Income Tax Severed Letters - 2024-06-12

Ruling

2024 Ruling 2023-0989121R3 F - Internal reorganization - 55(3)(a) and 55(3.01)(g)

Unedited CRA Tags
55(2), 55(3)(a), 55(3.01)(g)
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.01) - Paragraph 55(3.01)(g)
transfer of real estate to separate Realtyco beneath a newly-formed Holdco
Summary Under
Tax Topics - Income Tax Act - Section 75 - Subsection 75(2)
2 unrelated individuals were the settlors for each other’s family trust
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(10)
estate freeze transactions represented to be independent of subsequent transfer
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a) - Subparagraph 55(3)(a)(ii)
s. 55(3.01)(g) applied to the transfer (fresh after an estate freeze) by unrelated shareholders of Opco to a new Holdco, with an Opco realty spin-off to a new Realtyco sister

Principal Issues: Whether an internal reorganization meets the requirements of paragraphs 55(3)(a) and 55(3.01)(g).

Position: Yes. Favourable rulings given.

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

Technical Interpretation - Internal

16 April 2024 Internal T.I. 2023-0998991I7 F - Qualification fiscale de certaines sommes

Unedited CRA Tags
56(1)n), 56(3), 56(3.1)
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)
amount per week of training in short-term program leading to a skills training certificate was a bursary/ amount paid upon graduation was a bursary or a prize

Principal Issues: Quelle est la qualification fiscale des sommes qui seront versées dans le cadre de l’« Offensive liée aux formations du domaine de la construction ». Plus spécifiquement, 1) une somme de 750 $ par semaine de formation qui sera versée à certains particuliers s’étant inscrit à un programme d’études de courte durée menant à l’obtention d’une attestation d’études professionnelles et 2) une « bourse de persévérance » d’un montant de 9 000 $ à 15 000 $ qui sera versée à un particulier à l’obtention du diplôme lorsque certains critères d’admissibilité sont remplis. / What is the tax qualification of the amounts to be paid as part of the « Offensive liée aux formations du domaine de la construction »? More specifically, 1) an amount of $750 per week of training that will be paid to certain individuals who enrolled in a short-term study program leading to a Skills Training Certificate and 2) a « bourse de persévérance » of $9,000 to $15,000 that will be paid to an individual upon graduation when certain eligibility criteria are met.

Position: 1) La somme de 750 $ est une bourse d’études. 2) La « bourse de persévérance » est soit une bourse d’études ou une récompense couronnant une œuvre remarquable dans un domaine d’activité habituel / The amount of $750 is a bursary. 2) The « bourse de persévérance » is either a bursary or a prize for achievement in a field of endeavour ordinarily carried on by the taxpayer.

Reasons: 1) Nous sommes d’avis que la somme de 750 $ par semaine de formation qui sera versée à un particulier inscrit à un programme d’études menant à l’obtention d’une attestation d’études professionnelles est versée afin qu’il poursuive poursuivre ses études. 2) Nous sommes d’avis que la « bourse de persévérance » peut se qualifier à titre de bourse d’études si elle est versée pour la poursuite des études ou bien à titre de récompense couronnant une œuvre remarquable dans un domaine d’activité habituel si elle est versée pour couronner l’obtention du diplôme. / We are of the view that the amount of $750 per week of training that will be paid to an individual enrolled in a program of study leading to a Skills Training Certificate is paid to enable an individual to pursue his or her education. 2) We are of the view that the « bourse de persévérance » could qualify as a bursary if it is paid to enable an individual to pursue his or her education or as an prize in recognition of obtaining a diploma.

26 March 2024 Internal T.I. 2023-0974091I7 - Interaction between s. 220(3.1) and 227.1(1)

Unedited CRA Tags
152(8), 153(1), 160(2), 222, 227(10), 227.1(1), 227.1(2), 227.1(7), 220(3.1)
Summary Under
Tax Topics - Income Tax Act - Section 220 - Subsection 220(3.1)
10 year limitation in s. 220(3.1) applied based on the taxation years in which the underlying corporate liability arose
Summary Under
Tax Topics - Income Tax Act - Section 227.1 - Subsection 227.1(1)
assessment of a director under s. 227.1 does not restart the 10-year limitation on relief under s. 220(3.1)

Principal Issues: Does subsection 220(3.1) allow the Minister to cancel penalties and interest assessed by virtue of subsections 227(10) and 227.1(1), if they attach to a corporation’s liability that dates more than 10 calendar years back?

