Income Tax Severed Letters - 2024-12-11

Ruling

2022 Ruling 2021-0919101R3 - Ruling Letter

Summary Under
Tax Topics - Income Tax Act - Section 106 - Subsection 106(2)
aunt’s renunciation of her trust income interest, resulting in the corpus distribution to her nieces/nephews as approved by her, does not trigger s. 106(2) or other proceeds to her
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition
aunt’s renunciation of her trust income interest, and her approval of the resulting scheme of distribution to the residual beneficiaries, did not entail a disposition

Principal Issues: 1) Will the income beneficiary receive proceeds of disposition when she renounces her interest? 2) Will the beneficiaries receive proceeds of disposition when they consent to the distribution of Fund property? 3) Will subsection 107(2) apply to the proposed distributions to the beneficiaries? 4) Will GAAR apply?

Position: 1) No. 2) No. 3) Yes, to the extent that they are not distributions of net TCGs. 4) No.

Reasons: 1) to 4) See discussions below.

2022 Ruling 2022-0941371R3 - Post-mortem tax planning

Unedited CRA Tags
84(2), 191(4), 245

Principal Issues: 1) Whether subsection 84(2) applies to the proposed post-mortem pipeline transactions; 2) Whether dividends paid on the redemption of taxable preferred shares are subject to Part VI.1 tax.

Position: 1) No; 2) No.

Reasons: 1) In accordance with the Act and consistent with CRA's published positions; 2) the dividends are excluded dividends pursuant to subsection 191(4).

Technical Interpretation - External

7 October 2024 External T.I. 2022-0944011E5 - Treatment of legislated rescission fee

Unedited CRA Tags
9(1), 40(1), 54, 56.4, 248(1)

Principal Issues: 1) Whether a legislated rescission fee is subject to income tax. 2) Whether the rescission fee may be considered to be proceeds for the disposition of a principal residence. 3) Whether any costs are deductible against the rescission fee. 4) Whether the payor of the rescission fee must report it to the CRA.

Position: 1) Question of fact, depending on the purpose of the rescission fee. 2) No. 3) Question of fact, depending on whether the costs are on account of income or capital. 4) No.

Reasons: 1) Surrogatum principle. 2) It appears there is no disposition of property when the contract is rescinded. 3) Question of fact. 4) Wording of the Act.

Technical Interpretation - Internal

18 June 2024 Internal T.I. 2023-0994641I7 - Tax treatment of losses in personal scams

Unedited CRA Tags
9, 38, 39, 40(1), 40(2)(g)(iii); 44(2); 52(4); 54 “adjusted cost base”, “listed personal property”, “personal-use property”, “proceeds of disposition”; 69(1); 111(8); 248(1) “property

Principal Issues: Whether losses incurred as a result of a personal scam are deductible for tax purposes.

Position: No.

Reasons: There are no specific provisions within the Act which address losses incurred as a result of fraud. As a result, any potential deduction in respect of a loss incurred as a result of fraud would only be available under the general rules of the Act. Where the intended use of the funds was not a legitimate investment for the purpose of earning income, the better view appears to be that such funds would be considered PUP of the taxpayer. Under subparagraph 40(2)(g)(iii) of the Act, a loss from the disposition of any PUP of the taxpayer (other than listed personal property or a debt referred to in subsection 50(2)) is nil. While this is ultimately a question of fact, it will generally be the case that money of a taxpayer that was the subject of a personal fraud is PUP by the very definition of a personal scam, such that any loss incurred in respect of that money would be nil under subparagraph 40(2)(g)(iii).