News of Note
We have translated 7 more CRA interpretations
Email this ContentWe have translated a translation of a CRA interpretation released last week and a further 6 translations of CRA interpretations released in April of 2003. Their descriptors and links appear below.
These are additions to our set of 2,515 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 20 ¼ 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 |
|---|---|---|---|
| 2023-06-28 | 13 March 2023 External T.I. 2019-0802271E5 F - Déduction supplémentaire prévue au sous-alinéa 110 | Income Tax Regulations - Regulation 1100 - Subsection 1100(1) - Paragraph 1100(1)(c.1) | transferring Class 14.1 property under s. 98(3) eliminates any additional Reg. 1100(1)(c.1)(i) CCA claims |
| 2003-04-11 | 9 April 2003 Internal T.I. 2003-0001597 F - FRAIS ACCESSOIRES
Also released under document number 2003-00015970.
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Income Tax Act - Section 18 - Subsection 18(3.1) | application of s. 18(3.1) to work on a rental property |
| 2 April 2003 External T.I. 2003-0002285 F - FRAIS OBLIGATOIRE SERVICE INFORMATIQUE
Also released under document number 2003-00022850.
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Income Tax Act - Section 118.5 - Subsection 118.5(1) - Paragraph 118.5(1)(a) | fees rendered by the university’s computer department for services are includible in tuition fees | |
| 1 April 2003 External T.I. 2003-0004125 F - Freeze by Paying a Stock Dividend
Also released under document number 2003-00041250.
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Income Tax Act - Section 74.4 - Subsection 74.4(2) | non-application to stock dividend | |
| Income Tax Act - Section 15 - Subsection 15(1.1) | s. 15(1.1) inapplicable to stock dividend paid to wholly-owning shareholder | ||
| Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(b) | imputed disposition to which s. 69(1)(b) applied where common shares issued at undervaluation to children’s trust | ||
| General Concepts - Effective Date | price-adjustment clause to redemption value of preferred shares did not accord with IT-169 | ||
| 8 April 2003 Internal T.I. 2003-0004827 F - Avantage conféré par une fiducie-par. 105(1)
Also released under document number 2003-00048270.
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Income Tax Act - 101-110 - Section 105 - Subsection 105(1) | s. 105(1) benefit can be conferred by trust on a tenant who is not a beneficiary/ benefit to be based on fair rental value at the time the deceased entered into the lease | |
| 2 April 2003 External T.I. 2002-0171215 F - FRAIS DE FINANCEMENT
Also released under document number 2002-01712150.
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Income Tax Act - Section 18 - Subsection 18(3.1) | treatment of CMHC guarantee fees and interest rate guarantee fee | |
| 2003-04-04 | 31 March 2003 External T.I. 2002-0171835 F - DON D'ACTIONS COTEES EN BOURSE
Also released under document number 2002-01718350.
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Income Tax Act - Section 149.1 - Subsection 149.1(6.3) | donation of Pubco shares to public foundation qualified as such given that s. 149.1(6.3) designation not effective until following year |
| Income Tax Act - Section 38 - Paragraph 38(a.1) | donation of Pubco shares to public foundation qualified as such given that s. 149.1(6.3) designation not effective until following year |
CRA confirms that transferring Class 14.1 property under s. 98(3) eliminates any additional Reg. 1100(1)(c.1)(i) CCA claims
Regarding where a taxpayer acquired Class 14.1 property after 2016 pursuant to an s. 98(3) rollover, CRA noted that, for taxation years ending before 2027, Reg. 1100(1)(c.1)(i) allows a claim of additional CCA of 2% on a portion of the undepreciated capital cost of Class 14.1 property of the taxpayer at the beginning of January 1, 2017. CRA effectively noted that there is no continuity rule regarding the transfer of Class 14.1 property under an s. 98(3) rollover, so that such a transfer would result in the loss of the additional CCA claims. 2017-0729871E5 makes essentially the same point regarding the s. 85 rollover.
Neal Armstrong. Summary of 13 March 2023 External T.I. 2019-0802271E5 F under Reg. 1100(1)(c.1).
Amex Bank – Tax Court of Canada finds that costs of Amex’ points program were inputs to its exempt credit card revenues, and did not generate ITCs
CRA denied the input tax credit (“ITC”) claims of Amex for its 2002 to 2012 taxation years for GST/HST paid on expenses arising in connection with the administration and operation of Amex’s Membership Rewards Program (“MRP”), including expenses incurred for the purpose of providing its cardholders who were members of the MRP (“Members”) with rewards on the redemption of points earned by them mostly through making purchases on their cards.
