News of Note
CRA sets out conditions for paying a refund, previously owing to a dissolved sub, to the parent
Email this ContentCRA’s starting point is to consider that when a sub has been wound up into its parent and dissolved, its right to receive a refund of an overpayment also ceases. However, if "all returns have been filed up to the date of dissolution, the articles of dissolution indicate that the corporation will distribute its assets to the shareholder…after satisfying its creditors [the articles of dissolution will not state this but presumably a general conveyance will do the trick],… the shareholder is the rightful owner of the funds and the sole shareholder completes and returns a signed ‘Release and Indemnification' form to the CRA," then CRA "may" issue the refund to the parent.
Neal Armstrong. Summary of 18 November 2014 TEI Roundtable, Q. E.4 under s. 164(1).
NorthWest International Healthcare REIT is being merged under s. 132.2 into NorthWest Healthcare REIT
NorthWest International Healthcare REIT, which holds its international portfolio through a subsidiary Ontario LP with an exchangeable unit structure is being merged under s. 132.2 into NorthWest Healthcare REIT. Although there principally are Ontario entities involved, Alberta is an easier jurisdiction for obtaining a non-corporate plan of arrangement than perhaps Ontario. In order to qualify as an Alberta plan of arrangement, some minor transactions involving an Alberta asset manager were inserted.
Newer-style exchangeable units are to be created: an affiliated group holding a 65% economic interest in NWI will exchange (under s. 97(2)) their exchangeable units in the subsidiary LP of NWI for units of that LP which are redeemable for NWH units.
NWI and NWH are seeking CRA approval to change the fiscal year ends of various subsidiaries so that their income earned up to the effective date will be allocated to the respective NWI and NWH unitholders.
Neal Armstrong. Summary of NorthWest International Healthcare and NorthWest Healthcare REIT Circular under Mergers & Acquisitions – REIT/Income Fund/LP Acquisitions – Section 132.2 Mergers – REIT Mergers.
Slate U.S. Opportunity (No. 3) Realty Trust will be merged into Slate Retail REIT
It is proposed that Slate U.S. Opportunity (No. 3) Realty Trust ("SUSO 3") be merged into Slate Retail REIT using the standard s. 132.2 merger mechanics. They have the same manager and focus on the same type of US real estate.
Somewhat unusually, the number of Slate REIT units to be received by SUSO 3 unitholders will be subject to a working capital adjustment to be determined immediately before the merger. The merger is not occurring pursuant to a plan of arrangement (which in most other merger contexts is required in order to avoid the need to file a US registration statement) – perhaps because the units of SUSO 3 are unlisted.
Neal Armstrong. Summary of Slate U.S. Opportunity (No. 3) Realty Trust under Mergers & Acquisitions – REIT/Income Fund/LP Acquisitions – Section 132.2 Mergers – REIT Mergers.
CRA considers that a QET can contemplate the distribution of the trust funds to the company in order to establish a replacement trust
The definition of a "qualifying environmental trust" includes a requirement that it "is maintained for the sole purpose of funding the reclamation of a qualifying site." CRA has provided a technical interpretation, on the model trust drafted by the National Energy Board for pipeline companies, indicating that it is acceptable to have a clause providing that towards the end of any applicable perpetuities period, the trust fund shall be distributed to the pipeline company, which has covenanted to use the fund to establish a replacement reclamation trust.
Neal Armstrong. Summary of 22 August 2014 T.I. 2014-0521951E5 under s. 211.6(1) - qualifying environmental trust.
CRA considers that the HST/GST customs release rule can apply only where the related sales agreement was entered into after importation
On its face, ETA s. 144 deems any supply of goods which otherwise would be deemed to be made in Canada by a registrant (including a registered non-resident) on the basis of the legal delivery occurring in Canada, to instead to be made outside Canada if the goods have been imported and their legal delivery (e.g., DDU or DAP destination) occurs before customs release. However, CRA considers that this rule does not apply where an agreement for the supply of the goods was entered into before the goods are imported - so that s. 144 has only a narrow field of application.
Neal Armstrong. Summary of CBAO National Commodity Tax, Customs and Trade Section – 2014 GST/HST Questions for Revenue Canada, Q. 33 under ETA, s. 144.
Brokerage statements often are inadequate for T1135-preparation purposes
Those preparing T1135 forms are finding
that the availability and quality of this information will vary greatly from one dealer to another, as well as between types of accounts. For example, very little (if any) information appears to have been provided for taxpayers using many of the popular discount brokerage accounts. Even where there is information available, you may have to double-check to ensure that the properties have been properly classified.
Neal Armstrong. Summary of Maureen Vance, "T1135 – The Saga Continues," Tax Topics, Wolters Kluwer, Number 2248, April 9, 2015, p. 1 under s. 233.3(3).
CRA finds that a taxpayer cannot request a notice of determination of loss until after audit
Contrary to an interpretation favoured by the Department of Finance, CRA considers that a notice of determination of loss cannot be made by the Minister in response to a request made by the taxpayer at the time of originally filing its return, so that such determination can only be made after the Minister has adjusted the amount of the reported loss on audit.
Neal Armstrong. Summary of 18 November 2014 TEI Roundtable, Q. E.1, 2014-0550351C6 under s. 152(1.1).
CRA narrowly construes the s. 95(3)(b) safe harbour for “services performed in connection with the… sale of goods”
In s. 95(3)(b) there is a safe harbour - from the general rule in s. 95(2)(b)(i) that income of a foreign affiliate from providing services to its Canadian parent (which are deductible in computing the parent’s Canadian business income) is foreign accrual property – for "services performed in connection with the purchase or sale of goods." CRA’s position is "that only services directly related to such sales so qualify," so that services of a foreign affiliate in testing prototypes (manufactured by its Canadian parent) of goods that would subsequently be manufactured and sold by the parent, were found not to qualify.
Neal Armstrong. Summaries of 13 January 2015 Memo 2013-0497361I7 F under s. 95(3)(b) and s. 95(3)(d).
CRA implies that a U.S. LLC with a normally drafted LLC Agreement does not have PUC
CRA considers that "to the extent [the applicable State corporate] laws and constating documents do not provide for stated capital akin to that which is provided for under Canadian domestic corporate law but, rather, provide for an attribute that is akin to a partner's capital account, [a] US LLC would not…have stated capital" – and therefore would have no paid-up capital for s. 90(3) purposes. Given that the various State LLC statutory provisions do not provide for distributable corporate capital (and, conversely, in Canada, stated capital generally is provided for in the governing statute rather than in the articles), the reference here to the effect of the LLC’s "constating documents" (i.e., LLC Agreement) is helpful and may be consistent with an LLC with a properly drafted LLC Agreement having PUC.
Neal Armstrong. Summary of 20 March 2015 T.I. 2014-0535971E5 under s. 90(3).
CRA apparently considers that there is no deduction for repaid employment benefits
CRA considers that only reimbursements of remuneration described in s. 8(1)(n) (such as repayments of income received during a leave when the individual did not return to employment) are deductible, so that if an employee is required in a subsequent year to repay employment benefits received, the employee apparently does not receive a deduction for the repayment.
Neal Armstrong. Summary of 16 March 2015 T.I. 2014-0524371E5 F under s. 8(1)(n).