Position: The Minister’s discretion is limited to the interest that accrued during the 10 calendar years preceding the application under 220(3.1).

Reasons: The combined effect of subsections 227(10) and 227.1(1) is not to create a new tax debt. Under 220(3.1), the Minister has the discretion to cancel the interest and penalties payable in respect of a taxation year, provided the taxpayer makes an application within the following 10 calendar years. When analyzing the merits of the application made under 220(3.1), the Minister has to give consideration only to that portion of the director’s assessment that pertains to a penalty levied against the corporation in any of the 10 preceding calendar years as well as the interest that accrued during that period.

25 January 2024 Internal T.I. 2023-0973901I7 - Loss carryback and 152(4)(b)(ii)

Summary Under
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4)
CRA could, but is not required, to amend a statute-barred year to replace an inventory with a capital gain
Summary Under
Tax Topics - Income Tax Act - Section 161 - Subsection 161(1)
accepting an amended return so as to replace an inventory gain by a capital gain and eliminate a loss carryback would eliminate the interest that had accrued on the initial assessment

Principal Issues: Can a taxpayer request adjustments to a non-taxable year in order to change an amount previously reported as business income so that it is treated as a capital gain?

Position: Yes.

Reasons: The limitations provided in subsection 152(4) do not apply to notifications that no tax is payable. However, the Minister cannot be compelled to accede a taxpayer’s request to amend a tax return where it would not be appropriate to do so.

21 November 2023 Internal T.I. 2021-0880101I7 - Article 5(3)(b) of the Canada-Mexico Treaty

Unedited CRA Tags
Article 5(3)(b) of the Canada-Mexico Treaty, Section 28 of the Interpretation Act, Subsections 3(1) and 35(1) of the Interpretation Act.
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 5
the “six months” test in Art. 5(3)(b) of the Mexico Treaty should be day-counted (more than 183 days)
Words and Phrases
month

Principal Issues: How to compute the term “six months” contained in Article 5(3)(b) of the Canada-Mexico Treaty.

Position: For the purpose of Article 5(3)(b) of the Canada-Mexico Treaty, the term “six months” generally means the aggregation of the number of days in six months.

Reasons: The term “six months” in this context refers to the aggregate number of days measured by the number of months.

31 July 2023 Internal T.I. 2021-0876331I7 - SR&ED ITC Recapture Rules

Unedited CRA Tags
10(1), 37(1), 37(8), 127(5), 127(9), 127(13), 127(27), 127(28), 127(29), 127(32), 248(1) of the Income Tax Act; 2900(2)(a) of the Income Tax Regulations
Summary Under
Tax Topics - Income Tax Act - Section 127 - Subsection 127(32)
cost included only the cost of trees and not the costs incurred in processing them
Words and Phrases
acquire cost maintain modify transform

Principal Issues: What components of the cost of materials for which a SR&ED ITC has been claimed are included in the “cost of the particular property” to a taxpayer described under subsection 127(32) of the Act which applies for purposes of the ITC recapture rules contained in subsections 127(27), 127(28), and 127(29).

Position: Mixed question of fact and law, however, in the situation presented, it is our view that not all SR&ED material costs that are qualified expenditures and eligible for an ITC are required to be recaptured pursuant to the ITC recapture rules contained in subsections 127(27), 127(28) and 127(29) of the Act. More specifically, by virtue of the additional clarifying language in subsection 127(32), the costs will only be included in the "cost of the particular property” if they are an amount paid by the taxpayer to acquire the particular property from a transferor of the particular property and for greater certainty are not an amount paid by the taxpayer to maintain, modify, or transform the particular property.

Reasons: See reasoning below.