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Technical Advisor (613) 590-1116 XXXXXXXXXX TSO 2004-006977 Taxable Capital Gain on Personal-use Property This is in response to your letter of March 31, 2004, in which you seek our comments in connection with a reassessment you propose to issue regarding the calculation of a taxable capital gain on the disposition of "personal-use property", as defined in section 54 of the Income Tax Act (the "Act"). ... In general, for an article to be considered a fixture, some substantial connection with the land or a building on it must be shown. ...

The Taxpayer incurs expenses for food, beverages and entertainment in connection with these meetings that it has fully deducted for income tax purposes. ... Subsection 67.1(1) of the Act applies to the food, beverage and entertainment expenses incurred in connection with the Taxpayer's XXXXXXXXXX Meetings and Conventions. ...

The intention in the examples of Guideline 2 is just to ensure that the employment income has enough connection to a reserve. ... " The above comments appear in the section of the Workshop paper discussing employment income and are in the context of, for example, creating an employment relationship through the use of an intermediary, the purpose being to provide a connection to a reserve. ...

Following the above, in our view, the term “reasonably attributable” used in conjunction with the expression “in the circumstances” in the regulation denotes the requirement that in order to attribute the OCNP to a particular PE under subsection 403(4) of the Regulations, a direct causal connection be established between the OCNP and the PE taking in account all the applicable facts of the case. ... In such situations, it is our view that since subsection 403(4) requires a connection between the PE(s) and the earning process of the particular premiums in question, in order for the CRA to propose an allocation on a particular basis, the CRA must be satisfied that the basis being proposed is reasonable, even where the taxpayer has not provided sufficient information for allocating on a reasonable basis. ...

When dividends are paid on the Shares, Employerco would make additional loans to the EPSP Trust each year (“Additional Loans”) equal to the amount of the dividends received to enable the EPSP Trust to acquire additional Shares on the open market in connection with the additional DSUs provided to the Participants as dividend equivalents. ... Paragraph 144(7)(b) would then exclude that amount from being included under subsection 144(7) in the Participant’s income in connection with their receipt of the Shares. ...

They import such meaning as "in relation to", "with reference to" or "in connection with". The phrase "in respect of" is probably the widest of any expression intended to convey some connection between two related subject matters. ...

Our comments on the resulting income tax consequences are: a)   no deduction will be allowed to the vendor as no outlay of an expense nature has been incurred; b)   the outlay made by the purchaser in connection with the service contracts was a capital outlay made in connection with the sale of a service business; c)   the purchaser purchased a business and the service obligations assumed are part of the consideration paid for the business, so no amount can be brought into the purchaser's income under paragraph 12(1)(a) of the Act as the service obligations arose in connection with a capital transaction; and d)   the purchaser will not be allowed to deduct any costs incurred to render the related services as the outlay is incurred in connection with a capital obligation acquired in the purchase transaction, that is, they are not expenses laid out to earn income. ...

The reason for the requirement that an Indian organization must be controlled by one or more bands that have reserves is that "bands that have reserves" establish a connection to reserves, and it is the property (including income) of an Indian on a reserve that is exempt from taxation. ... The employment duties would also have to be considered to determine if, as required under Guideline 4, 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. ... It will always be a question of fact as to whether income can be considered to be situated on a reserve but where one's duties are always carried out in a certain location and one spends just some incidental time on a reserve, in our view, there is not a strong connection to a reserve. ...

., (1949] S.C.R. 287 (49 DTC 514), where it was held that commission payments were not allowable as deductible expenses since they were incurred in connection with the  financing of the business and were not related to the income earning process. ... Yonge-Eglinton Building Limited (74 DTC 6180], where Thurlow, states that:       "... the words "In the course of"... are not a reference to the time when the expenses are incurred but are used in the sense of "in connection with" or incidental to" or arising from" and refer to the process of carrying out or the things which must be undertaken to carry out the issuing or selling or borrowing for or in connection with which the expenses are incurred. ... The Queen [75 DTC 5126], affirmed without written reasons [76 CTC xvi (FCA)], where it was accepted that the amount of interest paid in connection with a damages award would be characterized to be of the same nature as the damages to which it related.  ...

CRA Response Paragraph 3 of Article XXIX A of the Treaty provides as follows (underlining added): Where a person is a resident of a Contracting State and is not a qualifying person, and that person, or a person related thereto, is engaged in the active conduct of a trade or business in that State (other than the business of making or managing investments, unless those activities are carried on with customers in the ordinary course of business by a bank, an insurance company, a registered securities dealer or a deposit-taking financial institution), the benefits of this Convention shall apply to that resident person with respect to income derived from the other Contracting State in connection with or incidental to that trade or business (including any such income derived directly or indirectly by that resident person through one or more other persons that are residents of that other State), but only if that trade or business is substantial in relation to the activity carried on in that other State giving rise to the income in respect of which benefits provided under this Convention by that other State are claimed. ...