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While the effect of adding an amount to taxable income under section 110.5 is to convert into a non-capital loss for the year foreign taxes paid that might otherwise not be creditable against Canadian taxes payable in the year or any other year, the object and purpose of section 110.5 cannot be considered to have been abused or misused for the sole reason that another plan to achieve the same goal had failed because the actual loss incurred by Canco was greater than it had anticipated. ...

19 November 2012 Internal T.I. 2012-0433201I7- Legal fees incurred re: job reinstatement-- summary under Paragraph 60(o.1) Summary Under Tax Topics- Income Tax Act- Section 60- Paragraph 60(o.1) apportionment among objectives Regarding a taxpayer's lawsuit for reinstatement of employment and associated retroactive pay, and to receive performance pay and other damages, CRA stated that the taxpayer's legal fees should be apportioned reasonably among the various objectives of the taxpayer's suit, and the deductibility of each portion should be considered based on its corresponding objective and on its success: The portion relating to unpaid performance pay, which allegedly accrued during the taxpayer's employment, is deductible under s. 8(1)(b) regardless of the suit's outcome, in accordance with Loo. ...

19 November 2012 Internal T.I. 2012-0433201I7- Legal fees incurred re: job reinstatement-- summary under Paragraph 8(1)(b) Summary Under Tax Topics- Income Tax Act- Section 8- Subsection 8(1)- Paragraph 8(1)(b) Regarding a taxpayer's lawsuit for reinstatement of employment and associated retroactive pay, and to receive performance pay and other damages, CRA stated that the taxpayer's legal fees should be apportioned reasonably among the various objectives of the taxpayer's suit, and the deductibility of each portion should be considered based on its corresponding objective and on its success: The portion relating to unpaid performance pay, which allegedly accrued during the taxpayer's employment, is deductible under s. 8(1)(b) regardless of the suit's outcome, in accordance with Loo. ...

According to the CRA, the amounts could be considered as an early reimbursement of medical expenses that did not have to be included in the calculation of the recipient's income. ...

After noting that the stock option benefit would be exempt from Canadian tax under the exemption in para. 2 of Article XV of the Canada-US Convention, CRA asserted that this did not relieve USCo of its source deduction obligations: The corporation that has agreed to sell or issue the shares to the employee (in this case, Canco) will be considered to be the "payer" of the stock option benefit for purposes of paragraph 153(1)(a) (and will be responsible for the normal withholding), unless it receives reimbursement, in whole or in part, either directly or indirectly, in respect of the benefit. ...

In such a case, the amounts received by the employee are not considered as salary as the employee had no right to them. ...

The Directorate considered that the income on such earmarked funds was not deemed to be active business income by s. 95(2)(a)(i). ...

CRA responded: [T]he FAPI-Inclusions trigger permanent adjustments to the ACB of the shares of CFA [under s. 92(1) and s. 53(1)(d)], which adjustments have to be considered in order to determine any further Canadian tax consequences to NRT in respect of its shares of CFA. ...

After noting that “assumed debt can be considered to be an amount payable for property acquired,” and that “one can look to the assets of Canco 3 that become assets of Amalco in order to satisfy the purpose test under subparagraph 20(1)(c)(ii) in respect of the Assumed Debt,” the Directorate stated: If any part of the Assumed Debt is allocable to the FA shares then, after the FA shares are distributed as a return of capital, we would likely take the position that a portion of the interest is not deductible on the basis that there would be no property substituted for the FA shares…. ...

However, expenses that are related to the restoration of the building to its original state should be considered as current expenses. ...