP) machine for sleep apnea.

Position: No.

Reasons: While amounts paid for a CPAP machine, including replacement parts, may qualify as an eligible expense under paragraph 118.2(2)(m) of the Act and paragraph 5700(c) of the Regulations, the wording in these provisions is not sufficiently broad to allow for expenses associated with operating the machine.