Income Tax Severed Letters - 2024-06-26

Ruling

2024 Ruling 2023-0994301R3 F - Loss consolidation arrangement

Unedited CRA Tags
20(1)c), 15(1), 55(2), 56(2), 112, 186(2), 186(4), 187.1, 191, 245(2), 246(1)
Summary Under
Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(a)
loss-shifting transactions beneath a non-wholly owning Canadian LP

Principal Issues: Whether Lossco would be entitled to apply existing non-capital losses against the interest income that would be generated as part of particular loan that would be made under the loss consolidation transaction and whether the accompanying interest expense would be deductible by Profitco.

Position: Yes.

Reasons: The proposed transactions conform to our requirements for these types of loss consolidation rulings. The proposed transactions would be legally effective and commercially plausible.

Technical Interpretation - External

16 February 2024 External T.I. 2023-0984301E5 - Code 5 - Reducing inclusion under para 12(1)(x)

Unedited CRA Tags
12(1)(x), 12(2.2), 13(7.1), 13(7.4), 53(2)(k), 53(2.1)
Summary Under
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7.1)
s. 13(7.1) applied automatically in priority to s. 12(1)(x) (or 13(7.4), if election) re government assistance for constructing or refurbishing accommodation
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(2.2)
s. 12(2.2) election can be made for statutory deductions or amounts deductible under s. 9 in respect of affordable housing project
Summary Under
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A
cost of building includes cost of construction but not statutory deductions or amounts deductible under s. 9
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x) - Subparagraph 12(1)(x)(vi)
s. 13(7.1) (or s. 53(2)(k)) overrides the application of s. 12(1)(x) re government assistance to construct or repair affordable housing

Principal Issues: Whether the income inclusion for government assistance under subparagraph 12(1)(x)(iv) could be can be reduced under the Act.

Position: Yes, depending on what the government assistance was received for.

Reasons: See analysis.

31 January 2024 External T.I. 2024-1002821E5 - Employer Crowdfunding Contributions

Unedited CRA Tags
6(1)(a)

Principal Issues: Whether an employer’s contribution to an employee’s crowdfunding page set up to raise funds for cancer treatment costs would result in a taxable benefit to the employee.

Position: Question of fact. Voluntary contributions received by an individual in their personal capacity are generally not required to be included in income.

Reasons: Previously published position.

Technical Interpretation - Internal

18 April 2023 Internal T.I. 2020-0864031I7 - Application of subparagraph 95(2)(a)(i)

Unedited CRA Tags
95(2)(a)(i); 95(1) "investment business"; 95(2)(b)(i)
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(i)
CFA1’s lending activity that depends on services provided by CFA2 is not directly related to that servicing activity under s. 95(2)(a)(i)(A) - which can apply if one business
Summary Under
Tax Topics - Income Tax Act - Section 4 - Subsection 4(1) - Paragraph 4(1)(a)
debt portfolio servicing, and debt portfolio, activities likely were separate businesses
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(b) - Subparagraph 95(2)(b)(i) - Clause 95(2)(b)(i)(B)
s. 95(2)(b)(i)(B) inapplicable where s. 95(2)(a)(i) deemed the property income of the payer CFA to be active business income, i.e., s. 95(2)(a)(i) applied 1st

Principal Issues: Does subparagraph 95(2)(a)(i) apply to the income of a foreign affiliate (FA5 Subco) that has a debt portfolio business?

Position: Based on the information that we were provided, it appears that subparagraph 95(2)(a)(i) applies for a portion of the relevant taxation years.

Reasons: It depends if the conditions of subparagraph 95(2)(a)(i) are met, namely on whether the activities of FA5 Subco's debt portfolio business are "directly related" to the activities of the debt portfolio business of another foreign affiliate (FA4) or of a partnership of which that foreign affiliate is a qualifying member (LP). FA4 has two businesses: a service business and a debt portfolio business. The activities of FA5 Subco's debt portfolio business are not directly related to the activities of FA4's service business but they may be directly related to the activities of either FA4's debt portfolio business or to LP's debt portfolio business.

4 March 2023 Internal T.I. 2023-0994501I7 - Non-resident non-arm's length transfer of property

Unedited CRA Tags
13(7)(e), 248(1) - definition of taxpayer, 54 - definition of capital property, 13(21) - definition of depreciable property, 20(1)(a), ITR 1102(3)
Summary Under
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7) - Paragraph 13(7)(e) - Subparagraph 13(7)(e)(ii)
s. 13(7)(e)(ii) applies to the purchase of a depreciable property from a non-arm’s length non-resident corporation with no tax nexus to Canada
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Taxpayer
Oceanspan inapplicable where the non-resident’s Canadian tax status is not relevant to the purpose of the provision

Principal Issues: Does subparagraph 13(7)(e)(ii) apply to a transferee taxpayer when a capital property (that is depreciable property for the transferee) is acquired from a non-arm's length non-resident corporation.

Position: Yes, subparagraph 13(7)(e)(ii) applies to the transferee taxpayer regardless of whether the non-arm's transferor corporation is a resident or non-resident corporation.

Reasons: Previous technical interpretations and the wording of subparagraph 13(7)(e)(ii).