Income Tax Severed Letters - 2026-08-05

Ruling

2026 Ruling 2025-1076711R3 - Reduction of Paid-Up Capital

Unedited CRA Tags
40(3), 53(2)(a), 84(3), 83(2), 83(2.1), 83(2.2), 112(3.2), 245(2)

Principal Issues: Does the PUC reduction on high PUC low ACB preferred shares to allow for the election of a capital dividend on the redemption of the shares.

Position: Yes.

Reasons: The series of transactions is similar to those on ATR-54 and do not offend the scheme of the Act.

2024 Ruling 2023-1002681R3 - Standard Loss Consolidation

Unedited CRA Tags
245; 20(1)(c); 112(1); 55(2); 88(1.1); 18.2

Principal Issues: Whether a particular loss consolidation arrangement is acceptable. In this arrangement, Lossco obtains a daylight loan from a third party and uses the proceeds to make an interest bearing loan to NewLossco. NewLossco uses the proceeds to invest in preferred shares of Newco. The main issues are whether Lossco would be entitled to apply existing non-capital losses against the interest income received on the loan; and whether NewLossco would be entitled to deduct the interest expense paid on the loan and the dividends received on the Newco Preferred Shares.

Position: Yes.

Reasons: The proposed transactions conform to our requirements for these types of loss consolidation rulings, in this case on the basis that the entities involved are related and affiliated. The proposed transactions would be legally effective and commercially plausible.

Technical Interpretation - External

29 July 2026 External T.I. 2026-1095401E5 - Wood waste - Wood pellets

Unedited CRA Tags
ITR: 1104(13) "solid biofuel, "specified waste material", and "wood waste"

Principal Issues: Whether wood pellets that are derived from wood waste are considered wood waste (and therefore specified waste material).

Position: Question of fact, but likely no. Where the wood pellets are considered solid biofuel the pellets would no longer be considered wood waste or specified waste material.

Reasons: Textual, contextual, and purposive analysis of the relevant provisions.

9 July 2026 External T.I. 2026-1090151E5 - GMTA - Fiscal years and Part 3 return filing obligations of JV entities

Unedited CRA Tags
GMTA 2(1) "fiscal year", 3(1), 35(1), 35(2), 52, 55(1) "GIR due date", 61

Principal Issues: For an entity (USCA JV) that is a JV entity in respect of two qualifying MNE groups, Group CA and Group US, with ultimate parent entities, CanParentCo and USParentCo, respectively: 1) What is the first fiscal year of USCA JV that is subject to Part 2 or Part 3 of the GMTA? 2) Is USCA JV required to file a Part 3 return under subsection 61(2) of the GMTA, regardless of whether it has any Part 3 tax payable? 3) Can USCA JV file a single Part 3 return in respect of both Group CA and Group US? When is a Part 3 return for USCA JV due? 4) Can a Canadian filing entity file Part 3 returns on behalf of USCA JV?

Position: 1) The first fiscal period of USCA JV that is subject to Part 2 or Part 3 of the GMTA is its fiscal year from November 1, 2023 to October 31, 2024, as it ends within Group US' fiscal year ended December 31, 2024. 2) If USCA JV does not have Part 3 tax payable in respect of an MNE group for a fiscal year, it is generally not required to file a Part 3 return in respect of that MNE group for that fiscal year. 3) A Part 3 return should be filed in respect of USCA JV in relation to each of Group CA and Group US. A Part 3 return for USCA JV is due on the GIR due date for Group CA or Group US, as applicable, and as determined with respect to CanParentCo and USParentCo, respectively. 4) Yes.

Reasons: 1) Subsections 35(1) and 3(1). 2) See 2026-1088301E5. 3) Subsection 61(2) and definition of "GIR due date" in subsection 55(1). 4) Subsections 61(3) and (4).

4 June 2026 External T.I. 2023-0991701E5 - Stripped bond held in RCA

Unedited CRA Tags
LEGISLATIVE REFERENCE: 12(4); 12(9); 12(11); 52(1); 56(1)(x); 82(1)(b); 149(1)(q.1); 207.5(1); 207.6(1); 207.7(1); 207.7(2); 207.7(3); Reg 7000(1) and Reg 7000(2)(b)

Principal Issues: The taxpayer has posed questions regarding certain tax issues where an RCA holds a stripped bond.

Position: Application of the Act and Regulations explained in response to his three questions.

Reasons: The law is clear.