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15 December 1989 Income Tax Severed Letter ACC8866 F- Correspondence Unedited CRA Tags 246(1)(b)     89M12544     December 15, 1989 Mr. ... Allington   957-2064 Attention:  Mr. E.S. Eng Paragraph 246(1)(b) Enclosed is a copy of the letter received from the Department of Finance in response to our enquiry of June 14, 1989, copy of which is also enclosed. ...

3 June 1991 Income Tax Severed Letter 91M06315 F- Flow-through Shares- Prescribed Shares Unedited CRA Tags 6202.1(1)(c), 66(12.73), 6202.1 Question 20.      ... Answer 20.     We reiterate our answer to this question which was asked in Question 7 at the 1990 Roundtable (Canadian Petroleum Tax Journal, Fall 1990, page 141):      Provided the issuer agrees to pay damages to the subscriber only to the extent of any additional tax payable by the subscriber as a consequence of a reduction of the expected tax deductions pursuant to subsection 66(12.73) of the Income Tax Act, it is our view that such an indemnity would not cause any issued shares to be prescribed shares within the meaning of section 6202.1 of the Regulations.      It is also our view that where no shares have been issued in respect of any unspent proceeds, the issuer agrees to refund such proceeds to the subscriber, and the price of any shares subsequently issued will not be reduced because of the refund, such an indemnity would not cause the prescribed share rules to apply.       ...

A taxpayer is preparing a request for an advance income tax ruling and is desirous of submitting the request in such manner that would facilitate processing of the ruling request.       ... Our records show that the necessity of having to make repeated requests for information or documents is the principal reason why there is, in far too many cases, a slow turnround time.       ... Nevertheless, as part of our review, we do want to see all relevant documentation and agreements.       ...

1 November 1991 Income Tax Severed Letter 91M11276 F- CCA Classes for "Buildings or Other Structures" Unedited CRA Tags 1104(2)       1991 TAX EXECUTIVES INSTITUTE ROUNDTABLE 12.      ... ANSWER 12.       Paragraph 1 of IT-79R3 states, inter alia, that the word "structure" includes anything of substantial size that is built up from component parts and intended to remain permanently on a permanent foundation. ...

1 April 1980 Income Tax Severed Letter Dear Sirs: We would be grateful for your technical interpretation regarding the calculation of foreign accrual property income (FAPI) in the following situation: Beneficiary (resident in Canada)      ] (100%) S94(1)(d) Trust (resident Bahamas)      ] (100%) Investment Holding Co. ...

The following example will serve to illustrate: UKCO | | 100% | CANCO I / \ 100% 100% / \ CANCO II USCO Underlying assets and liabilities: $ CANCO I Canadian real property 1,000 Debt (300) 700-------- CANCO II Canadian real property 1,000 Debt (800) 200-------- USCO U.S. real property 2,500 Debt 2,000 500 Value of assets relating to Canadian immovable property: Gross 2,000/4,500 = 44% Net 900/1,400 = 64% In the above example the determination under paragraph 4(a) will vary depending upon whether the gross or net asset values are considered. ... Assuming the same corporate structure as that noted previously: CANCO I Canadian real property 2,000 Other assets 1,000 Debt (500) CANCO II Canadian real property 1,500 Other assets 1,000 Debt (500) USCO U.S. real property 2,000 Other assets- Debt (800) Debt offset first against immovable property: 2,500/5,700 = 44% Debt offset first against other assets: 3,500/5,700 = 61% In light of the above and given that only assets can give rise to value, we would submit that the only reasonable way to make the determination is to look at gross assets in the parent and any subsidiaries or other companies in which the parent has an interest. ...

In forming our opinion, we gave consideration to the following points: 1.      ... (c)       Subsection 74.1(1) of the Act contains the following exclusion from amounts otherwise attributable under that subsection:      "otherwise than by an assignment of any portion of a retirement pension pursuant to section 64.1 of the Canada Pension Plan or a comparable provision of a provincial pension plan as defined in....)".      Such pension income would be taxed under section 56 of the Act (i.e., subparagraph 56(1)(a)(i)).  ...

