News of Note
CRA indicates that an Appeals Officer can (and may) increase the reassessment under appeal
Email this ContentCRA stated that it has the authority under ETA s. 301(3) (equivalent, although not identical, to ITA s. 165(3)) to further increase a reassessment that has been objected to (for example, if a second valuation prepared for the Appeals Officer produced an even higher valuation) – but indicated that “[a]ny upward adjustment must be approved by the Appeals Officer’s manager or the Chief of Appeals.”
Neal Armstrong. Summary of 7 April 2022 CBA Roundtable, Q.1 under ETA s. 301(3).
CRA has provided its written responses for the 2022 CBA Roundtable
We have prepared summaries of questions posed to CRA at the April 7, 2022 CBA Commodity Tax Roundtable and provided the full text of the CRA written responses.
We have translated 7 more CRA interpretations
We have published a CRA interpretation released last week and a further 6 translations of CRA interpretations released in October of 2003. Their descriptors and links appear below.
These are additions to our set of 2,404 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 19 1/3 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 |
|---|---|---|---|
| 2023-03-08 | 16 January 2023 Internal T.I. 2020-0851561I7 F - SSUC/CEWS -– rémunération admissible et rémunérati | Income Tax Act - Section 125.7 - Subsection 125.7(1) - Eligible Remuneration | eligible remuneration for each qualifying period includes additions for vacation and sick leave, but excludes taxable benefits |
| Income Tax Act - Section 125.7 - Subsection 125.7(1) - Baseline Remuneration | baseline remuneration includes additions for vacation and sick leave pay, and security allowances | ||
| 2003-10-03 | 23 September 2003 External T.I. 2003-0035905 F - REG 4900(3)
Also released under document number 2003-00359050.
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Income Tax Regulations - Regulation 4900 - Subsection 4900(3) | employee can designate a survivor benefit in the annuity contract |
| 11 September 2003 External T.I. 2003-0010375 F - MONTANT RECU D'UN ORDRE RELIGIEUX
Also released under document number 2003-00103750.
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Income Tax Act - Section 6 - Subsection 6(3) | amount paid to a member departing a religious order | |
| 11 September 2003 External T.I. 2003-0029145 F - CREDIT D'IMPOT POUR DON
Also released under document number 2003-00291450.
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Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts | meaning of gift under Quebec civil law | |
| 11 September 2003 External T.I. 2003-0032975 F - DON A UN PETIT-FILS HANDICAPE
Also released under document number 2003-00329750.
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Income Tax Act - Section 74.1 - Subsection 74.1(2) | s. 74.1(2) applies irrespective of child’s physical or mental condition | |
| 15 September 2003 External T.I. 2003-0033405 F - CONVENTION DE RETRAITE INTERETS COURUS
Also released under document number 2003-00334050.
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Income Tax Act - Section 207.5 - Subsection 207.5(1) - Refundable Tax - Paragraph (b) | computation of refundable tax includes income under application of s. 12(9) to stripped coupons | |
| 15 September 2003 External T.I. 2003-0034195 F - ALLOCATION DE RETRAITE
Also released under document number 2003-00341950.
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Income Tax Act - Section 60 - Paragraph 60(j.1) | employee purchase of back years of service with a related employer permitted | |
| General Concepts - Agency | common law Crown agency test applied for determining whether current and previous employers were related employers |
CRA confirms that eligible remuneration for CEWS purposes does not include taxable benefits
CRA essentially confirmed its position in 2020-0856411I7 F that where mandatory vacation, statutory holiday and sick leave pay provided for in the various collective agreements in the Quebec construction industry is added by the employer (an eligible entity) to the basic salary or wages included in each pay cheque of an eligible employee, it will consider that the eligible entity has paid that additional amount to the eligible employee in respect of the same week as the related salary or wages are paid, so as to be included in determining the CEWS entitlement of that employer for that week.
It now added that baseline remuneration is determined on the same basis for CEWS purposes, and that taxable benefits (here, group insurance plan benefits) were not to be included given that “[o]nly eligible remuneration paid to an eligible employee is included in computing the CEWS.”
Neal Armstrong. Summaries of 16 January 2023 Internal T.I. 2020-0851561I7 F under s. 125.7(1) – eligible remuneration, and baseline remuneration.
