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20 June 2023 STEP Roundtable Q. 12, 2023-0959591C6- Corporate Beneficiary and CDA-- summary under Subsection 104(21) Summary Under Tax Topics- Income Tax Act- 101-110- Section 104- Subsection 104(21) s. 104(21) designation can be made re distributing the taxable half of a trust capital gain to a corporate beneficiary – who receives no CDA addition An inter vivos Canadian resident trust pays an amount equal to its net taxable capital gains for the year to a Canadian private corporation that is a beneficiary and designates that amount pursuant to s. 104(21). ... (a)(i.1) of the capital dividend account definition, there would be no addition to the corporation’s CDA – whereas there would be such an addition if both portions of the capital gains were distributed to the corporate beneficiary. ...

Furthermore … the transfer of the employee's rights in the DSU Plan could indirectly allow the individual to access the value of the individual's rights before one of the times specifically identified in paragraph 6801(d)(i) … which would also contravene the requirements of paragraph 6801(d). ...

. … As no amount is included in the computation of income under the provisions of the Act, no amount could be included as FAPI. ... Accordingly, the life insurance proceeds … would form part of Foreignco's pre-acquisition surplus pool. ...

11 October 2013 Roundtable, 2013-0495281C6 F- Question 9- APFF Round Table-- summary under Subsection 146.3(6.1) Summary Under Tax Topics- Income Tax Act- Section 146.3- Subsection 146.3(6.1) transfer of RRIF by executor to RRIF of surviving spouse Does the position in 2002-0141355- that an RRSP can be transferred to the RRSP of a surviving non-resident spouse, who can open an RRSP, even if he or she does not have a Social Insurance Number ("SIN") – apply to the transfer of an RRIF? CRA responded: [W]here an amount out of the RRIF of a deceased annuitant is paid to the deceased's legal representative and the surviving spouse is the beneficiary of the estate, subsection 146.3(6.1) deems the amount received by the legal representative of the last annuitant under the fund to be received by the surviving spouse to the extent that, on the one hand, the amount would have been a refund of premiums if it had been paid, under the plan, to the beneficiary spouse of the annuitant's estate and that, on the other hand, it is jointly designated by the legal representative and the surviving spouse in the prescribed T1090 form … filed with the Minister as required by the definition of "designated benefit" in subsection 146.3(1). ...

. … [T]he fact that inner door access is installed between the two units or that meals are prepared and taken the vast majority of the time in one of the two units does not appear to be sufficient for the two units to be considered as a single housing unit for the purposes of the I.T.A. ... On this basis, only the housing unit ordinarily inhabited by the individual qualifies as a principal residence. … Our comments would be the same if the property belonged to the parent, except that in this case, one or other of the housing units could qualify as the principal residence of the parent. ...

. … [I]f an employer establishes an arrangement under which it has full discretion to award a bonus or has full discretion as to the mode of payment of this bonus (in shares or in cash), [this] discretion… would ensure that it could not be an agreement for purposes of section 7…. ... This could be the case [where]…[a]fter the first year, the employer exercises its discretion and sets the amount of the bonus at 75 shares, which is payable in shares at the end of the year if the employee is still employed by the employer. … [T]he choice of the employee…does not preclude an undertaking from being an agreement to issue shares. ...

In the case of disability of either individual, Opco will receive the proceeds of the policy covering such event in order to then pay a special dividend of $1,000,000 to the Holdco of the active shareholder to fund the purchase by the latter of the shares held directly by the disabled individual – with Opco then redeeming shares held by the purchased Holdco of the disabled individual for $500,000. After indicating that there was insufficient information to provide more than a general discussion of the purpose tests in ss. 55(2.1)(b)(i) and (ii), CRA noted that, in 2015-0613821C6, it indicated that it could issue a favourable advance ruling on a determination of purpose “where all manifestations of purpose and corroborating circumstances support the absence of one of the purposes described in subparagraph 55(2.1)(b)(ii) and (ii)” with such determination “conditional on the representation made by the taxpayer that the purposes for which the dividend was paid do not include one of the purposes described in proposed paragraph 55(2.1)(b)(i) and (ii) ….” ...

Can the estate designate itself as the graduated rate estate (“GRE”) of the deceased (non-resident) individual when filing its first tax return under Part I – and what is required respecting if there was no SIN? ... (d) of the GRE definition- that the estate designate itself as the GRE of the deceased individual in its Part I return for its first taxation year ending after 2015 – would be satisfied if such designation was made in the estate’s return for its first taxation year after 2015 in which it was required to file a Part I return. ...

CRA stated: As noted … in Keybrand and Aeronautic, the financial dependence of one party on the other could, depending on the facts and circumstances of the situation, demonstrate that the parties are not dealing with each other at arm's length at a particular time in respect of a particular transaction. ... CRA concluded: If the facts and circumstances of a specific case demonstrate that the financial dependence of one party on another is such that it is possible for the CRA to conclude that a transaction or series of transactions was entered into between persons not dealing with each other at arm's length under any of the criteria listed in … S1-F5-C1, [para. 1.38, respecting a common mind directing the bargaining, acting in concert or de facto control], then such dependence may be sufficient to conclude that the parties are not dealing at arm's length. ...

Since this occurred after the safe-income determination time, the taxable income from the sale was not included in computing safe income – so that if the vendor then paid a dividend out of the asset sale proceeds, it would be recharacterized as a capital gain because of the lack of safe income. ... However, practical solutions to these types of technical issues exist and therefore the CRA does not consider that a flexible approach is necessary in the[se] circumstances …. ...