News of Note

We have translated 6 more CRA interpretations

We have translated a 6 further CRA interpretations released during April of 2002. Their descriptors and links appear below.

These are additions to our set of 2,739 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 21 3/4 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
2002-04-12 19 March 2002 External T.I. 2002-0120785 F - Allocation de retraite - 212(13)(d) Income Tax Act - Section 215 - Subsection 215(2) s. 215(2) applicable to retiring allowance paid by US employer where it invoiced the sister Canadian corporation, as the predecessor employer, therefor
Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(j.1) s. 212(1)(j.1) applicable to the extent that the retiring allowance paid by the US employer to the non-resident retired employee is invoiced to the predecessor affiliated employer in Canada
24 April 2002 External T.I. 2001-0095755 F - TÉLÉTRAVAIL Income Tax Act - Section 8 - Subsection 8(13) telework arrangement, even if voluntary, and some time spent in the employer office, can satisfy s. 8(13) requirements/ time spent on the road does not satisfy the “primarily” requirement
4 April 2002 External T.I. 2001-0103735 F - Fiducie exclusive au conjoint et ass.-vie Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(14) - Paragraph 110.6(14)(g) s. 110.6(14)(g) inapplicable to shares held by spousal trust on the spouse’s death
Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(15) - Paragraph 110.6(15)(a) the spouse beneficiary of a Quebec spousal trust owns the shares owned by that trust
Income Tax Act - Section 248 - Subsection 248(3) - Paragraph 248(3)(e) s. 248(3)(e) deems the spouse beneficiary of a Quebec spousal trust to own shares of that trust
Income Tax Act - Section 70 - Subsection 70(5.3) s. 70(5.3) applicable to s. 104(4)(a)(i) disposition
15 April 2002 External T.I. 2002-0128145 F - 84.1(2)(a.1) of the Act Income Tax Act - Section 84.1 - Subsection 84.1(2) - Paragraph 84.1(2)(a.1) - Subparagraph 84.1(2)(a.1)(ii) where old common exchanged for new common shares and prefs with s. 85(1) election equal to the pref FMV, the s. 110.6 deduction will be traced under s. 84.1(2)(a.1)(ii) only to the prefs
24 April 2002 External T.I. 2001-0111185 F - DISPOSITION PARTIELLE D'UNE PARTICIPATION Income Tax Act - Section 248 - Subsection 248(1) - Disposition reclassification of LP units into three classes of alphabet units did not entail a disposition
Income Tax Act - Section 97 - Subsection 97(2) creation of 3 classes of units which tracked the 3 types of partnership property was not a disposition and did not engage s. 97(2)
Income Tax Act - Section 43 - Subsection 43(1) all the partner’s units were a single property, so that the disposition of one type of unit engaged s. 43(1)
Income Tax Act - Section 248 - Subsection 248(1) - Property all units of three classes constituted a single property to the limited partner
22 April 2002 External T.I. 2002-0117135 F - Appl. de 107.4(1)a) à une fiducie du CcQ Income Tax Act - 101-110 - Section 107.4 - Subsection 107.4(1) - Paragraph 107.4(1)(a) s. 107.4(1)(a) applicable on transfer by individual to Quebec trust of which he is a the sole beneficiary
Income Tax Act - 101-110 - Section 107 - Subsection 107(4.1) s. 107(2.1) applicable to distribution by personal trust of property to beneficiary other than the settlor

CRA indicates that it generally will not make a designation of a municipality under the ETA retroactive to the extent this changes the tax status of supplies already made

A registered charity (Corporation A) which has been making exempt supplies of accommodation to residents of housing sites and long-term care facilities as well as providing housing management services to the Province and to Corporation B regarding units owned by them has applied to be designated as a municipality for GST/HST purposes.

CRA noted that such change in status (although generating enhanced rebates for non-creditable expenses) would cause some of the supplies made by Corporation A to cease to be exempted by virtue of the exclusion in Sched. V, Pt. VI, s. 2(n), for example, the supplies of its management services, and the optional supplies of laundry and cable services. CRA then stated:

Retroactive determinations will generally not be granted where the retroactive determination would change the tax status of supplies that have already been made. The effects of a municipal determination discussed herein would only apply as of the effective date of the municipal determination.

