News of Note
We have translated 6 more CRA interpretations
Email this ContentWe have translated a further 6 CRA interpretations released in October of 2001. Their descriptors and links appear below.
These are additions to our set of 2,872 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 22 2/3 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
| Bundle Date | Translated severed letter | Summaries under | Summary descriptor |
|---|---|---|---|
| 2001-10-26 | 16 November 2001 Internal T.I. 2001-0097587 F - COPRODUCTION-DROIT D'AUTEUR | Income Tax Act - Section 248 - Subsection 248(1) - Disposition | licence to UK co-producer of rights, as copyright co-owner, to exploit its co-ownership rights outside Canada but with the licence back of those rights by the UK partnership licensee of the UK co-producer, did not constitute a copyright disposition |
| Income Tax Regulations - Regulation 1106 - Subsection 1106(12) | description of ruling letter regarding licensing of copyright by qualified corporation to UK co-producer and licence back | ||
| 16 November 2001 Internal T.I. 2001-0099927 F - INTERETS PAYES SUR PRET POUR ORDINATEUR | Income Tax Act - Section 118.62 | interest on loan for the purchase of a microcomputer obtained under the loan guarantee program of the Aide financière aux études did not qualify | |
| 29 October 2001 External T.I. 2000-005230A F - INDEMNITE DE TEMPS DE TRANSPORT | Income Tax Act - Section 6 - Subsection 6(6) - Paragraph 6(6)(b) | s. 6(6)(b) exception does not apply to compensation for travel time | |
| 30 October 2001 External T.I. 2000-0052765 F - CAISSE D'ENTRAIDE DE DIOCESE | Income Tax Act - Section 248 - Subsection 248(1) - Superannuation or Pension Benefit | amounts voluntarily paid to improve the retirement income of priests who did not have 35 years of service was pension income to them | |
| Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) | reimbursements of priests’ dental expenses out of gift fund, and one-off gifts, were not taxable benefits | ||
| 29 October 2001 External T.I. 2001-0075565 F - FRAIS DE SEJOUR ET ALLOCATIONS POUR REPAS | Income Tax Act - Section 6 - Subsection 6(6) - Paragraph 6(6)(a) | meaning of “temporary nature” and distance test | |
| Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) | meal allowance paid to employees working at least 3 hours of overtime, on an infrequent basis, may be non-taxable | ||
| 2001-10-12 | 30 October 2001 External T.I. 2001-0100555 F - PERTE ET REER | Income Tax Act - Section 40 - Subsection 40(3.3) | suspended loss rule did not apply to sale by individual’s corporation to that individual’s RRSP |
| Income Tax Act - Section 251.1 - Subsection 251.1(1) - Paragraph 251.1(1)(g) | an RRSP was not affiliated with its annuitant prior to s. 251.1(1)(g) |
Active Asset Management – Tax Court of Canada finds that issuing promissory notes in satisfaction of dividends in kind does not entail a transfer of property
AAM, which wholly-owned a private corporation (Bakorp), resolved to increase the stated capital of one of the two classes of shares held by it by $35 million (resulting in a deemed dividend in that amount) and, on the same day, received two promissory notes aggregating $77.6 million in satisfaction of dividends declared on that date on both classes of shares.
In finding that none of these dividends constituted a transfer of property by Bakorp to AAM, so that s. 160(1) did not apply regarding an unpaid tax debt of Bakorp, Bocock J first stated, regarding the stated capital increase:
AAM can now say its shares reflect a different stated value, but not a penny has been received by it as a consequence of the deemed dividend. …
[T]he mischief targeted by s.160, avoidance of payment of a tax debt to the Crown, has also not occurred. The “funds” available to Bakorp have not changed in the slightest. … .
Regarding the dividends-in-kind, he stated:
Where and how has Bakorp transferred, dissipated or surrendered control of its assets, funds or property to circumvent the payment of its tax liability.[citing Algoa] It has not in any way done so. No assets or funds of Bakorp, consequentially arising from the declaration of the declared dividends or making of the promissory notes, reside with AAM.
He did not refer to the statement in Banner Pharmacaps that:
[I]n some circumstances a promissory note may be evidence of a debt to be paid at some future time. In other circumstances, delivery of a promissory note may itself be payment of a particular obligation.
It is not apparent from the above-quoted passages from his judgment that Bocock J would have considered this distinction to be relevant.
Neal Armstrong. Summary of Active Asset Management Inc. v. The King, 2024 TCC 87 under s. 160(1).
CRA finds that the FMV of an FHSA which is not distributed by the second year of the last holder’s death is, absent designations of beneficiaries, included in the estate’s income
S. 146.6(16)(a)(ii) provides that an FHSA ceases to be an FHSA at the end of the year following the year of death of the last holder. If this occurs, s. 146.6(17)(c) provides that the proportion of the FMV of all the (former) FHSA property that a beneficiary is entitled to at that time is deemed for purposes of s. 146.6(14) to be distributed at that time from the FHSA to the beneficiary, so that such deemed amount is included in the beneficiary’s income for the year under s. 146.6(14).
CRA confirmed that, in this situation, where the deceased last holder had designated three siblings as equal beneficiaries under the FHSA in accordance with provincial law, then each of the three siblings would be required to include 1/3 of the FHSA FMV in their income; whereas, if under the provincial law, the individual’s estate was the beneficiary (for example, because the individual had not designated any individual beneficiary under the FHSA), the income inclusion resulting from s. 146.6(17)(c) would be to the estate.
Neal Armstrong. Summary of 7 May 2024 CALU Roundtable, Q.2, 2024-1005791C6 under s. 146.6(17)(c).
