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Gaz Métro considered that, under generally-accepted accounting principles, this arrangement qualified as one in which (as per the relevant accounting pronouncements) it had been “legally released” from its debt, thereby reducing its capital for Quebec capital tax purposes. Fournier JCQ considered that, notwithstanding that the partnership had effectively assumed the debt, there had been no legal release given that there had been no novation. ...

18 June 2017- 4:16pm CRA indicates that a dual-resident individual who is subject to direct U.S. tax on income from a s. 94(3) trust can generate a FTC if the trust income is annually distributed or he elects under s. 94(16) Email this Content A Canadian resident and U.S. citizen who settled a revocable living trust for him and his family, is considered for U.S. purposes to be earning the U.S. ... In particular, the income received by him would be considered to have a U.S. source on general principles, given that s. 94(3) would not deem the trust to be resident in Canada for s. 108(5) purposes. ...

CRA considered that this requirement can be satisfied where the TFSA property is used for the payment of family-law debt of the deceased (e.g., obligations for support or under a separation agreement) to the surviving spouse, given the effect of the 248(23.1)(a) deeming rule. CRA also indicated, similarly to 2016-0679751E5 F, that in light inter alia of s. 248(8)(a), a payment could be considered to be made to a surviving spouse directly or indirectly out of the former TFSA as a consequence of the deceased’s death where an executor in his discretion chooses to satisfy a legacy of specific property (in this case, of the residue of the estate, which included the family residence) by retaining the proceeds from the sale of the residence and instead paying an equivalent amount out of TFSA property. ...

21 December 2017- 11:37pm CRA extends its policy on the executor’s year to a stub executor’s year Email this Content IT-286R2, para. 6 states that the income of the trust for that year is considered to be payable to the beneficiaries where the sole reason for the rights of a beneficiary being unenforceable is the existence of an executor's year, the taxation year of a testamentary trust coincides with the executor’s year, and all of the beneficiaries agree to this treatment. ... In this regard, CRA indicated that the mere fact that the beneficiaries each had a fixed percentage entitlement to the net estate would not by itself result in the trust income being considered to be payable to them during the stub executor’s year. ...

Whether it was entitled to deduct the redemption premium under s. 18(9.1) turned on whether (as per s. 18(9.1(a)) it could reasonably be considered to have paid the premium “in respect of the substitution” of the SAB for the SAD. In finding that this was not the case, the Directorate stated: [S]ince the SAD Investors are a substantially different group of investors than the SBD Investors … it could not reasonably be considered that the SAD Investors were paid the Redemption Premium “in respect of the substitution of the [SAD]” since it was the SBD Investors, and not the SAD Investors, who provided a substitute debt for the SAD. ...

1 March 2018- 1:08am CRA applies its guidelines on cash as an active business asset to the “specified small business corporation” test Email this Content CRA set out general guidelines on when cash held by a corporation would be considered to be used in an active business carried on by it for purposes of the “specified small business corporation” definition in Reg. 4901(2) (respecting qualification of its shares for RRSPs). The listed factors (which are similar to those applied by CRA in other contexts) included: Cash or near cash property is considered to be used principally in the business if its withdrawal would destabilize the business. ...

CRA considered this to be the appropriate result: there would have been the same $300 loss had Canco directly owned FA ($3,000 dividend- $3,000 s. 113(1) deduction- $300 interest expense). However, CRA considered that it is appropriate to “reinstate” $2,000 of exempt surplus of FA in respect of Canco, and to reduce its taxable surplus in respect of Canco by the same amount. ...

However, CRA apparently considered that where the non-service income was necessary for or incidental to the provision of the services themselves, all of the income would be considered to be services income. ...

11 July 2018- 11:35pm CRA confirms that the substituted loan exception in s. 18(9.1)(a) does not apply re a prepayment penalty incurred in refinancing with another arm’s length lender Email this Content S. 18(9.1) may deem a penalty that can reasonably be considered to relate to the amount of interest that would have been payable on a loan for subsequent taxation years to be deductible interest in those years – subject to an exception that applies where the penalty can reasonably be considered to have been made respecting the substitution of the debt obligation. ...

She noted that the municipalities themselves considered that they controlled the companies, in most cases a majority of the company’s board was named by the municipality or chosen from among a list proposed by the municipality (para. 58)), their budgets were approved by the municipal Councils, they received much of their financing from the municipalities and their activities were integrated with those of the municipalities. Quenneville JCQ stated: It is important to emphasize that it is not actual control which must be considered, but rather the potential for the municipality to exercise such control. ...