Income Tax Severed Letters - 2026-06-10

Ruling

2026 Ruling 2022-0943251R3 - Application of 108(2)(b)(iii) and (iv)

Unedited CRA Tags
108(2)(b)
Summary Under
Tax Topics - Income Tax Act - Section 108 - Subsection 108(2) - Paragraph 108(2)(b) - Subparagraph 108(2)(b)(iv)
s. 108(2)(b) unit trust using a subsidiary LP to engage in hedging to offset hedging by an underlying fund investment, while avoiding net hedging gains for s. 108(2)(b)(iv) purposes

Principal Issues: 1) Whether units of a particular ETF would be considered a marketable security for purposes of clause 108(2)(b)(iii)(E)? 2) Whether income is computed on a net basis for purposes of subparagraph 108(2)(b)(iv) where the relevant income sources are held in a tiered partnership structure.

Position: 1) The particular units would qualify. 2) Opinion provided.

Reasons: 1) The law.

2024 Ruling 2023-1001661R3 - Loss consolidation arrangement

Unedited CRA Tags
9; 12(1)(c) and (x); 20(1)(c); 55(2) and (2.1); 112(1), (2.1­), (2.2), (2.3), (2.4) and (2.5); 187.1; 187.2; 191.1(1) and (2); 245(2)

Principal Issues: (1) Whether Lossco will be entitled to apply the Non-Restricted Non-Capital Losses that it incurred against the interest income that it will earn on the Profitco Notes as part of the Loss Consolidation; (2) Whether each of the Profitcos will be entitled to deduct the interest expenditure that will be payable on the Profitco Note that they will owe to Lossco, and the Newco Preferred Share Dividends that they will respectively receive on the Newco Preferred Shares.

Position: (1) Yes; (2) Yes.

Reasons: The Loss Consolidation transactions will be legally effective, and will not contemplate dollar amounts and time frames that are blatantly artificial. In addition, each of the Profitcos will comply with the requirements found in paragraph 20(1)(c) and subsection 112(1), and the CRA views applicable to loss consolidations arrangements.

Technical Interpretation - External

8 January 2026 External T.I. 2025-1071821E5 - Mineral Resource Certification

Unedited CRA Tags
248(1) "mineral resource"

Principal Issues: Whether the XXXXXXXXXX deposit located on the taxpayer's property qualify as a mineral resource pursuant to subsection 248(1).

Position: Yes.

Reasons: The law and a positive opinion from NRCan.

Conference

13 May 2026 IFA Roundtable Q. 1, 2026-1087881C6 - Subsection 84(2) and Withholding Tax on Payments to Non-Residents

Unedited CRA Tags
84(2)
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2)
s. 84(2) generally does not apply to a payment made by Amalco to a shareholder dissenting to the amalgamation
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(3)
s. 84(3) does not apply to a payment made by Amalco to a shareholder dissenting to the amalgamation

Principal Issues: In the context of an amalgamation, whether a payment received by a shareholder exercising dissent rights pursuant to applicable corporate law falls within the scope of subsection 84(2).

Position: Depends on the relevant facts and circumstances, but generally no, in circumstances where the amalgamation and exercise of the shareholders' dissenting rights and subsequent payment are undertaken for bona fide non-tax reasons.

Reasons: See below.

13 May 2026 IFA Roundtable Q. 2, 2026-1087921C6 - Paragraph 95(3)(b) and Cryptocurrency

Unedited CRA Tags
95(3)
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(3) - Paragraph 95(3)(b)
crypto (or other intangible property) is not “goods” for s. 95(3)(b) purposes
Words and Phrases
goods

Principal Issues: 1) Whether cryptocurrencies held on income account in connection with a cryptocurrency trading business of a Canadian taxpayer would be considered "goods" for purposes of paragraph 95(3)(b). 2) If yes, whether various investment and trading execution services performed by a foreign affiliate of the taxpayer in connection with the cryptocurrency business would be characterized as "services performed in connection with the purchase or sale of goods" within the meaning of paragraph 95(3)(b), such that paragraph 95(2)(b) would not recharacterize the foreign affiliate's income from those services as income from a business other than an active business.

Position: 1) Cryptocurrencies are intangible (incorporeal) property and therefore do not constitute "goods" for purposes of paragraph 95(3)(b). 2) Not applicable given the answer to 1.

Reasons: 1) Based on textual, contextual and purposive analysis, including previous position that "goods" for purposes of subsection 95(3) means tangible moveable property. 2) Same.

