Income Tax Severed Letters - 2025-10-08

Ruling

2024 Ruling 2023-1002231R3 - Advance Income Tax Ruling – Structured Settlement

Unedited CRA Tags
56(1)(d)

Principal Issues: Will the payments to be received pursuant to the structured settlement agreement be taxable in the plaintiff's hands?

Position: No.

Reasons: The terms of the structured settlement are consistent with the CRA's position as set out in paragraph 5 of Interpretation Bulletin IT-365R2.

Technical Interpretation - External

22 August 2025 External T.I. 2019-0826681E5 - Immigration of a Controlled Foreign Affiliate

Unedited CRA Tags
128.1, 5907(13), 95(1), 91(1).
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(13)
gain on the shares of CFA2 (sub of CFA1) on the continuance of CFA1 (a sub of Canco) to Canada does not result in a net Reg. 5907(13) amount
Summary Under
Tax Topics - Income Tax Act - Section 91 - Subsection 91(4)
no FAT generated to Canco when its sub (CFA1) holding the shares of CFA2 with an accrued gain, is continued to Canada, nor when CFA1 subsequently sells CFA2
Summary Under
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(1) - Paragraph 128.1(1)(b)
gain on the shares of CFA2 (sub of CFA1) on the continuance of CFA1 (a sub of Canco) to Canada could be taxed again when CFA1 actually disposes of the CFA2 shares

Principal Issues: Whether, as a result of paragraph 128.1(1)(b) of the Act, there would be an income inclusion in computing income of Canco on the immigration of CFA1 that could potentially result in taxation of the same amount of the capital gain accrued on the shares of CFA2 in the hands of Canco and CFA1, if the shares of CFA2 are not considered excluded property. If so, whether any relief is available.

Position: The taxable capital gain realized by CFA1 pursuant to paragraph 128.1(1)(b) will be included in its FAPI and will be included in computing income of Canco pursuant to subsection 91(1) without any deduction on account of FAT.

Reasons: A deduction for notional foreign taxes in subsection 5907(13) of the Regulations is only available when computing the prescribed amount included in FAPI of a foreign affiliate pursuant to subparagraph 128.1(1)(d)(ii), and not when computing FAPI inclusion as a result of paragraph 128.1(1)(b).

11 March 2022 External T.I. 2019-0829251E5 - Section 119 and departure tax

Unedited CRA Tags
subsection 40(3.7), subsection 84(3), section 119, subsection 128.1(4), subsection 152(6.3), subsection 212(2)
Summary Under
Tax Topics - Income Tax Act - Section 119
use of s. 119 to reduce exit tax on CCPC shares by the Pt. XIII tax on their subsequent redemption
Summary Under
Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.7)
capital loss on CCPC shares that was denied to non-resident under ss. 40(3.7) and 112(3)(b) effectively gave rise to s. 119 deduction

Principal Issues: Whether Part XIII tax paid on a deemed dividend arising upon a redemption of shares may, by virtue of section 119, reduce the departure tax previously imposed on a capital gain realized on a deemed disposition of the shares upon the taxpayer’s departure from Canada.

Position: In the hypothetical situation described below, a credit under section 119 should be available in respect of the Part XIII tax previously paid, provided all the conditions of section 119 are met.

Reasons: Previous positions and provisions of the Act.