Ossai – Federal Court sets aside a CRA decision on the basis that it was unintelligible
Although the facts are more intricate, they essentially involved the taxpayer, in early 2021, promptly withdrawing $29,000 from his TFSA when he discovered (before being so notified by CRA) that he had over-contributed by $20,000 – then shortly thereafter, contributing a further $6,000 to his TFSA, not realizing that under the “excess TFSA amount” definition, such contributions were not offset by his “excess” TFSA withdrawal earlier in the year of $9,000 because it is only a prior, not a current, year’s withdrawals that restore contribution room. He did not withdraw the excess contributions created by these further contributions until a number of months after CRA had assessed him in 2021 for his $20,000 overcontribution. CRA denied his request for relief under s. 207.06(1) on the basis that the removal of the excess contributions did not occur within a reasonable time frame – but provided no explanation as to why the $9,000 excess withdrawal in 2021 did not offset the further 2021 contributions.
Aylen J found that, in the absence of any such explanation, the CRA adverse decision was “unintelligible and lack[ed] justification and transparency.” The decision was set aside and remitted for re-determination by a different CRA officer.
Neal Armstrong. Summary of Ossai v. Canada (Attorney General), 2023 FC 313 under s. 207.06(1).
CRA comments indicate that a loan from an Ontario partnership to a general partner will be treated as a distribution
CRA indicated that whether a payment made by a limited partnership to a limited partner that was styled as a loan was to be treated as a loan for purposes of ss. 96(2.2)(c) and 53(2)(c)(v) (rather than as a distribution) was to be determined based on the laws of Ontario.
Regarding the common law, the Directorate stated (adverting to the Rye v. Rye/ Klein line of cases):
It is well established at common law that a man cannot contract with himself and that a partner cannot contract with a partnership of which he is a member. Therefore, it is necessary to determine whether a limited partnership can make a loan to a limited partner pursuant to statutory law, thereby overriding such long-standing common law rule.
CRA had earlier referred to s. 60(1) of the Partnership Act (B.C.), which provides that “A limited partner may lend money to, borrow money from and transact business with the limited partnership,” and noted that such a loan therefore can be valid.
Although, on its analysis, this was the very provision at issue, it curiously did not go on to refer to s. 12 of the Limited Partnerships Act (Ontario), which provides a truncated (but likely not maimed) version of s. 60(l) of the B.C. Act: “A limited partner may loan money to and transact other business with the limited partnership … ” (i.e., s. 12 does not specifically refer to limited partner borrowings). However, CRA indicated that the doubts expressed in 2016-0637341E5 as to whether it was possible under the civil law for a limited partnership to make loans to a limited partner were not meant to apply to Ontario limited partnerships.
The above comments suggest that CRA Headquarters would characterize a loan made to a general partner by a partnership governed by the laws of a common law province, such as Ontario, as instead being a distribution.
Neal Armstrong. Summary of 16 December 2019 Internal T.I. 2019-0816101I7 under s. 96(2.2)(c) and Statutory Interpretation – Interpretation Act, s. 8.1.
Income Tax Severed Letters 8 March 2023
This morning's release of three severed letters from the Income Tax Rulings Directorate is now available for your viewing.
BMO Nesbitt Burns – Federal Court of Appeal confirms that providing a full spreadsheet would not breach privilege or amount to an impermissible self-audit
The Federal Court had granted a CRA application pursuant to s. 231.7 seeking an order requiring BMO Nesbit Burns (“NBI”) to provide an unredacted version of a spreadsheet in connection with CRA’s audit of suspected dividend rental arrangement transactions of NBI.
NBI in response to the initial request made pursuant to s. 231.1 had redacted a column in the spreadsheet on the basis that it reflected written legal advice it had received. In rejecting NBI’s claim of privilege, Kane J had stated that the spreadsheet was not more than the mere “operational outcome or end product of legal advice” and did not satisfy the requirement that it “communicate … the very legal advice given by counsel.” Without reviewing these findings in detail, Locke JA found no reversible error.
In rejecting NBI’s further argument that “the Minister’s application should not have been granted in the absence of an ongoing tax audit,” Locke JA noted that the audit was still ongoing when CRA first requested the unredacted spreadsheet,” and then stated:
[I]t cannot have been Parliament’s intent to permit the target of an audit to avoid an order pursuant to subsection 231.7(1) of the Act by delaying compliance with a document request until after issuance of a notice of reassessment. …
He also very briefly rejected NBI’s submission (based on BP Canada) “that ordering production of the unredacted Spreadsheet amounts to requiring NBI to conduct a self-audit or to reveal its ‘soft spots’,” simply stating that BP Canada was distinguishable.