Results Alternative 1 Effective Rate of Tax 8.5% 21% Taxes Paid by FA Interest $ 85,000 $ 210,000 Capital Gain 85,000 210,000 $ 170,000 $ 420,000 FAT 2ith respect to Canco Interest $ 85,000 $ 210,000 Capital Gain 85,000 210,000 $ 170,000 $ 420,000 Alternative 1 Effective Rate of Tax FAPI of Canco 8.5% 21% (Subsection 91(1)) Interest $1,000,000 $1,000,000 Taxable Capital Gain 500,000 500,000 1,500,000 1,500,000 Deduction for FAT (Subsection 91(4))(2xFAT) 340,000 840,000 Net Inclusion in Canco's Income $1,160,000 $ 660,000 Alternatives 2 & 3 In Example 1 Alternatives 2 and 3 produce the same results. ... Results Alternative 2 & 3 Taxes paid by FA Interest $ 480,000 Capital Gain 300,000 $ 780,000 FAT with respect to Canco Interest $ 480,000 Taxable Capital Gain (equals amount required to eliminate Canadian tax on the capital gain) 250,000 $ 730,000 FAPI to Canco (Subsection 91(1)) Interest $l,000,000 Capital Gain 500,000 $1,500,000 Deduction for FAT (Subsection 91(4)(2xFAT)) 1,460,000 Net Inclusion in Canco's Income $ 40,000 2. ... Allocation of Foreign Tax Paid Results Alternative 1 2 3 One half All to To FAPI To FAPI FAPI to extent required (1) Capital Gain $100 $100 $100 (2) Foreign Tax $ 30 $ 30 $ 30 (3) Net gain available for distribution to Canada $ 70 $ 70 $ 70 (Item (1)- Item (2)) (4) FAPI 91(1) (one half Item $ 50 $ 30 XXX (1)) (5) FAT 95(1)(c) $ 15 $ 30 XXX (6) Deduction from Income 91(4) (Lesser of 2 times Item (5) and Item (4)) $ 30 $ 50 $ 50 (7) Net Income Inclusion in Canada (Item (4)- Item (6))$ 20-- (8) Canadian Tax on FAPI (50% Item (7)) $ 10-- (9) Total Tax on Gain domestic plus Foreign (Item (2)+Item (8)) $ 40 $ 30 $ 30 (10)Tax if gain had been Domestic $ 25 $ 25 $ 25 Adjustment to Exempt Surplus (11)1/2 of the gain $ 50 $ 50 $ 50 (12)Foreign taxes applicable 15- 5 (13)Net adjustment $ 35 $ 50 $ 45 (14)Exempt Surplus After Adjustment $ 35 $ 50 $ 45 Adjustment to Taxable Surplus (15)1/2 of the gain $ 50 $ 50 $ 50 (16)Foreign taxes applicable 15 30 25 (17)Net adjustment $35 $ 20 $ 25 (18)Taxable Surplus After Adjustment (Includes opening balance of $100) $135 $120 $125 (19)Increase in Underlying Foreign Tax (also new balance) $ 15 $ 30 $ 25 Amount available as a Tax-free dividend to Canada because of the gain (20)From exempt surplus (Item (14)) $ 35 $ 50 $ 45 (21)From taxable surplus (Deduction) equal to Item (19)) 15 30 25 (22)Deduction under 91(5) (also from taxable surplus) 20-- (23) $ 70 $ 80 $ 70 Balances after tax-free dividend (24)Exempt Surplus (Item (14)Item (20))--- (25)Taxable Surplus $ 100 $ 90 $100 (Item(18)- Item(21)+Item (22)) (26)Underlying Foreign Tax (Item(19)- Item(21))--- Comments A. ...

18 June 1990 Income Tax Severed Letter 74830 F- Ressessment Where Misclassification of Property Unedited CRA Tags 13(6), 152(4)   June 18, 1990 Audit and Investigations Head Office Training Program Division Specialty Rulings Centre for Career Development Directorate Room 315, 460 O'Connor Street C.R. Bowen Vince Renda 957-2096 Manager   Your File No.      HBI-3933-9      Our File No.     7-4830 (900226)Subject: Research Guide on Subsection 13(6) We are writing in reply to your memorandum of March 21, 1990 addressed to Mr. ...

Example #1 You propose to calculate the taxable benefit pursuant to section 80.4 of the Act for each of the two taxpayers as follows: (i) (Prescribed + (Subsidy- (Total of Actual = Total Taxable Interest) Interest) Interest Paid by Benefit Both Employer and Employee) 11% + (1% + 1%)- 12% = 1% (ii) The net taxable benefit is 1% for the two employees combined. ... Employer A contributes 1% and Employer B contributes 2%), the following calculations, in your view, will apply: (i) (Prescribed + (Subsidy- (Total of Actual = Total Taxable Interest) Interest) Interest Paid by Benefit Both Employer and Employee) 11% + (1% + 2%)- 12% = 2% (ii) The net taxable benefit is 2% for the two employees combined. ... Example #2 Employee of Employer A Paragraph 80.4(1)(a): 11% 80.4(1)(b): 1% 80.4(1)(c): 12% 80.4(1)(d): nil Then (a) + (b)- (c)- (d) = 12%- 12% = nil Employee of Employer B Paragraph 80.4(1)(a): 11% 80.4(1)(b): 2% 80.4(1)(c): 12% 80.4(I)(d): nil Then (a) + (b)- (c)- (d) = 13%- 12% = 1% Accordingly, the employee of Employer A is not assessed a taxable benefit while the employee of Employer 8 will be assessed a taxable benefit based on 1% provided the two employers are not related to each other. ...