Neal Armstrong. Summary of 15 June 2023 GST/HST Interpretation 222419 under ETA s. 123(1) – municipality – (b) and Sched. V, Pt. VI, s. 2(n).

Cassidy – Federal Court reverses CRA’s declining to provide significant interest relief due to its failing to engage with the taxpayer’s financial hardship request

The taxpayer requested interest relief under s. 220(3.1) primarily based on his inability to pay due to his divorce, the 2008 economic downturn, and the COVID-19 pandemic. The decision of the CRA reviewing officer to provide only very limited relief was found by Fothergill J to be unreasonable because the officer failed to engage with those submissions, so that the application for judicial review was allowed.

Neal Armstrong. Summary of Cassidy v. Canada (Attorney General), 2024 FC 174 under s. 220(3.1).

CRA has released the final version of the 2 November 2023 APFF Roundtable

We have translated the complete 2 November 2023 APFF Roundtable as released by CRA yesterday in final form (which did not vary significantly from the preliminary version that was provided in November). For your convenience, the table below provides links to the questions, and to the summaries that we prepared in November.

Topic Descriptor
2 November 2023 APFF Roundtable Q. 1, 2023-0975421C6 F - Paragraph 25 of IT-293R (Archived) Income Tax Act - Section 9 - Forgiveness of Debt reversal of CRA position that forgiveness of an old trade debt generally will be on capital account
2 November 2023 APFF Roundtable Q. 2, 2023-0982751C6 - Meaning of purpose tests in paragraph 55(2.1) Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(b) the payment of a pre-closing dividend of significant excluded assets by the target to its parent likely would engage s. 55(2) where no safe income
2 November 2023 APFF Roundtable Q. 3, 2023-0984441C6 F - Qualified small business corporation share - meaning of "all or substantially all" and "asset" Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1) - Qualified Small Business Corporation Share - Paragraph (d) a momentary right to discharge a dividend payable constitutes a non-active business asset for QSBCS purposes/ no rigid equating of "substantially all" with 90%
2 November 2023 APFF Roundtable Q. 4, 2023-0982781C6 F - Section 51 Share Exchange Income Tax Act - Section 51 - Subsection 51(1) s. 51(1) is inapplicable to an exchange for identical shares
2 November 2023 APFF Roundtable Q. 5, 2023-0982821C6 F - Notion d’ « entreprise principale » aux fins du paragraphe 1100(12) R.I.R. Income Tax Regulations - Regulation 1100 - Subsection 1100(12) criteria in IT-206R for distinguishing separate businesses, and in IT-371 for distinguishing a principal business, are applicable under Reg. 1100(12)
2 November 2023 APFF Roundtable Q. 6, 2023-0982831C6 - Paragraph 12(1)(x) Income Tax Act - Section 127 - Subsection 127(9) - Government Assistance CAE followed
2 November 2023 APFF Roundtable Q. 7, 2022-0942171C6 F - Indemnité payée pour libérer temporairement un logement locatif Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Improvements v. Repairs or Running Expense compensating a tenant for temporary displacement from a rental property being improved and repaired by the landlord may be a current deduction
2 November 2023 APFF Roundtable Q. 8, 2023-0982881C6 - Revision of Capital Cost Allowance Claims Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - E CRA will exercise its discretion in IC84-1 having regard to avoiding inappropriate tax results
Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(a) - Revising Claims CRA will continue on a discretionary basis to accept revisions to prior years’ CCA claims for nil-income years
2 November 2023 APFF Roundtable Q. 9, 2023-0982911C6 - APFF - Congrès 2023 - Table ronde sur la fiscalité Income Tax Act - Section 54 - Personal-Use Property bitcoin to be used for online purchases is not personal-use property
Income Tax Act - Section 54 - Proceeds of Disposition - Paragraph (b) damages for loss of bitcoin from fraud would be compensation for property unlawfully taken
Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Loss v. Loss - Damages bitcoin loss from fraud might be capital loss, and timing of a loss could be governed by s. 44(2)
2 November 2023 APFF Roundtable Q. 10, 2023-0993641C6 - APFF - Congrès 2023 Q.10 disposition de cryptomonnaie General Concepts - Ownership bitcoin platform likely acquired ownership of bitcoin deposited with it
Income Tax Act - Section 248 - Subsection 248(1) - Disposition there likely was a disposition of bitcoin on its transfer to a bitcoin platform
2 November 2023 APFF Roundtable Q. 11, 2023-0983621C6 F - Paragraph 12(1)(x) and Non-Refundable Tax Credit Income Tax Act - Section 53 - Subsection 53(2) - Paragraph 53(2)(k) Quebec synergy tax credit is received on the due date for the related return, or when a carryforward or carryback request is made for it
2 November 2023 APFF Roundtable Q. 12, 2023-0982931C6 F - APFF - Congrès 2023 - Table ronde sur la fiscalité General Concepts - Evidence documentation of a loss from the collapse of a crypto exchange
2 November 2023 APFF Roundtable Q. 13, 2023-0982941C6 F - APFF - Congrès 2023 - Table ronde sur la fiscalité Income Tax Act - Section 152 - Subsection 152(8) stay of proceedings under the BIA is a procedural limitation that does not affect an assessment’s validity
Other Legislation/Constitution - Federal - Bankruptcy and Insolvency Act - Section 69 - Subsection 69(4) where a contested notice of assessment is subject to a stay, it generally must apply to the bankruptcy court for lifting the stay
2 November 2023 APFF Roundtable Q. 14, 2023-0982951C6 F - Article 56.4 L.I.R. - Clauses restrictives Income Tax Act - Section 56.4 - Subsection 56.4(7) - Paragraph 56.4(7)(g) CRA will entertain applications for late s. 56.4(7)(g) (letter) elections
2 November 2023 APFF Roundtable Q. 15, 2023-0982901C6 - Impact of the Collins Family Trust decision Income Tax Act - Section 152 - Subsection 152(1) CRA lacks discretion to not apply the provisions of the ITA as judicially interpreted

