News of Note
An amalgamation of a purchaser corporation and subject corporation can cause the control test in s. 84.1(2.31)(f)(i) or 84.1(2.32)(g)(i) to cease to be met
Email this ContentAlthough s. 87(2)(j.6) deems the amalgamation of a purchaser corporation and subject corporation to be a continuation of each such predecessor for purposes of inter alia ss. 84.1(2.31)(f)(i) and 84.1(2.32)(g)(i), it does not provide a safe harbour for intergenerational transfers in all cases, as illustrated by the following example.
If a parent sells 51% of the shares of ParentCo to a corporation wholly owned by the parent's child (ChildCo) and 49% of the shares to a corporation wholly owned by an arm's length third party (ThirdCo), then if, in the months following such intergenerational transfer, there is an amalgamation of ChildCo, ThirdCo, and ParentCo, s. 84.1(2.31)(f)(i) and s. 84.1(2.32)(g)(i) will be met both before and after the amalgamation, having regard to the continuity rule in s. 87(2)(j.6), given that the child will control ChildCo before the amalgamation and will control Amalco thereafter.
However, if the parent instead transferred 50% of the ParentCo shares to ChildCo and 50% to ThirdCo, and within 36 months there was an amalgamation, with Amalco owned equally by the child and the third party, those tests would no longer be met because, following the amalgamation, the child did not control Amalco (although before the amalgamation the child controlled ChildCo).
Neal Armstrong. Summary of Patricia Houle and Vincent Dansereau, “Intergenerational Transfer of a Business: Is a Post-Sale Merger Problematic?” Canadian Tax Focus, Vol. 15, No. 3, August 2025, p. 1 under s. 84.1(2.32)(g)(i).
Non-resident individuals very well may be subject to AMT on their gains, in excess of the s. 116 withholding
Where a family member with high taxable income has lent money to a trust at the prescribed rate provided in Reg. 4301(c), under s. 127.52(1)(j) only 50% of this interest is deductible in computing the trust’s adjusted taxable income (ATI). The s. 104(6) deduction is only available for distributions of income computed under the ordinary rules and does not permit the distribution of the additional ATI.
A possible solution is for the trust to forgo claiming deductions under s. 20 and distribute the resulting increased income to its beneficiaries (provided they are both capital and income beneficiaries).
AMT applies to all individuals, with no exemptions for non-residents, so that a non-resident selling taxable Canadian property (TCP) often will be subject to AMT on the resulting capital gain (equaling 100% of the gain). Although the purchaser of the TCP may have withheld under s. 116, the non-resident nonetheless is required to file a Canadian tax return to report the capital gain, so that the application of AMT may give rise to a balance owing upon such T1 filing.
Neal Armstrong. Summaries of David Carolin, Nadia Rusak and Manu Kakkar, "AMT: Alternative Minimum Tax Should Be Renamed Additional Massive Tax," Tax for the Owner-Manager, Vol. 25, No. 3, July 2025, p. 8 under s. 127.52(1)(j) and s. 127.52(1)(d).
CRA issues a Folio on professional and other dues
CRA has published a new Folio on the s. 8(1)(i) deduction, which expands on comments that it made in Interpretation Bulletin IT-158R2. Comments made on the deduction under s. 8(1)(i)(i) for an amount paid as annual professional membership dues, the payment of which was necessary to maintain a professional status recognized by statute, include:
- Dues must be of a recurring nature in order to qualify as annual dues. Initiation or entrance fees, special assessments, examination fees, licence fees, costs to obtain continuing professional education credits, and dues paid by students before becoming members of a professional organization would not qualify as annual membership fees.
- A professional status refers to possessing advanced education or training and satisfying other conditions and requirements established by a professional organization.
- Montgomery clarified that the phrase “recognized by statute” should be afforded a broad interpretation, and that “recognized by statute” does not necessarily mean that a professional status was incorporated, created, or regulated by a particular statute.
- The employee's professional status does not necessarily have to be recognized by statute in the jurisdiction of the employment, e.g., an Alberta employee belonging to an association in Australia where this professional status of the employee is recognized by statute.
- Payment of dues will likely be considered necessary to maintain a professional status only where membership in the professional organization is mandatory in order to maintain professional status and the non-payment of the annual dues could adversely affect or cause the employee to lose their professional status.
- In some instances, a professional organization may require payment of annual dues that are in part passed on to a national association. In such cases, provided that membership in the provincial organization is necessary to maintain the employee's professional status, the entire amount of the annual dues paid will be considered necessary to maintain that professional status.
- Professional membership dues must reasonably relate to the employment income source, but it is not necessary that the payment of the annual dues be essential for the employee to hold the position; however, there must be a reasonable connection between the professional membership and the position, e.g., professional status as a chemical engineer at a chemicals company.
Neal Armstrong. Summaries of Income Tax Folio S2-F2-C1, Employee Professional Membership and Other Dues under s. 8(1)(i)(i), s. 8(1)(i)(iv), s. 8(1)(i)(vi), s. 8(1)(i)(vii) and s. 8(5).
