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CRA indicated: The definition of “Canadian resident partnership” … is not relevant for the application of [subpara. 2(f)] …. ... The CRA will in general consider that [subpara. 2(c)] … is satisfied even if a particular vendor is not directly involved in the negotiations for the sale of shares, when [the other conditions are satisfied]. … … T5013 forms … do … not constitute a return of income for the purpose of [subpara. 2(e)] …. ... Therefore, neither a partnership nor the partners of a partnership in situations such as described above may use the cost recovery method …. ...

Jan 1 1.50 Deposit US$100K from Cdn. bank account None – not a tax transaction Feb 1 1.40 Withdraw US$20K to buy shares Capital loss based on the excess of value of US$20K on Jan 1 compared to Feb 1 June 1 1.35 Deposit US$100 of dividends Dividend recognized based on 1.35 rate at dividend payment July 1 1.30 Deposit $20K of share sale proceeds Capital loss from disposition of $2,000 (their ACB of $28,000 (US$20,000 x 1.40) over the proceeds of $26,000 (US$20,000 x 1.30) Sep 30 1.20 Transfer US$50K to Cdn bank account The average exchange rate is 1.46, being the ratio of the total of each of the transactions in the bank account expressed in Cdn dollars [(150,000- 30,000 + 135 + 26,000) = 146,135] to the balance of that account in USD [(100,000- 20,000 + 100 + 20,000) = 100,100]. ...

CCRA responded: [T]he situation … is similar to … Grenier …. Consequently, subject to additional facts to the contrary, … the interest paid … could be deductible pursuant to paragraph 20(1)(c). ...

That is what the Tax Court of Canada indicated in … Ekamant … 2009 TCC 408 …. Thus … Corporation A did not become a CCPC at the time of the signing of the purchase offer made by Corporation B since it continued to be controlled by Pubco at that time. ...

In this regard we cite … MDS Health … and … Haro Pacific …. ...

Had this been the case, the $1,000 exemption would lose all of its meaning as it only applies to taxable income. … … [P]rovincial laws … such as legislation on labour standards or on occupational health and safety … [define] "volunteer firefighters" …. ... This approach allows some light to be shed on the meanings provincial government authorities accord to the expression as well as municipal or other public administrations. … [M]unicipalities and other public authorities are better able to determine the status of their employees. Paragraph 81(4)(b) states that this responsibility clearly falls on the shoulders of the municipality or public authority. … [On] an audit …[it] could be asked to … justif[y] its decision to grant … the exemption …. ...

CRA stated: The taxpayer's administrative policy for all officers and directors to reimburse the cost of a business class airline ticket in certain circumstances primarily benefits the employer. … [B]usiness class air travel may allow the employer to get better performance from the employee. Consequently … the reimbursement … does not constitute a taxable benefit …. … [T]he reimbursement of the spouse's ticket is made primarily for the benefit of the employee and … the latter derives an economic advantage from it. ... Thus … the reimbursement … is a benefit to be included in the employee's income under paragraph 6(1)(a). ...

CRA responded: Question 1 – Broad class of persons The phrase “a broad class of persons” … would generally encompass a large group of persons dealing with a financial institution at arm’s length who have been offered the same incentive without regard to tax considerations or their other personal or financial circumstances. … For example, an incentive offered by a financial institution to all clients who invest or maintain registered and non-registered accounts at a specific minimum dollar amount would generally be considered to be offered to a broad class of persons. … [W]hether an incentive offered only to a “select group” of clients would qualify for the exception would depend on the size of the group relative to the financial institution’s client base as a whole as well as on the particular criteria used to select eligible investors. ... Question 2 – Commercially reasonable In general terms, we consider reasonable incentive programs of the type frequently offered by financial institutions, such as moderate fee rebates or bonus interest payments, to be offered in a “normal commercial or investment context” in which parties deal with each other at arm’s length and act prudently, knowledgeably and willingly (described in this letter as commercially reasonable). … [F]actors indicating that an incentive program is not commercially reasonable would include disproportionate benefits relative to investment size, parties acting in concert and other commercially unreasonable behaviour that suggests a main purpose of the arrangement is to allow the investor to benefit from the registered plan’s tax exemption. Question 3 – Monetary value of incentive We consider the value of the incentive relative to the amount invested to be a significant factor in determining if an incentive program is commercially reasonable. ...

Does the application of s. 55(2) to the deemed dividend received by each corporation, which generates an addition to its RDTOH account and, therefore, generates a dividend refund to it and associated Part IV tax on the deemed dividend paid by it to the other corporation, engage the exclusion from s. 55(2) for dividends which are subject to Part IV tax – or does the Part IV tax exclusion not apply so that s. 55(2) applies to the full amount of the deemed dividend received by each corporation? ... Furthermore … in … 943963 Ontario Inc. … the parties … and the Court accepted that there was a given amount subject to Part IV tax by the appellant, the dividend recipient, notwithstanding that a part of the deemed dividend…was deemed to not be a dividend received, by virtue of subsection 55(2). ... The application of subsection 55(2) in that case did not engage any circular calculation. … Moreover, the fact of calculating the RDTOH account at the end of a taxation year of each corporation in such a situation…involving cross redemptions and thus cross dividends, entails circular calculations by them of their respective RDTOH, dividend refunds and Part IV tax. ...

This principle has been invoked … [in] Burnco Industries … Wawang Forest … and Newfoundland Light …. ...