Income Tax Severed Letters - 2025-08-20

Ruling

2025 Ruling 2024-1002891R3 - Multi-wing split-up net asset butterfly

Unedited CRA Tags
55(2), 55(3)(b)

Principal Issues: Whether the exception to the application of subsection 55(2) provided in paragraph 55(3)(b) will apply to the proposed transactions.

Position: Yes.

Reasons: Conditions for application have been met and the "butterfly denial rules" in subsection 55(3.1) do not apply.

Technical Interpretation - External

25 June 2030 External T.I. 2025-1056861E5 - EIFEL - Excluded Entity Exception

Unedited CRA Tags
18.2(1) definition of "excluded entity"
Summary Under
Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(1) - Excluded Entity - Paragraph (c) - Subparagraph (c)(i)
holding of US cottage by a discretionary family trust that is an eligible group entity of real estate Cancos likely would taint the latter under (c)(i) of “excluded entity”

Principal Issues: Based on the Facts provided, whether the Trust would meet the requirement in subparagraph (c)(i) of the definition of “excluded entity” in subsection 18.2(1).

Position: No, the Trust would not meet the “all or substantially all” requirement in subparagraph (c)(i) of the “excluded entity” definition in subsection 18.2(1).

Reasons: Whether any particular undertaking or activity of a taxpayer takes place in Canada is a question of fact. Based on the facts provided, a significant portion of the Trust’s undertakings and activities take place outside of Canada.

5 June 2025 External T.I. 2025-1055221E5 - CCUS Factor - Power Purchase Agreements

Unedited CRA Tags
127.44(1)"dual-use equipment" and "qualified carbon capture expenditure", 127.44(15).
Summary Under
Tax Topics - Income Tax Act - Section 127.44 - Subsection 127.44(1) - Qualified Carbon Capture Expenditure - A - Paragraph (b) - Subparagraph (b)(i)
re whether there can be an agreement for the sale of electricity between two carbon capture companies through a utility

Principal Issues: Whether the eligible proportion of the capital cost of dual-use equipment for the purpose of calculating the CCUS investment tax credit of a taxpayer (Taxpayer A), as determined by subparagraph (b)(i) of variable A of the definition of "qualified carbon capture expenditure" in subsection 127.44(1) of the Act, should be determined by reference to energy sold to another taxpayer (Taxpayer B) for use in Taxpayer B's qualified CCUS project where the energy is delivered over an electrical utility grid.

Position: Question of fact.

Reasons: Textual, contextual, and purposive analysis of the relevant provisions. There is no restriction on counting energy delivered through an electrical utility grid in determining "the amount of energy expected to be produced for use in a qualified CCUS project" under the definition of qualified carbon capture expenditure. However, the energy must be sold by the taxpayer to the owner of the other qualified CCUS project (e.g., through a direct sales agreement) and such energy must be necessary for the operation of the other project. Energy that is provided to an electrical utility grid that may, incidentally, be used by another qualified CCUS project should not be counted.

30 May 2025 External T.I. 2025-1050201E5 - Part XX Reporting Obligations

Unedited CRA Tags
282(1) "consideration", "excluded seller", “platform”, “platform operator”, “reporting platform operator”, "reportable seller"; 283; 288(1); 288(2); 291(1); 291(2); 292

Principal Issues: 1. What is the deadline for a reporting platform operator to comply with the reporting obligations found in section 291, in light of the transitional rule in subsection 288(2), in respect of sellers as described below:
A seller that is already registered on the platform as of the date on which an entity becomes a reporting platform operator (January 1, 2024 or a subsequent date), where the reporting platform operator does not complete the due diligence procedure in sections 283 to 287 in respect of the seller in its first reportable period.
A seller that is already registered on the platform as of the date on which an entity becomes a reporting platform operator (January 1, 2024 or a subsequent date), where the reporting platform operator completes the due diligence procedure in sections 283 to 287 in respect of the seller in its first reportable period.
A seller that registers on the platform after the date on which an entity becomes a reporting platform operator (January 1, 2024 or a subsequent date).
2. Should a platform operator make assumptions based on the data it has regarding the status of a particular seller as a “reportable seller” where the platform operator is aware of the total value of the orders placed on the platform for this seller, but not of the final price paid to the seller? If not, does this imply that even if the platform operator qualifies as a reporting platform operator, it would not be required annual information returns as it would not know if the seller is a reportable seller ?
3. If the answer to question 2 is yes, can it be assumed that the reporting platform operator would only be required to report the following information regarding a reportable seller ?
a) Legal name;
b) Address of registered office;
c) Business number;
d) Jurisdiction(s) of residence for tax purposes at the end of the calendar year,
4. Does an operator qualify as a “platform operator” with respect to sellers, which are not separate legal entities, as the operator does not contract with the sellers (since it is itself) to make all or part of a platform available to them?

Position: 1. a) January 31 of the year following the calendar year in which the seller is identified as a reportable seller; in this case the calendar year corresponds to the second reportable period of the reporting platform operator.
1. b) January 31 of the year following the calendar year in which the seller is identified as a reportable seller; in this case the calendar year is the first reportable period of the reporting platform operator.
1. c) January 31 of the year following the calendar year in which the seller is identified as a reportable seller; in this case the calendar year is the first reportable period of the reporting platform operator.
2. Question of facts.
3. Question of facts.

Reasons: 1. Wording of the Act.
2. Whether the Platform is a “platform” under subsection 282(1) of the Act and whether the “available records” of the reporting platform operator allow to determine that the sellers are “excluded sellers ”are questions of fact.
3.