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2014 Ruling 2014-0530961R3- Cross-Border Butterfly-- summary under Subparagraph 55(3.1)(b)(i) Summary Under Tax Topics- Income Tax Act- Section 55- Subsection 55(3.1)- Paragraph 55(3.1)(b)- Subparagraph 55(3.1)(b)(i) pro rata allocation of Foreign Spinco debt In connection with a spin-off by a U.S. public company (Foreign PubCo) of a U.S. subsidiary (Foreign Spinco) to which one of its businesses was transferred, there was a butterfly split-up of an indirect Canadian subsidiary (DC) directly and indirectly holding Canadian portions of the two businesses in question, so that the Canadian transferee corporation (TCo) of DC was a subsidiary of Foreign Spinco. ... In connection with the s. 55(3.1)(b)(i)(A)(II) rule, CRA indicated that indebtedness of Foreign SpinCo will be considered to reduce the FMV of each property of Foreign SpinCo pro rata in proportion to the relative FMV of all property of Foreign SpinCo. ...

In the course of general comments, CRA stated: [T]he words "in respect of" [in s. 248(1) – "retiring allowance"] have been held… to imply a connection between the loss of employment and the subsequent receipt, where the primary purpose of the receipt was compensation for the loss of employment. Two questions set out by the Courts to determine whether a connection exists for purposes of a retiring allowance are as follows: But for the loss of employment would the amount have been received? ...

21 March 2006 External T.I. 2005-0158451E5 F- Québec Mining Duties Act- Credit for Losses-- summary under Element J Summary Under Tax Topics- Income Tax Act- Section 66.1- Subsection 66.1(6)- Cumulative Canadian exploration expense- Element J credit under the Quebec Mining Duties Act based on exploration and development losses of operator was not “assistance" under J S. 32 of the Quebec Mining Duties Act (MDA) provided a credit to an operator equal generally to an amount not exceeding 12% of the lesser of (i) its annual loss (excluding the portion thereof attributable to ore processing activities) and (ii) the amount by which the expenses in respect of exploration, mineral deposit evaluation and mine development work, incurred by the operator for the fiscal period in connection with the mining operation, exceeds the amount of government assistance that the operator received or was entitled to receive relating to those expenses. After finding that this credit was not required to be included in income under s. 12(1)(x.2), CRA noted that it: has taken the position in the past that the RDCL does not reduce cumulative Canadian exploration expenses ("CCEE") and cumulative Canadian development expenses ("CCDE"), on the basis that the RDCL was too remote from the Canadian exploration expense ("CEE") and Canadian development expense ("CDE") and therefore did not have a sufficiently direct connection to the CEE and CDE incurred by the particular corporation to fall within element J of the definition of CCEE in subsection 66.1(6) and the description of M in the definition of CCDE in subsection 66.2(5) …. ...

An arm’s length corporation (USCo), along with its Canadian subsidiary (Canco) receives a grant (under the “Licensing Agreement”) of the right to use the Copyright Property in connection with the manufacture, sale and distribution of products (manufactured by USCo). ... CRA responded: [W]here a payor has entered into a legal agreement with a non-resident for the right to use copyrighted property in connection with the manufacture, sale and distribution of any artistic work in Canada, a royalty or similar payment for that right would be considered to be “on or in respect of a copyright in respect of the production or reproduction of any...artistic work” in subparagraph 212(1)(d)(vi) even if the payor does not manufacture the artistic works, which it distributes under that legal agreement. ...

After finding that s. 95(2)(b) applied to the R&D Services provided to Canco, the Directorate rejected Canco’s argument that the R&D Services provided to Canco should be considered to be services performed in connection with the sale of goods under s. 95(3)(b), stating: [T]he phrase “services performed in connection with the (...) sale of goods” is limited to services that are directly related to the sales function …. ...

CRA noted that IT-357R2, para. 9 indicates that training is aimed at learning a subject in accordance with a formal course of study, whereas a convention is a formal meeting of members of an organization for professional or business purposes, and that para. 2 indicated that where the taxpayer takes a training course merely to maintain, update or upgrade an already existing skill or qualification respecting the individual’s business or profession, expenses incurred in connection with such a course are not considered to be capital in nature. ... If the costs were incurred in connection with a convention, nothing would be deductible because an ocean cruise is considered to occur outside Canada ...

17 April 2001 External T.I. 2000-0056455 F- AVANTAGE IMPOSABLE-EMPLOYE-- summary under Paragraph 6(1)(a) Summary Under Tax Topics- Income Tax Act- Section 6- Subsection 6(1)- Paragraph 6(1)(a) the distribution of employer shares to employees as beneficiaries of a discretionary trust is a s. 6(1)(a) benefit if it has the slightest connection to their employment Mr. ... CCRA responded: [T]here would be a benefit pursuant to paragraph 6(1)(a) if the designation of employees as beneficiaries of the capital of the trust had any connection, however slight, with their employment. ...

29 May 2001 External T.I. 2001-0075245 F- SOCIETE DE GESTION DE PENSION-- summary under Subparagraph 149(1)(o.2)(i) Summary Under Tax Topics- Income Tax Act- Section 149- Subsection 149(1)- Paragraph 149(1)(o.2)- Subparagraph 149(1)(o.2)(i) s. 149(1)(o.2)(i) corporation can be incorporated for the administration of more than one RPP – but cannot be incorporated to provide management services to other RPPs Regarding the application of s. 149(1)(o.2)(i) to a corporation incorporated before November 17, 1978 specifically for two registered pension plans but now wishing to offer management services to several other registered pension plans, CCRA indicated: [T]he expression “in connection with, or for the administration of, a registered pension plan” must be interpreted by applying subsection 33(2) of the Interpretation Act, which states that "[w]ords in the singular include the plural, and words in the plural include the singular” … [so that] a pension corporation that was formed before November 17, 1978 in relation to one or more registered pension plans satisfied the condition set out in subparagraph 149(1)(o.2)(i). However: [T]he corporation will not be exempt pursuant to paragraph 149(1)(o.1) because it will not be operated solely in connection with, or for the administration of, a registered pension plan but also to provide management services. ...

CCRA indicated that if the corporation exercises extensive control from beginning to end over the content, design and physical qualities of the goods and is substantially involved in those aspects, the product development, design and conception activities are activities carried out in connection with manufacturing operations, but they would not be carried out in connection with manufacturing operations in Canada since a very significant portion of the manufacturing and processing activities is carried on outside Canada. ...

Expense- Contract or Option Cancellation cash settlement of employee stock options in connection with the privatization of the corporation was a capital expenditure After Aco had acquired control of Bco, Bco was privatized so that Aco acquired all the remining shares. ... In our opinion, the payment was being made in connection with Aco's offer to purchase all of the outstanding and issuable shares of Bco through the cancellation of the Plan. ...