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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. ...

CRA essentially adopted this statement and stated: [T]here are certain situations where the average work commitment could be considered as being “regular, continuous and substantial” even if the bright-line deeming rule is not met. Accordingly, the fact that an individual was unable to work for a portion of a year in which the business operated due solely to the adoption or birth of a child would not, in and by itself, mean that the individual was not otherwise considered to meet the regular, continuous and substantial requirement for that year. ...

CRA noted that in T4130 it had stated that its concept of a "regular place of employment” included, for example, “a client's premises when an employee reports there daily for a six month project” and “a client's premises if the employee has to attend biweekly meetings there,” and then indicated that it could only make a few general comments, including: If the place of business of a client of the firm constitutes a "regular place of employment" for the auditor, the travel between the auditor’s residence and the place of business of that client is considered personal travel and is therefore not considered travel "in the performance of the duties of the employee’s office or employment". ...

D’Auray J considered this approach to be unfair and anomalous, since if the company had instead lain in the grass and been assessed by CRA for the unreported GST, CRA would have been required under s. 296(2.1) to allow the (more than) offsetting unclaimed rebate amounts, so that no interest or late-fiing penalties could have been assessed by it. Furthermore, on her reading of s. 228(6), she considered that the same result obtained, i.e., under this rule as well, CRA was required net the rebate claims against the gross GST payable for interest and penalty purposes. ...

In discussing how it has applied this test, CRA noted that 9234795 stated that oil or gas from wells located in different provinces would be considered to be a “similar property,” and that although CRA has not taken a position on whether the different types of hydrocarbons are similar to each other, in 9314945 it “opined that where a corporation carries on the business of mining and selling metallurgical coal as well as the business of mining and selling other minerals, income therefrom will be considered to be derived by those businesses from the “sale, leasing, rental or development…of similar properties” for the purposes of subparagraph 111(5)(a)(ii) provided that the other conditions in paragraph (a) are met.” ...

Accordingly, if all the LLCs were fiscally transparent for U.S. income tax purposes (so that LLC1 was a partnership for U.S. purposes), USCo1 and USCo2 would be considered to be deriving income through LLC3 that met the same tax treatment condition in Art. IV(6) – and, similarly, LLC1 Itself would be considered to be deriving such income as a qualifying person if it had chosen to be treated as a corporation. ...

., the dividend income would not be considered to be derived in Canada in connection with, or incidental to, the USco trade or business (including any such income derived directly or indirectly by USco through one or more other Canadian residents). CRA went on to indicate that to the extent that this denial is not considered appropriate in the circumstances, the taxpayer may request special relief through the CRA competent authority under Art. ...

(k) of the salary deferral arrangement definition no longer applied), then the plan would not be considered to come within CRA’s accommodation of SAR plans, so that the SDA rules could apply. ... This is because, in such a case, the units would not be considered to be solely for future services. ...