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CRA reaffirms rebuttable application (subject to 74.4(4)) of 74.4(2) to estate freeze where trust with minor child acquires common shares

2 January 2017- 11:25pm CRA reaffirms rebuttable application (subject to 74.4(4)) of 74.4(2) to estate freeze where trust with minor child acquires common shares Email this Content When asked to comment on factors taken into account in deciding if “one of the main purposes” of a transfer or loan is reasonably considered to benefit a designated person, CRA stated: In…2001-0067725…we stated that in a situation where a trust of which the beneficiary is a minor child of the freezor acquires common shares of the freezor’s Holdco on an estate freeze, the provisions of subsection 74.4(2) will generally apply, subject to subsection 74.4(4). ...

CRA applies its position on fractional share exchanges under 85.1(1) domestic exchanges to 85.1(5) exchanges

However, the foreign merger parties often will be insensitive to Canadian tax considerations, so that the allocation requirement in the Folio will not be satisfied – as appeared to be the case in the example considered by CRA. ...

CRA confirms that capital gains cannot constitute s. 95(2)(a.1)(iv) income

Where the foreign affiliate disposes of the property on capital account (in this case, an intangible sold to the ultimate Canadian parent of the Canco holding the foreign affiliate), the two categories do not overlap, so that the gain will be dealt with under the capital gains component of FAPI (variable B) and not the component (variable A) dealing inter alia with income from a business other than an active business (notwithstanding that the taxable capital gain would come within the wording of s. 95(2)(a.1)(iv) if it were considered to “pertain to” or be “incident to” such a business.) ...

CRA takes an expansive view of what constitutes regular places of employment so as to render reimbursements for related travel as taxable benefits

15 February 2017- 12:33am CRA takes an expansive view of what constitutes regular places of employment so as to render reimbursements for related travel as taxable benefits Email this Content CRA considers that if an individual has multiple regular places of employment (RPE) and travels between them during the day, the trip from the individual’s home to the first RPE and the trip home from the last RPE is personal, whereas travel between RPEs is considered employment-related – so that reimbursement of or allowances respecting the former but not the latter would give rise to employment benefits. ...

CRA affirms general reasonability of a car allowance rate of $0.54/$0.48 per kilometre including for electric vehicles

19 March 2017- 6:17pm CRA affirms general reasonability of a car allowance rate of $0.54/$0.48 per kilometre including for electric vehicles Email this Content In S2-F3-C2 respecting employee vehicle allowances, CRA states that “generally, a per-kilometre rate will be considered reasonable if it is equal to the rate prescribed for the particular province in [Reg.] 7306,” which currently is at the rate of $0.54 per km for the first 5,000 km and $0.48 per km for the excess. ...

Freitas – Tax Court of Canada finds that a s. 96(1.1) allocation of income from an accounting firm was business income rather than a retiring allowance

10 April 2017- 1:44am Freitas – Tax Court of Canada finds that a s. 96(1.1) allocation of income from an accounting firm was business income rather than a retiring allowance Email this Content A retired Deloitte partner received an opinion from his firm that professional income allocated to him under ITA s. 96(1.1) was a retiring allowance and thus excluded from being subject to CPP contributions, and also relied on the CRA opinion in 9527946 that: Income allocated pursuant to subsection 96(1.1)… for the purposes of the CPP provision is not considered to be from a business carried on by the retired partner and consequently such a partner is not required to contribute to CPP solely as result of receiving such income. ...

CRA treats amounts paid by a Canadian sub, to reimburse its U.S. parent for dilution under SARs that could be settled in cash at the issuer’s option, as deductible

However, it considered that s. 7(3)(b) applied to a performance share plan (where the number of shares to be received by the employee was contingent on assessed performance over a three year period), as well as to a number of other plans where the USco obligation to issue shares was less contingent. ...

CRA indicates that income that is paid to a minor beneficiary in contravention of the trust deed is non-deductible under s. 104(6)

Accordingly, there was no s. 104(6) deduction to the trust, and CRA considered the distributions to be includible in the children’s income under s. 105(1) rather than s. 104(13). ...

CRA confirms that reassessing to increase closing inventory permits a s. 152(4.3) reassessment to increase the following year’s COS

CRA appears to have effectvely treated the reassessment as increasing the taxes payable for Year 1 (viewed as a "balance,") and this balance can reasonably be considered to relate to the taxes payable balance for Year 2. ...

CRA considers that a “survivor payment” can be made out of the deceased’s TFSA even where this occurs in the executor’s discretion

CRA considered that these requirements could be satisfied (in light inter alia of s. 248(8)(a)) where an executor in his discretion chooses to satisfy a specific legacy out of TFSA property, rather than this being spelled out in the will. ...

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