Joint Committee comments on the short-term rental rules

Comments of the Joint Committee on the proposed rules in s. 67.7 denying the deduction of expenses for non-compliant short-term rentals include:

  • The wording of non-compliant amount does not reflect the different timing for various deductions and instead simply refers to “outlays made, or expenses incurred, in the taxation year.”
  • It would seem inappropriate to include bad debt expenses in the non-compliant amount since the effect is to impose tax on more than the revenues collected.
  • It would seem appropriate to add the limitation that the short-term rental definition refers to short-term rentals by the taxpayer to address, for example, situations where the taxpayer leases the property on a long-term basis, but the tenant subleases it on a short-term basis.
  • Most, if not all, municipalities and provinces, that have restrictions for short-term rentals use 30 consecutive days, not the 90 consecutive days used in the “short-term rental” definition.
  • Quaere whether it was really necessary to provide no time limit on CRA assessments under s. 67.7.
  • Non-residents who are not subject to Part I tax have a tax advantage over Canadian residents regarding the taxation of non-compliant short-term rentals.

Neal Armstrong. Summaries of Joint Committee, “Subject: Proposed section 67.6 of the Income Tax Act”, 5 February 2024 Joint Committee Submission under s. 67.7(1) - non-compliant amount, short-term rental, s. 67.7(2) and s. 67.7(4).

Income Tax Severed Letters 7 February 2024

This morning's release of 15 severed letters from the Income Tax Rulings Directorate is now available for your viewing.

9154 – Court of Quebec finds that the ARQ contravened its role by assessing a taxpayer for QST on a property transfer while continuing to collect QST as if the taxpayer was still owner

The ARQ assessed the appellant (9154-6093) for its failure to collect and remit QST on its transfer of a condo unit to the couple who were its shareholders for stated consideration. Alcindor JCQ accepted that the transfer was made to them for the purpose of obtaining mortgage financing on the unit and that they acquired the unit as nominees for 9154-6093 (so that no QST was payable), stating:

[D]espite the assignment, 9154-6093 rented Unit 54 to third parties, declared the income from such rentals, and collected the taxes and remitted them to Revenu Québec. …

Just before the sale of the Unit in October 2019 [the shareholders] retroceded the building to 9154-6093, which collected and remitted the GST and QST [on the sale] … to Revenu Québec.