13 May 2026 IFA Roundtable Q. 4, 2026-1087931C6 - Section 116 Cash Flow Issues on Share Redemption from a Non-Resident

Unedited CRA Tags
84(3); 212(2); 116(1); 116(2); 116(3); 116(4); 116(5); 248(28)(a).
Summary Under
Tax Topics - Income Tax Act - Section 116 - Subsection 116(5)
when issuing a s. 116 certificate, CRA will not require s. 116 withholding on the portion of redemption proceeds generating a deemed s. 84(3) dividend

Principal Issues: Have there been any updates or changes regarding CRA's policy for administrative relief for the hypothetical situation provided? If the answer to the above is No, to what extent would paragraph 248(28)(a) provide relief for this hypothetical situation? Would CRA recommend to Finance that proper changes be made to address this double taxation scenario?

Position: See below.

Reasons: Wording of the Act.

13 May 2026 IFA Roundtable Q. 5, 2025-1078201C6 - Computation of a gain or loss for purposes of subsection 39(2) on the settlement of a foreign currency denominated debt

Unedited CRA Tags
Subsection 39(2), section 80.
Summary Under
Tax Topics - Income Tax Act - Section 39 - Subsection 39(2)
on the partial repayment of USD debt with forgiveness of the balance, the s. 39(2) gain or loss is computed on a net basis.

Principal Issues: How should the gain or loss be computed for purposes of subsection 39(2) where the principal amount of a debt is only partly repaid, with the remaining principal amount being forgiven?

Position: The gain or loss should be calculated by comparing: (i) the part of the amount borrowed that is repaid, converted into Canadian currency on the issuance date; and (ii) the amount repaid by the borrower, converted into Canadian currency on the repayment date. If the amount in (i) is less than the amount in (ii), there is a loss. If the amount in (i) exceeds the amount in (ii), there is a gain.

Reasons: In a situation involving debt forgiveness, the calculation formula in Agnico-Eagle needs to be modified to isolate the forgiven amount governed by section 80.

13 May 2026 IFA Roundtable Q. 6, 2026-1098321C6 - Foreign tax credit on U.S. tax paid on the redemption of shares of a U.S. corporation

Unedited CRA Tags
126
Summary Under
Tax Topics - Income Tax Act - Section 126 - Subsection 126(1)
doubtful that Canco can claim an FTC for a US sub’s distribution that produces a capital gain but is treated under the Code as a distribution out of E&P subject to US withholding tax
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 24
distribution from US sub that produced a capital gain arose in the US pursuant to Art. XXIV(2)(a) because it was taxed there as a dividend

Principal Issues: Where the shares of a U.S. resident corporation are held by a Canadian resident corporation, whether U.S. tax paid on the repurchase by the U.S. resident corporation of the shares of its capital stock, the proceeds from which are treated as a taxable dividend under U.S. tax law but as proceeds of disposition under the Act, is creditable under section 126.

Position: The availability of a foreign tax credit will depend on the particular facts and circumstances.

Reasons: Under Article XXIV(3)(a) of the Canada-U.S. Tax Treaty (the "Treaty"), the gain is considered U.S. source for purposes of Article XXIV if the gain is taxed in the U.S. in accordance with the Treaty. However, a foreign tax credit under subsection 126(1) will not be available if the U.S. tax paid can "reasonably be regarded as having been paid by the taxpayer in respect of income from a share of the capital stock of a foreign affiliate of the taxpayer".

13 May 2026 IFA Roundtable Q. 7, 2026-1087951C6 - Foreign tax credit and deemed year-end

Unedited CRA Tags
LEGISLATIVE REFERENCE: Subsections 126(1); 126(7) - non business income tax; 125(7) - Canadian-controlled private corporation; 249(3.1); 251.2(2) - loss restriction event; 249(4); 256(9).
Summary Under
Tax Topics - Income Tax Act - Section 126 - Subsection 126(1)
general guidelines on how to allocate foreign tax to a short Canadian tax year for FTC purposes

Principal Issues: In a situation where a taxpayer has three taxation years in the calendar year for purposes of the Act but only one taxation year for U.S. tax purposes, can the entire amount of U.S. taxes paid on a capital gain be allocated to the taxation year in which the capital gain arose for purposes of the foreign tax credit?

Position: yes.

Reasons: In the scenario presented, it is reasonable to allocate the foreign taxes to the Canadian taxation year in which the capital gain was realized.