We have translated 6 more CRA interpretations
We have translated a further 6 CRA interpretations released in May of 2000. Their descriptors and links appear below.
These are additions to our set of 3,268 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 25 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
Pommet – Court of Quebec finds that a former Quebec resident spending significant time in Quebec, supervising rental properties and hunting, was an Ontario resident
The taxpayer was found to be resident in Ontario, given that he considered his farm in Ontario, which he had acquired in 2015 a number of years after separating from his Quebec wife (leaving independent adult children in Quebec), to be his home, notwithstanding that he spent around 100 to 120 days each year in Quebec to supervise his residential rental properties there and to spend time at his Quebec hunt camp, and his riverside chalet for duck hunting. His time in Quebec was mere “sojourning.”
Neal Armstrong. Summary of Pommet v. Agence du revenu du Québec, 2025 QCCQ 2592 under s. 2(1).
CRA agrees that the concept of reporting platform operators collecting “business registration numbers” from Canadian-resident sellers is inapplicable
S. 284(2) requires (digital) reporting platform operators (RPO) to collect a taxpayer identification number (TIN) and a business registration number (BRN) in respect of a seller other than an excluded seller. However, s. 284(4)(a) provides that a TIN or BRN is not required to be collected if the jurisdiction of residence of the seller does not issue a TIN or BRN to the seller.
CRA agreed with the view that s. 284(4)(a) does not require RPOs to collect BRNs in respect of Canadian resident entity sellers, on the basis that Canada does not issue such a number.
A TIN is defined in s. 282(1)(a) as the number used by the Minister to identify an individual or entity, including a business member. Although a BRN is not defined in the ITA, the OECD commentary indicates that this references “high integrity number” functional equivalents of TINs for jurisdictions that do not issue TINs. Although the provinces may issue BRNs, Canada does not – hence the conclusion.
Neal Armstrong. Summary of 25 January 2024 External T.I. 2023-0990781E5 under s. 284(2)(d).
CRA indicates that consent given over the phone or by pressing options on a touchtone phone does not constitute “express consent” to electronic information slips
For some of the information slips, most notably, the T4, T4A and T5, the issuer has the right pursuant to Reg. 209(5) to issue them in electronic format. For the others, it can only do so if (per Reg. 209(3)) it receives the ”express consent” of the recipient taxpayer, which is defined in Reg. 209(4) as consent “given in writing or in an electronic format”.
CRA indicated that consent of the taxpayer given over the phone would not be in writing or in electronic format and that an audio recording of verbal consent provided over the phone would not be so considered, as the recording would not be in an electronically readable form.
Furthermore, consent provided by selecting the electronic receipt of documents using a touch-tone phone would not so qualify, since the "act of selecting an option using a touch-tone phone does not provide clear and explicit consent in writing" and, furthermore, unless the consent provided in this scenario could be retained in an electronically readable format, it would not constitute consent in an electronic format.
Neal Armstrong. Summary of 6 November 2023 External T.I. 2022-0954001E5 under Reg. 209(4).
CRA confirms that there can be double source deductions where a resident Canadian is employed in the US by a US employer
CRA confirmed that where a non-resident employer was paying salary, subject to US source deductions, to a Canadian resident employee performing the employment services in the US, the employer was required to withhold the amounts prescribed under Reg. 102(1). The Reg. 104(2) exemption regarding a non-resident employee was inapplicable.
The employee could annually request, through submitting a form T1213, a Letter of Authority to authorize the non-resident employer to reduce the Canadian source deductions to take into account the employee's foreign tax credit (FTC) for the year. It was recommended that the request include a completed form T2209 (computing the FTC), or a letter providing FTC details.
Neal Armstrong. Summary of 12 December 2023 External T.I. 2023-0967811E5 under Reg. 102(1).
CRA indicates that RRSP beneficiaries of unit trusts are now generally required to get a TIN
CRA concluded that an RRSP trust, which does not have a tax identification number (TIN), and is the beneficiary of a unit trust, is now required to get one.
CRA noted that, by virtue of s. 150(1.2) ITA and Reg. 204.2, the unit trust was required, for taxation years ending after December 30, 2023, to file a Schedule 15 with its T3 returns disclosing, inter alia, each beneficiary and that beneficiary’s “TIN” which, in the case of a trust, was its trust account number (TAN).
Furthermore, s. 237(1.1)(b) provided that a person was required to provide its “designated number” (i.e., per s. 237(1.2)(b), its TAN, if a trust) to another person at that person's request if that person was required to make an information return that required that designated number. Accordingly, the RRSP trust, as a beneficiary of the unit trust, was required to provide its TAN to the unit trust upon the request of the unit trust.
CRA concluded from this that, should the RRSP Trust not have a TAN, it should request one from CRA. In other words, the requirement on the RRSP trust to provide its TAN to the unit trust implied that it was required to get one.
Neal Armstrong. Summary of 19 March 2024 External T.I. 2024-1003321E5 under s. 237(1.1)(b).
Income Tax Severed Letters 23 July 2025
This morning's release of four severed letters from the Income Tax Rulings Directorate is now available for your viewing.