Income Tax Severed Letters - 2024-11-27

Ruling

2023 Ruling 2022-0957571R3 - Cross-Border Butterfly

Unedited CRA Tags
55(2), 55(3)(b), 55(3.1), 55(3.2)(h), 212.1(1), 212.1(1.1), 212.1(1.2)

Principal Issues: Whether the Canadian butterfly transactions, as described below, in the context of a cross-border butterfly, meet legislative and administrative requirements?

Position: Transactions meet requirements.

Reasons: Consistent with law and administrative requirements.

2022 Ruling 2022-0924291R3 - Loss Consolidation Arrangement

Unedited CRA Tags
20(1)(c), 15(1), 53(1)(c), 111, 56(2), 69(1), 69(4), 69(11), 80, 112(1), 112(2.1), 112(2.2), 112(2.3), 112(2.4), Part IV.1, 245(2), 246(1), 251(5)(b)), 251(2), 252(2)(c) and 256(7)(a)(i)(B).

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.

Technical Interpretation - External

24 September 2024 External T.I. 2023-0972671E5 - Indian Act tax exemption and Employment Income

Unedited CRA Tags
81(1)(a); 153(1); 227(8); 227(8.3), 87(1)(b) of the Indian Act

Principal Issues: 1. Do Guidelines 1, 2 or 3 of the Indian Act Exemption for Employment Income Guidelines apply to the employment income of an organization’s employees who do not live on reserve?
2. Does Guideline 4 of the Indian Act Exemption for Employment Income Guidelines apply to the employment income of an organization’s employees?
3. Is the fact that the organization provides services that benefit Indigenous individuals, including First Nations individuals, sufficient to situate the employment income on a reserve for the purposes of the Indian Act tax exemption.

Position: 1. Guideline 1 or 3 may apply to employees who live off-reserve but work on-reserve.
2. No.
3. Not likely.

Reasons: 1. Guidelines 1 or 3 may apply depending on the amount of time that the employee perform their required duties of employment on a reserve.
2. Guideline 4 would not apply as the services provided do not appear to be dedicated exclusively to First Nations individuals who for the most part live on reserves.
3. Based on the connecting factors identified and consistent with jurisprudence, the fact that the organization and its employees are providing child and family services that benefit Indigenous individuals, including First Nations individuals is not a factor that is given significant weight in a connecting factors test.

15 July 2024 External T.I. 2023-0990221E5 - Principal Residence Exemption-Condo parking Spaces

Unedited CRA Tags
40(2)(b), 54 - Definition of Principal Residence
more than one parking space potentially may be part of a condo “housing unit”
principal residence exemption could apply to sale of 2 condo parking spots

Principal Issues: Whether a housing unit (that is a condo), for purposes of the definition of principal residence in section 54, could include parking spaces which are located in a different location than the housing unit, such that all or a portion of any gain on the disposition of the parking space would be exempt pursuant to paragraph 40(2)(b).

Position: Whether the parking spaces can reasonably be regarded as contributing to the use and enjoyment of the housing unit as a residence for individuals, is a question of fact. Such a determination can only be made after a review of all the facts and circumstances of the taxpayer's situation. Based on the information provided, and assuming that the parking spaces are capital property, in applying the facts to the meaning of housing unit, it is possible that the parking spaces form part of the housing unit.

Reasons: See analysis.