16 May 1990 Income Tax Severed Letter ACC9113 - Annual Review of General Tax Guide

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

May 16, 1990
Assessing and Enquiries Directorate    Provincial and International
Enquiries and Taxpayers                  Relations Division
 Assistance Division                   J. Wilson
400 Cumberland Place, 8th Floor        957-2063

Attention: Rene Tapp

                                                       HB4 1482-1

ANNUAL REVIEW OF GENERAL TAX GUIDE

Further to your memorandum of April 23, 1990, we have reviewed the Guide from a provincial and international viewpoint, and offer the following comments:

1) Step 1 - Identification Area Consideration should be given to adding the underlined words in the following sentence:

"If you left Ontario before December 31, 1990 to live outside Canada but kept residential ties in Ontario you are Del a "factual" resident of Ontario. You would then enter Ontario as your province of residence".

Note: Determination of residence status is a question of fact. The Fact that someone maintained "certain" residential ties does not by itself ensure factual residency status.

2) Line - 130 - Other Income

Even though have raised this issue in the past, we feel obligated
to comment again.  The last 3 non-taxable items (ie welfare, net
federal supplements and WCB) should be included in net income and
deducted Co arrive at taxable income.   We are not convinced that
the elimination of this "in and out" procedure simplifies matters
because of the adjustments necessary for purposes of the child
tax credit, federal sales tax credit and northern residents
deductions                21(1)(b)

3) Line - 219 - Moving Expenses

Consideration should be given to tightening up the following sentence:

"the move was from one place in Canada to another place in Canada (except deemed and factual residents, and students)"

Under this present wording, all Canadian residents are excluded from the rule.

Also, the paragraph following "Deemed and Factual residents" on Page 28 may be too broad. For example, in a situation where a spouse relocates across the border to commence work with a U.S. employer but maintains Canadian residency status (ie. returns home to the family every weekend and therefore has not severed residential ties), the Guide would seem to imply that the relocation expenses would be deductible. We are unclear as to why there is reference to "factual" residences when section 63.1 only deals with deemed residents.

4) Line 235 - Social Benefits Repayment

Paragraph 18O.2(1)(a) (Bill C-28) states that supplements and spouses allowances under the Old Age Security Act are included in the base figure subject to Part 1.2 tax. However, Chart II of the guide is starting vith "Old Age Security pension from Line 113" which specifically does not include these supplements and spousal allowances.

5) Line 256 - Additional Deductions

The exempt portion of U.S. social security payments (and other income exempt under a tax treaty) may be subject to a Provincial Flat Tax. Accordingly, the satement that ends in "as that part is not subject to tax in Canada" may be incorrect in provincial tax guides where the Flat Tax applies.

Reference to "by Canada" may solve the problem.

6) Line 314 - Pension Income Amount

Consideration should be given to adding the following words to the sentence "pension payments from a pension plan that you receive as a life annuity,": "(including both domestic and foreign sources)"

Our division has received several queries in the past regarding the eligibility of foreign pensions for the pension credit. In our view the statement "when completing the chart that Applies to you, do not include foreign pension income exempt under a tax treaty" is incorrect and should have the following added to it: "that was deducted on line 256".

Since subsection 110(1) states "there may be deducted", it may be advantageous for a taxpayer to ignore the deduction and take advantage of the pension credit (ie. the unused pension credits may be transferred to the spouse.) Subparagraph 118(8)(d)(ii) refers to amounts actually deducted.

7) Minimum Tax - Page 59

There appears to be a typing error in the following statement: one-half (1/3) of allowable business investment losses on line 217,"

Note: Shouldn't the references to 1/3 of capital gains and business investment losses be 1/4 for 19907 Also, shouldn't the reference to "allowable business investment loss" read "business investment loss" (ie. it is the non-deductable portion of the business investment loss that is being deducted to arrive at adjusted taxable income.)

8) Line 549-4 - Page 63

You may be interested to know that information slips are to be issued by the provinces and territories for welfare, social assistance and WCB payments. A form TXXX supplementary is planned for the 1990 taxation year.

9) Lines 507 and 508 - Federal Foreign Tax Credit

The definition of "Net foreign non-business income" is not reflected in the formula at line 508 of the return. The guide states that the taxpayer must complete form T22O9* which would, in our view, make the formula on the return redundant. Form T22O9 states that the amount (H) should be entered on line 509 of the return

We suggest that this area of the return and the guide be clarified either by deleting the formula on the return or linking the definition of "net foreign non-business income" in the guide to the formula on the return.

10) General Comment

The majority of examples used throughout the guide involving spouses or ex-spouses state or imply that the man was the higher income earner. This could be viewed as sexist.

Christine Savage A/Director Provincial and International Relations Division JW/sg no4-14 File copy Sequence file Author's copy Chrono file Reading file