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Our Comments Reimbursements or awards for legal fees in connection with the collection or establishing a right to a retiring allowance: Paragraph 56(1)(l.1) of the Income Tax Act (the "Act") requires a taxpayer to include in computing income amounts received as an award or reimbursement of legal expenses paid to collect or establish a right to a retiring allowance. ... Reimbursements or awards for legal fees in connection with the collection or establishing a right to income from employment: Reimbursements or awards for legal fees in connection with the collection or establishing a right to income from employment are included in income from an office or employment by virtue of paragraph 6(1)(j) of the Act. ...

Reasons: The location of customers is relevant except where it can reasonable be considered that one of the main purposes for the establishment of the business-client relationship with the First Nation organization is to serve as a connection between the Indian’s business income and a reserve. 5-972173 XXXXXXXXXX Karen Power, C.A. (613) 957-8953 Attention: XXXXXXXXXX May 12, 1998 Dear Sirs: Re: Self-employed Income Earned by a Status Indian We are writing in response to your letter of August 11, 1997 wherein you requested our comments regarding the taxation of income earned by a self-employed status Indian. ... In such circumstances, in our view, it must be taken into consideration that where an arrangement creates an artificial connection between business income and a reserve, the arrangement will carry no weight as a connecting factor. Consequently, in the above-described situation, the weight that the on-reserve location of the customers would otherwise carry, as a connecting factor, will not be recognized if it can reasonably be considered that one of the main purposes for the establishment of the business-client relationship with the First Nation organization is to serve as a connection between the logger’s business income and a reserve, by acting as an intermediary between the logger and actual log buyers who are located off reserve. ...

Principal Issues: An individual (the Claimant), in connection with the Claimant’s XXXXXXXXXX business, purchased an insurance policy (the Policy) that provided the Claimant with coverage while the Claimant was totally disabled. ... To the best of your knowledge, and that of the taxpayer involved, none of the issues contained herein: (i) is in an earlier return of the taxpayer or a related person; (ii) is being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayer or a related person; (iii) is under objection by the taxpayer or a related person; and (iv) is before the courts or, if a judgement has been issued, the time limit for appeal to a higher court has not expired. ... In connection with the out-of-court settlement, the Insurer conceded that the Policyholder was totally disabled in XXXXXXXXXX and subsequent to that time. ...

Opco will be appointed the administrative agent of the Trust and provide to it administrative services in connection with the acquisition of securities, the execution of swap arrangements, the issuance of indebtedness and other activities incidental to same, subject to the control and direction of Trustco. 4. ... The transactions described below will be undertaken in connection with the first series of Notes to be issued by the Trust. a) The Trust proposes to acquire $XXXXXXXXXX face value floating rate notes issued by Targetco (the “Targetco Debt”). ... To the best of your knowledge and that of Opco none of the issues in respect of which rulings are herein requested is: (a) in an earlier return of Opco or a related person, (b) being considered by a tax services office or tax centre in connection with a previously filed tax return of Opco, (c) under objection by Opco or a related person, (d) before the courts or, if a judgement has been issued, the time limit for appeal to a higher court has not expired, and (e) the subject of a ruling previously issued by the Directorate. ...

We also followed the guidance provided by the Supreme Court of Canada in the Nowegijick case and also the subsequent Williams case (92 DTC 6320, (1992) 1 C.T.C. 225) that the Indian Act should be interpreted fairly and liberally, in determining whether or not there is a connection of income to a reserve. ... This provision has been intentionally limited to situations where the employee's duties are in connection with the employer's non-commercial activities which are carried on for the benefit of Indians living on reserve. ... It is to be noted that the Indian Act provides exemption for an Indian's property on a reserve and, thus, there is the need for a connection to a reserve. ...

In relation to this wording, subsection 70(2) of the Act, in connection with the election described therein concerning rights or things, states that "the legal representative shall file a separate return of income under this Part as if (a)     the taxpayer were another person; (b)     that other person's only income for the year were the value of the rights or things;... ... In connection with these comments, we also note that the return in which the rights and things were included as income would also be subject to the provisions of section 180.2 although it would be regarded as being the return of someone other than the Individual. We are also mentioning that in connection with the case at hand, you have referred to the provisions of sections 114.2 and 118.93 which provide rules on deductions that can be claimed where separate returns are filed under certain provisions including subsection 70(2) of the Act. ...