Hogan J, in dismissing Amex’s appeal, found that “all of the elements and components of the MRP are inherently intertwined and connected with the exempt supply of financial services made by the Appellant to its Members and merchants.” In particular, he found that that Amex incurred such expenses “for the purpose of earning greater [GST/HST-exempt] merchant discount revenue in its credit card business.”
Amex submitted that the free supply rule in s. 141.01(4) applied to characterize the supply of the rewards as a taxable supply, on the basis that (i) the supply of rewards to Members was made for no consideration, and (ii) the purpose of making such supply was to facilitate the activities of the Members. Hogan J rejected both branches: Amex in fact was not making free supplies since it made its supply of rewards “in satisfaction of a redemption liability that is extinguished on completion of the transaction;” and even if there was a free supply, its predominant purpose was facilitating the generation of revenues from Amex’s exempt credit card activities.
Neal Armstrong. Summaries of Amex Bank of Canada v. The King, 2023 TCC 93 under s. 169(1) and s. 141.01(4).
CRA illustrates the resident portion rules for a s. 94 trust that inter alia has lent to a resident beneficiary or earns FAPI
Regarding where a loan is made by a non-resident trust (which has made a valid (resident portion) election under s. 94(3)(f)) to a Canadian resident beneficiary, CRA noted that s. 94(2)(g)(iv) provides that the loan to the beneficiary involves the acquisition by the trust of the debt which entails a deemed transfer by the debtor – so that, here, there is a deemed transfer of property from the beneficiary to the trust. Accordingly, under para. (a) of the “resident portion” definition, the amount of the loan owing by the beneficiary would be considered as a contribution by the beneficiary (viewed in this regard as a resident contributor) and would be included in the resident portion of the trust.
The repayment of the loan would be considered to be a contribution to the trust by the resident beneficiary so that the cash repayment proceeds would be added to the resident portion. Since the debt ceased to exist, it is expected that it would no longer be included in the resident portion.
49% of the shares of a non-resident corporation owned by a non-resident trust which has made a valid s. 94(3)(f) election were included in the resident portion but the trust held 100% of the shares in all. CRA noted that s. 94(3)(f)(viii) provides that the resident portion trust and the non-resident portion trust are a deemed to not deal with each other at arm’s length and s. 94(3)(a)(x) provides that a deemed resident trust is deemed to be resident in Canada throughout the particular tax year for purposes of determining whether a foreign affiliate is a controlled foreign affiliate (CFA) of the taxpayer. Accordingly, in light of s. (b)(ii) of the CFA definition (effectively deeming the resident portion trust to hold the shares of a non-arm’s length person) the corporation would constitute a CFA of the resident portion trust. Accordingly, its FAPI would be computed in the usual way based on its participating percentage (based on its 49% shareholding).
Neal Armstrong. Summary of 20 June 2023 STEP Roundtable, Q.7 under s. 94(1) – resident portion.
GST/HST Severed Letters February 2023
This morning's release of 10 severed letters from the Excise and GST/HST Rulings Directorate (identified by them as their February 2023 release) is now available for your viewing.
Income Tax Severed Letters 28 June 2023
This morning's release of four severed letters from the Income Tax Rulings Directorate is now available for your viewing.
CRA confirms that a Canadian registered charity beneficiary of a non-resident trust does not engage the s. 94 rules
CRA noted that, since the definition of a “resident beneficiary” in s. 94(1) excludes an “exempt person,” the inclusion in the potential beneficiaries of a non-resident trust of Canadian registered charities would not by itself cause the s. 94 rules to apply to that trust.
Neal Armstrong. Summary of 20 June 2023 STEP Roundtable, Q.6 under s. 94(1) – resident beneficiary.
CRA illustrates the operation of the recovery limit rules to a resident beneficiary of a s. 94(3) trust that has unpaid Canadian taxes
A factually non-resident, inter vivos, personal trust which has one resident beneficiary and no resident contributors was subject to s. 94 in its 2020 taxation year, in which it earned taxable income. However, no distribution of property occurred until a capital distribution of $100,000 was made to the resident beneficiary on December 30, 2022.
CRA illustrated the operation of the rule under s. 94(3)(d) for joint and several liability of the resident contributor for unpaid taxes of the trust for its 2020 taxation year, subject to limitation by the “recovery limit” provisions of ss. 94(7) and (8), by focusing on two dates: January 1, 2021 (i.e., just after completion of the trust’s 2020 taxation year); and December 31, 2022 (i.e., one day after the distribution). Of particular note was para. (a) of the recovery limit formula in s. 94(8), which totaled the various amounts which were, for example, paid to the particular person, here, the resident beneficiary.
