Income Tax Severed Letters - 2024-10-23

Ruling

2023 Ruling 2023-0961611R3 - Loss consolidation arrangement

Unedited CRA Tags
20(1)(c); 112(1); 88(1); 245(1)

Principal Issues: Whether a loss consolidation arrangement involving a loan to buy preferred shares for the purposes of earning income would meet the CRA's requirement for acceptable loss consolidation transactions.

Position: Yes.

Reasons: Consistent with previous rulings.

2021 Ruling 2021-0887611R3 - Defined Contribution SERP

Unedited CRA Tags
248(1) "salary deferral arrangement", 147.1(8)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Salary Deferral Arrangement
SERP providing for lump sum or 10 annual instalments on retirement is not an SDA
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(a) - Subparagraph 56(1)(a)(i)
only income inclusion to employees under SERP is pursuant to S. 56(1)(a)(i)

Principal Issues: Will the proposed SERP be an SDA?

Position: No.

Reasons: The SERP will provide for reasonable pension benefits and therefore none of the main purposes will be to postpone the payment of tax.

Technical Interpretation - External

22 February 2024 External T.I. 2016-0667251E5 - Compensatory payments made to an LLC

Unedited CRA Tags
95(1); Regulations 5903(3), 5907(1.3) to (1.6)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1.3)
compensatory payments made by a US C-corp to LLC subsidiaries were FAT pursuant to Regs. 5907(1.3) and (1.5)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1.5)
compensatory payments made by a US C-corp to LLC subsidiary which had no FAPLs were denied under Reg. 5907(1.4), but might be reinstated under Regs. 5907(1.5) and (1.6)

Principal Issues: (i) Whether a compensatory payment made by a corporate shareholder to a fiscally transparent limited liability company is a foreign accrual tax pursuant to subsection 5907(1.3) and, where applicable, subsection 5907(1.5) of the Regulations; (ii) whether the CRA’s position expressed in Technical Interpretation 2003-0037291I7 has changed in light of subsequent amendments to subsection 5907(1.3) of the Regulations.

Position: (i) Yes; (ii) partially.

Reasons: (i) On a textual reading, the conditions in paragraph 5907(1.3)(b) are satisfied; (ii) the 2014 amendments to paragraph 5907(1.3)(b) extended its application to certain compensatory payments made to fiscally transparent entities.