News of Note
Dubois - Tax Court of Canada finds that if it’s over 100, it’s “antique”
Email this ContentReg. 1102(1)(e)(iv) applied to deny CCA claims for 18th and 19th century violins, on the basis that each violin, although not "antique furniture," was "any other antique object, produced more than 100 years before [acquisition]." Jorré J found that "antique" does not suggest any "limitation other than objects that are more than 100 years old." Accordingly, "antique" was redundant.
This reminds me of office items of a former partner which were very old, or mature for their years.
Neal Armstrong. Summary of Robert Dubois Inc. v. The Queen, 2013 TCC 409 under Reg. 1102(1)(e)(iv), and Statutory Interpretation – Noscitur a sociis and Interpretation Provisions.
An employer-paid medical exam is a taxable benefit unless negative exam results will negatively affect employment status
CRA considers that employer-paid medical examinations give rise to a taxable benefit unless they are required as a condition of employment. It will infer that there is no such requirement if "the employee can exercise discretion as to whether to take an annual examination by the employer's physician," or (even more astonishingly) "unless a medical exam with negative results impacts employment status in some manner."
Neal Armstrong. Summary of 19 February 2014 T.I. 2013-0508501E5 under s. 6(1)(a).
CRA may not impose a penalty for late-filing a s. 116 application if the property was not sold at a gain
After finding that a child of a diplomat was not exempt from the s. 162(7) penalty for late-filing a s. 116 application, CRA stated that "you may wish to consider exercising discretion in assessing the penalty given that ... there was a loss on the property."
Neal Armstrong. Summary of 17 February 2014 Memo 2013-0498121I7 under s. 162(7).
Guindon - SCC grants leave to appeal professionals' penalty decision
The Supreme Court has given leave to appeal the Federal Court of Appeal's decision in Guindon (discussed in a previous post), which reopens the question of whether large administrative penalties have a criminal aspect.
Scott Armstrong. See current summaries of Guindon v. The Queen, 2013 FCA 153, under ss. 163.2(5), 220(3.1) and Charter ss. 11 and 12.
CRA treats a partner-to-partnership loan as a debt owing to the partner by each other member
The s. 96 rule that a partnership is a separate person for income-computation purposes does not apply in determining whether a debt owing to a Canadian resident by a foreign partnership is "indebtedness owing by a non-resident person" for purposes of the requirement in s. 233.1 to report such indebtedness and other "specified foreign property." However, if the obligations of the partners for partnership debt are joint and several, each non-resident partner is considered to owe the full amount of the debt to the Canadian resident, so that the debt will be specified foreign property on that basis.
This conclusion is not affected if the Canadian resident also is a partner, so that in that respect the loan is owed by it to itself.
Neal Armstrong. Summary of 24 February 2014 Memo 2013-0484461I7 under s. 233.3(1) – specified foreign property.
CRA (sort of) reverses an interpretation indicating that s. 110.5 income adjustments potentially may be made for statute-barred years
In 2013-0481151I7, CRA indicated that, by analogy with the CCA revision policy in IC 84-1, an adjustment under s. 110.5 (to effectively convert what otherwise would be a wasted (for FTC purposes) foreign tax amount into a non-capital loss) may be made even beyond the six-year s. 152(4)(b)(iv) reassessment period "where there is no change in the tax payable for the year." However,"tax" included provincial taxes, so that a requested adjustment under s. 110.5 for a statute-barred year would not be permitted if it increased provincial taxes payable - and 2010-0379801I7 suggested that this usually (or always?) would be a problem.
CRA (without explanation) has now "clarified" that "a permissive amount in the context of IC84-1 would not…include the income inclusion provided in section 110.5."
Summary of 7 February 2014 Memo 2013-0512601I7 under s. 152(4).
CRA finds that a late-filed s. 216 nil return does not eliminate interest on the retroactively eliminated Part XIII withholding
Where a Canadian agent of a non-resident owner is assessed for failing to withhold and remit Part XIII tax on rental collections paid to the non-resident, a s. 216(4) undertaking is filed within six months of the applicable year end and a s. 216 return (showing nil tax payable) is filed on a timely basis, CRA considers, following Pechet, that the obligation to withhold and remit is not extinguished retroactively, so that the interest on the unpaid remittance obligation which accrued up to filing the return is not eliminated.
Neal Armstrong. Summary of 7 February 2014 Memo 2013-0506151I7 under s. 227(8.3).
CRA confirms that the exit tax exclusion for “rights” under a stock option “agreement” includes unvested rights under a free share plan
The exit tax in s. 128.1(4) does not apply to a "right" of an individual under "an agreement" referred to in s. 7(1). CRA has confirmed that this exclusion includes unvested rights to receive shares (in this instance, "free" shares for which no exercise price will be paid) under "any arrangement under which a corporation agrees to issue its shares to one of its employees."
Neal Armstrong. Summaries of 26 February 2014 T.I. 2013-0487961E5 under s. 128.1(10) – excluded right or interest and Treaties – Art. 15.
Income Tax Severed Letters 26 March 2014
This morning's release of 19 severed letters from the Income Tax Rulings Directorate is now available for your viewing.
Placement agencies can avoid responsibility for source deductions by placing incorporated workers
A placement or employment agency need not deduct and remit source deductions and employer premiums if payments are made to a corporation (such as an incorporated worker) for services rendered. Thus, a placement agency may limit its potential exposure for such deductions and premiums by placing incorporated rather than unincorporated workers.
Neal Armstrong. Summary of Michael Gemmiti, "Placement Agencies: Insurable and Pensionable Employment", Canadian Tax Highlights", Vol. 22, No. 3, March 2014, p. 10 under s. 125(7) – personal services business.