Neal Armstrong. Summaries of BMO Nesbitt Burns Inc. v. Canada (National Revenue), 2023 FCA 43 under s. 232(1) – solicitor-client privilege and s. 231.7.
CRA defines the meaning of “substantially complete” in a UHTA context
UHTA s. 6(7)(k) exempts a person who is not an excluded owner from tax respecting a residential property held at the end of a calendar year where “the construction of the residential property is not substantially completed before April of the calendar year.”
CRA indicated that it may use its GST/HST guidelines in determining when construction of a residential property is substantially completed for UHTA purposes. It stated:
Generally, substantial completion of a residential property means that construction is at a stage of completion (generally 90% or more) that allows an individual to reasonably inhabit the property.
S. 6(7)(l) provides an exemption where “the construction of the residential property is substantially completed in January, February or March of the calendar year, the residential property is offered for sale to the public during the calendar year and the residential property had never been occupied by an individual as a place of residence or lodging during the calendar year.” CRA indicated that this exemption would apply in the following simple example:
- C and D (who are not citizens or permanent residents) together own all the shares of a Canadian corporation which had substantially completed constructing detached homes in Canada in March 2022.
- Although the homes had been offered for sale to the public from shortly after the commencement of construction, they were still unsold on December 31, 2022.
Neal Armstrong. Summaries of Underused Housing Tax Notice UHTN13 Exemptions for New Residential Properties February 2023 under UHTA s. 6(7)(k) and s. 6(7)(l).
We have translated 7 more CRA interpretations
We have published a CRA interpretation released last week and a further 6 translations of CRA interpretations released in October of 2003. Their descriptors and links appear below.
These are additions to our set of 2,397 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 19 1/3 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 |
|---|---|---|---|
| 2023-03-01 | 30 June 2022 Internal T.I. 2022-0936671I7 F - Frais de déplacement | Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) | one-time travel between a home office and the employer’s office was in the course of employment |
| Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(vii.1) | per-kilometer allowances for one-time travel between home office and employer’s office qualified under s. 6(1)(b)(vii.1 | ||
| Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(vii) | one-time travel between home office and employer’s office did not qualify as travel away from the employer’s establishment | ||
| Income Tax Act - Section 6 - Subsection 6(6) - Paragraph 6(6)(b) | potential exclusion of allowances for meals and hotels paid for travel to a remote work site (an office) of the employer where the employees stay for 3 days | ||
| 2003-10-17 | 8 September 2003 Internal T.I. 2003-0010407 F - Gains et pertes sur change étranger
Also released under document number 2003-00104070.
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Income Tax Act - Section 39 - Subsection 39(2) | s. 39(2) applies to interest on US mortgage |
| Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(i) | Gaynor applies in computing gain on disposition of US securities | ||
| 29 September 2003 Internal T.I. 2003-0027347 F - FRAIS MEDICAUX DEPLACEMENT
Also released under document number 2003-00273470.
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Income Tax Act - Section 118.2 - Subsection 118.2(2) - Paragraph 118.2(2)(h) | travel and accommodation expenses of parents in order to be near their hospitalized child were not covered | |
| 24 September 2003 Internal T.I. 2003-0184097 F - perte au titre de placement
Also released under document number 2003-01840970.
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Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(g) - Subparagraph 40(2)(g)(ii) | Byram accepted: NIB loan can be made with a view to dividends | |
| 2003-10-10 | 11 September 2003 Internal T.I. 2003-0026217 F - Report de Pertes du de Cujus
Also released under document number 2003-00262170.
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Income Tax Act - Section 111 - Subsection 111(2) | net capital loss in year before death could be carried back rather than applied against all income in the two s. 111(2) years |
| 25 September 2003 Internal T.I. 2003-0032837 F - Market Maker: Reserve Account for Losses
Also released under document number 2003-00328370.
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Income Tax Act - Section 153 - Subsection 153(1) - Paragraph 153(1)(a) | payment of deferred commission amounts held as contingency loss reserve from old employer to new employer was a payment of “remuneration” subject to withholding | |
| General Concepts - Payment & Receipt | constructive receipt by employee where reserve loss account (funded out of commissions) is transferred from old brokerage employer to new brokerage employer | ||
| 2003-10-03 | 24 September 2003 External T.I. 2003-0028145 F - DON FAIT PAR UN PARTICULIER NON-RESIDENT
Also released under document number 2003-00281450.
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Income Tax Act - Section 118.1 - Subsection 118.1(3) | non-resident can carry forward a credit five years to when Canadian residence is acquired |