CRA issues a notice on the purpose-built rental housing rebate (PBRH rebate)
CRA has issued Notice 336 on the rebate under s. 256.2 of all the GST on the sale or self-supply of a newly-constructed multiple (over 4-unit) rental housing complex. Points made in the Q&A section include:
- Regarding the requirement that construction have commenced after September 13, 2023, this is considered to be when the excavation work starts.
- The PBRH rebate is not available for the substantial renovation of an existing complex (although it can be available for the addition of multiple units to an existing complex).
- Assuming the other requirements were met, the PBRH rebate could be available, for example, for the conversion of an office building to a multiple unit residential complex (where the conversion started after September 13, 2023), and to the construction of a long-term care facility (assuming it qualified as a multiple unit residential complex).
- The entering into before September 13, 2023 of an agreement to purchase a new 10-unit apartment building would not preclude access to the PBRH rebate where the construction started after that date.
Neal Armstrong. Summary of GST/HST Notice, No. 336, Purpose-built Rental Housing Rebate, June 2004 under ETA s. 256.2(3.1).
CRA indicates that the TCC has confirmed its view that an amount paid by a trust to a beneficiary is not deductible under s. 104(6) if it was not payable under the trust deed
CRA referred to an unreported 2023 Tax Court decision (which has not been appealed) regarding a family trust that realized a capital gain, paid $100,000 to each of two minor beneficiaries in the same taxation year, and claimed the deduction therefor pursuant to s. 104(6)(b) – notwithstanding that the trust deed prohibited any distributions to designated persons in respect of the father. Hogan J found that if an amount cannot be paid under the terms of a trust it cannot be considered to be payable, so that CRA’s denial of the deductions was confirmed.
CRA considers that this decision is consistent with its position in 2005-0159081I7 that in determining whether an amount is payable for the purposes of s. 104(6), it must first be determined whether the amount is payable under the provincial law, i.e., without regard to any ITA provision.
Neal Armstrong. Summary of 4 June 2024 STEP Roundtable, Q.10 under s. 104(6)(b).
CRA indicates that holding any GIC would preclude a trust from qualifying under s. 150(1.2)(b)
Although s. 150(1.1) historically had exempted trusts from a requirement to file returns if they had no income or dispositions of capital property in the year, this exemption was taken away by s. 150(1.2) for express trusts unless they came within a listed exemption, such as in s. 150(1.2)(b) regarding holding only specified property types with a value throughout the year of under $50,000. CRA indicated that a GIC issued by a Canadian bank or trust company did not constitute one of the assets listed in s. 150(1.2)(b), such as money, or a government issued or guaranteed debt obligation described in s. 212(3) – fully exempt interest – (a), so that any GIC would taint the trust under s. 150(1.2)(b).
Neal Armstrong. Summary of 4 June 2024 STEP Roundtable, Q.9 under s. 150(1.2)(b).
Income Tax Severed Letters 19 June 2024
This morning's release of 10 severed letters from the Income Tax Rulings Directorate is now available for your viewing.
Tourigny – Court of Quebec finds that damages for a burnt warehouse were compensation for lost profits rather than proceeds of goodwill
The taxpayer (“Trac-World”), whose warehouse was destroyed by fire, received damages from the local municipality in settlement of its claim for providing inadequate water supply during the fire. The quit claim stated that the sum was paid to compensate for the loss of Trac-World customers.
Trac-World reported the sum as being proceeds of disposition of goodwill, giving rise to an eligible capital amount. In finding that, under the surrogatum principle, the amount instead was fully taxable as compensation for lost profits, Bergeron JCQ noted that over 90% of Trac-World’s claim had been for lost profits and that its statement of claim had made no mention of loss of goodwill.
Neal Armstrong. Summary of Tourigny v. Agence du revenu du Québec, 2024 QCCQ 1914 under s. 9 - compensation payments.
CRA finds that “cost” under s. 127(32) did not include costs of processing property after its acquisition
The rules in s. 127 require the recapture of the cost of property previously claimed as investment tax credits where the property is, for instance, converted to commercial use or sold. S. 127(32) provides inter alia that, in this context, the cost “shall not exceed the amount paid by the taxpayer to acquire the particular property from a transferor [thereof].”
CRA, in a diffident analysis, suggested that, in light of this wording in relation to trees which were converted into logs and then used to test some experimental lumber-producing equipment, the cost likely only included the cost of the trees (i.e., the stumpage fees paid to the province) and not all the additional costs incurred in processing the trees.
Neal Armstrong. Summary of 31 July 2023 Internal T.I. 2021-0876331I7 under s. 127(32).
CRA finds that assessment of a director under s. 227.1 does not restart the 10-year limitation on relief under s. 220(3.1)
A corporation was assessed in its 2007, 2008 and 2010 taxation years regarding unremitted source deductions for its 2006 to 2009 taxation years together with interest and penalties. CRA assessed the director pursuant to s. 227.1 in September 2018, and the director applied for relief under s. 220(3.1) in 2019.
After stating that “the director’s liability under subsection 227.1(1) arises from his joint and several liability with the corporation and does not create a second tax debt,” the Directorate found that the taxation years referenced in s. 220(3.1) were those in which the corporation’s liability for the unremitted source deductions arose rather than that in which the director was derivatively assessed. Accordingly, as the director’s application for interest and penalty relief was in respect of the 2006 to 2009 taxation years, the 10-year limitation in s. 220(3.1) applied.
Neal Armstrong. Summary of 26 March 2024 Internal T.I. 2023-0974091I7 under s. 220(3.1).