The formula produced a nil result on January 1, 2021, and an amount of $100,000 on December 31, 2022. Accordingly, although on January 1, 2021, the resident beneficiary was jointly and severally liable for the taxes owing by the trust for its 2020 taxation year, CRA could not collect an amount from the resident beneficiary as of that date. It could, however, assess the resident beneficiary for an amount not exceeding $100,000 on December 31, 2022 given that the conditions in s. 94(7) were by assumption satisfied for the 2020 year – and this was so even if s. 94(3) had ceased to apply to the trust for its 2021 or 2022 taxation year.
Neal Armstrong. Summary of 20 June 2023 STEP Roundtable, Q.5 under s. 94(8).
CRA indicates that the expanded trust reporting requirements will extend to the reporting of contingent beneficiaries
Pursuant to Reg. 204.2(1)(a), a trustee of a trust is required to report information about each “beneficiary” of the trust, unless the trust is subject to one of the exceptions in s. 150(1.2) or an exception in s. 204.2(2) applies.
CRA was asked to comment on the meaning of “beneficiary” in the context of a query about the trust deed for a family trust providing that in the event that none of the parents and their issue survived, the trust assets went to extended family members. CRA indicated that, very generally, a beneficiary of a trust is a person, other than the protector, who has the right to compel the trustee to properly enforce the terms of the trust, regardless of whether that person’s right to the income or capital of the trust is immediate, future, contingent, absolute or conditional on the exercise of the discretion of any person – so that, accordingly, a beneficiary in the ordinary sense would include a beneficiary whose interest is contingent.
Neal Armstrong. Summary of 20 June 2023 STEP Roundtable, Q.4 under Reg. 204.2(1).
We have translated 6 more CRA interpretations
We have translated a further 6 translations of CRA interpretations released in April of 2003. Their descriptors and links appear below.
These are additions to our set of 2,508 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 20 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 |
|---|---|---|---|
| 2003-04-18 | 10 April 2003 Internal T.I. 2002-0177767 F - INDEMNITE RECUE PAR UN ARTISTE
Also released under document number 2002-01777670.
|
Income Tax Act - Section 54 - Proceeds of Disposition - Paragraph (f) | damages for infringement of an artist’s moral rights could be proceeds of disposition of a capital property |
| Income Tax Act - Section 248 - Subsection 248(1) - Property | the moral rights of an artist were property | ||
| 17 April 2003 Internal T.I. 2003-0006407 F - PRET SANS INTERET DEDUCTIBILITY INTERETS
Also released under document number 2003-00064070.
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Income Tax Act - Section 20.1 - Subsection 20.1(1) | s. 20.1(1)(b)(iv) can apply to money borrowed for an interest-free loan that was a source under the exceptional circumstances test | |
| 2003-04-11 | 9 April 2003 External T.I. 2003-0008735 F - DONATION XXXXXXXXXX
Also released under document number 2003-00087350.
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Income Tax Act - Section 248 - Subsection 248(31) | guidelines in ITTN No. 26 followed |
| 4 April 2003 External T.I. 2002-0171635 F - PERTE APPARENTE
Also released under document number 2002-01716350.
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Income Tax Act - Section 54 - Superficial Loss | purchase within 30 days by daughter of share vendor did not engage the superficial loss rules | |
| Income Tax Act - Section 40 - Subsection 40(3.3) | purchase within 30 days by daughter of share vendor’s controlling shareholder did not engage the superficial loss rules | ||
| Income Tax Act - Section 251.1 - Subsection 251.1(1) - Paragraph 251.1(1)(a) | father and daughter not affiliated | ||
| Income Tax Act - Section 251.1 - Subsection 251.1(1) - Paragraph 251.1(1)(b) | corporation and daughter of its controlling shareholder not affiliated | ||
| 4 April 2003 External T.I. 2002-0176305 F - DON PAR TESTAMENT
Also released under document number 2002-01763050.
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Income Tax Act - Section 118.1 - Subsection 118.1(5) | gift can be made by will to a foundation formed after testator’s death | |
| 3 April 2003 External T.I. 2003-0006945 F - XXXXXXXXXX
Also released under document number 2003-00069450.
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Other Legislation/Constitution - Federal - Indian Act - Section 87 | Guideline 2 satisfied notwithstanding that Indian with reserve home needs to stay off the reserve for temporary work assignment |