As you know Guideline 4 requires that: "The employer is resident on a reserve; and the employer is: an Indian band which has a reserve, or a tribal council representing one or more Indian Bands which have reserves, or an Indian organization controlled by one or more such bands or tribal councils, if the organization is dedicated exclusively to the social, cultural, educational, or economic development of Indians who for the most part live on reserves; and the duties of the employment are in connection with the employer's non-commercial activities carried on exclusively for the benefit of Indians who for the most part live on reserves" With respect to the term "employer is resident on a reserve", satisfaction of this element is always of some concern where the head office of an organization is located on a reserve but its main place of business is located off reserve. ... Although the employee's residence would not be a factor which connects the Indian's employment to the reserve, it is appropriate, under the circumstances laid out in Guideline 4, to recognize a connection since the employee is working for the benefit of Indians on reserve. However, if the population served by the organization was not comprised almost entirely of Indians who live on reserve, this latter connection would not exist. ...

Our understanding of the facts is as follows: XXXXXXXXXX Our Comments Guideline 4 requires a) that the employer is resident on a reserve; b) that the employer is an Indian band which has a reserve, or a tribal council representing one or more Indian bands which have reserves, or an Indian organization controlled by one or more such bands or tribal councils, if the organization is dedicated exclusively to the social, cultural, educational, or economic development of Indians who for the most part live on reserves; and c) that the duties of the employment are in connection with the employer's non-commercial activities carried on exclusively for the benefit of Indians who for the most part live on reserves. ... We would also like to point out that the employment duties of each particular Indian employee would have to be considered to determine if they were in connection with the employer's non-commercial activities carried on exclusively for the benefit of Indians who for the most part live on reserves. ... Furthermore, we note that your facts state that "the duties of the Indian employees of the Association are in connection with the Association's non-commercial activities carried on for the benefit of Indians who for the most part live on reserve. ...

Facts We understand the facts to be as follows: XXXXXXXXXX Your Position In your opinion, the Indians in question meet the criteria of Guideline 4, since they are employed by an Indian band which is resident on a reserve and their duties of employment are in connection with the social, cultural, educational or economic development of Indians who for the most part live on reserves. ... Thus, as regards the four Indians who are employed by the XXXXXXXXXX although it appears that the employer is resident on a reserve and that it is an Indian band that has reserves, it is not clear from the information provided that the duties of employment of the Indians are in connection with the Band's non-commercial activities carried on exclusively for the benefit of Indians who for the most part live on reserves. ... In summary, Guideline 4 requires that a) the employer be resident on a reserve; b) the employer be an Indian band which has a reserve, or a tribal council representing one or more Indian bands which have reserves, or an Indian organization controlled by one or more such bands or tribal councils, if the organization is dedicated exclusively to the social, cultural, educational, or economic development of Indians who for the most part live on reserves; and c) the duties of employment be in connection with the employer's non-commercial activities carried on exclusively for the benefit of Indians who for the most part live on reserves. ...

We also acknowledge the information provided in your subsequent correspondence and during our various telephone conversations (XXXXXXXXXX) in connection with the Request. ... We understand that, to the best of your knowledge and that of the taxpayers on whose behalf this ruling is requested, none of the issues involved in the Request: (i) is in an earlier return of the taxpayers or a related person; (ii) is being considered by a Tax Services Office or Taxation Center in connection with a previously filed tax return of the taxpayers or a related person; (iii) is under objection by the taxpayers or a related person; (iv) is before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired; or (v) is the subject of a Ruling previously issued by the Directorate. ... In connection with its business, Foreignco owns a number of patents for the manufacture of XXXXXXXXXX, including XXXXXXXXXX Canadian patents (the "Canadian Patents") relating to XXXXXXXXXX". ...