She further stated that in light of this reporting of the 2019 sale:

[A]llowing Revenu Québec to recover QST on the 2009 transaction means that 9154-6093 is remitting QST twice on the same housing unit. … [T]his runs counter to both Revenu Québec's role and tax policy in this regard.

Neal Armstrong. Summary of 9154-6093 Québec Inc. v. Agence du revenu du Québec, 2023 QCCQ 10241 under General Concepts – Ownership.

GST/HST Severed Letters September 2023

This morning's release of four severed letters from the Excise and GST/HST Rulings Directorate (identified by them as their September 2023 release) is now available for your viewing.

Serres Toundra – Court of Quebec finds that a greenhouse operation is farming, not manufacturing or processing

The Quebec manufacturing and processing credits claimed by Serres Toundra in connection with equipment acquired for use by it in its greenhouse cucumber-growing operation turned on whether such equipment was Class 29 property. A Quebec regulation (similar to the exclusion in (a) of the ITA definition in s. 125.1(3) of “manufacturing or processing”) excluded “farming” from “manufacturing or processing.” In finding that the greenhouse operation was farming, so that the exclusion applied, Vaillant JCQ stated:

Greenhouse cucumber growing at Serres Toundra requires the same elements as those needed for cultivation in home gardens or farmers' fields: soil, water, light, heat and fertilizers. …

[The] food-grade mineral fibre substrate [used] instead of soil … plays the same role as soil … .

Neal Armstrong. Summary of Serres Toundra Inc. v. Agence du revenu du Québec, 2023 QCCQ 10441 under s. 248(1) – farming.

We have translated 8 more CRA severed letters

We have translated 2 translations of a CRA interpretation and ruling issued last week and a 6 further CRA interpretations released during April of 2002. Their descriptors and links appear below.

These are additions to our set of 2,718 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 21 3/4 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
2024-01-31 2023 Ruling 2022-0955451R3 F - Post mortem pipeline Income Tax Act - Section 84 - Subsection 84(2) conventional post-mortem pipeline transaction
22 June 2023 External T.I. 2018-0746741E5 F - Eligible dividend allocation Income Tax Act - 101-110 - Section 104 - Subsection 104(19) eligible and non-eligible dividend can be wholly designated to two respective beneficiaries
Income Tax Act - 101-110 - Section 104 - Subsection 104(13) a discretionary trust can wholly allocate each of an eligible and a non-eligible dividend to each of two recipient beneficiaries
2002-04-26 22 May 2002 Internal T.I. 2001-0106577 F - APPARIEMENT DES REVENUS ET DEPENSES Income Tax Act - Section 9 - Timing following Canderel, an upfront payment made under a multi-year supply contract is currently deductible
14 May 2002 Internal T.I. 2001-0109517 F - SECTION DE LA LOI248(28) Income Tax Act - Section 248 - Subsection 248(28) disallowance of interest deduction to partnership on loans to corporate partners whose amount was included in their income under s. 15(2), was not contrary to s. 248(28)
8 May 2002 Internal T.I. 2002-0135737 F - REGIME DE CONGE A TRAITEMENT DIFFERE Income Tax Regulations - Regulation 6801 - Paragraph 6801(a) - Subparagraph 6801(a)(vi) s. 6(11) income recognition when apparent that the leave would not commence within 6 years/ Reg. 6801(a)(vi) does not to extend 6-year period but deals with leaves over one year
2002-04-12 3 May 2002 External T.I. 2001-0110145 F - avantage imposable-vetements Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) reimbursing a professor for a briefcase needed in connection with work would be non-taxable
3 May 2002 External T.I. 2002-0132615 F - PERTE DECOULANT D'UN PAIEMENT A UN RPDB Income Tax Act - Section 147 - Subsection 147(8) creation of a business loss from making a DPSP contribution is not necessarily inconsistent with the DPSP rules
1 May 2002 External T.I. 2002-0133145 F - RAP - BAIL & ACTIONS Income Tax Act - Section 146.01 - Subsection 146.01(1) - Qualifying Home unit consisting of a leasehold interest and shares of the corporation owing the property could qualify as qualifying home

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