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STRATEGY INSTITUTE- 1998 Round Table Questions (continued) Buy-out of Spouse’s Interest in Spousal Trust d) Does Revenue Canada agree that the capital beneficiary should rather be considered having acquired a separate interest in the trust (an income interest)? ... The fact that the spouse is no longer an income beneficiary of the trust would not, in and by itself, result in the trust being considered to have disposed of its remaining assets. ... Finally, the application of subsection 107(4) must be considered. This provision applies where a post-1971 spousal trust distributes capital property, resource property or land inventory during the beneficiary spouse’s lifetime to a beneficiary other than the spouse. ...

At page 2, the note further states “If the tax deductions required to be withheld from the client’s OAS exceed the expected “OAS repayment” for the current year, the excess is considered to be “regular” income tax deductions.” ... Factors that are considered include: The client’s current year income will be significantly lower than the base year income; The client’s estimated tax deducted for the full year, plus installments already made, will exceed the total expected tax liability for the current year; Any voluntary tax deductions have already been reduced to zero; and There are no other assessed or pending debts. ... It cannot be considered “undue hardship” to require individuals to pay monthly installments of tax that will be owing when the return is filed. ...

The central management and control of an organization is usually considered to be exercised by the group that performs the function of a board of directors of the organization. ... Where an organization, which would otherwise not be considered to be resident on a reserve, is asserting that it satisfies the definition because it holds its board of directors meetings on a reserve, it should generally be considered to satisfy the definition where management and control over the organization is legitimately exercised during those meetings. ...

The Courts have, generally, found that a corporation is not considered to be in the business of lending money where it makes loans only to subsidiary corporations and does not hold itself out to the general public as a money lender. Moreover, if it is found that the parent corporation does, in fact, carry on such money-lending activities, advances made to a subsidiary corporation which could be considered to constitute permanent capitalization of that subsidiary may be considered to be on account of capital and outside the scope of the parent's money-lending activities such that a bad debt reserve in respect of those amounts would not be available. ...

Under paragraph 252(4)(a) of the Act, two individuals of the opposite sex after 1992 will be considered to be spouses of each other when they are cohabiting in a conjugal relationship and either (a) they have so cohabited throughout the preceding 12 months, or (b) they are the natural parents of the same child. Paragraph 252(4)(a) of the Act also provides that for the purpose of that paragraph, a common law marriage is considered to have been dissolved at the beginning of a separation that lasts at least 90 days. ... Where a transfer of property occurs between two common law partners or former common law partners who are considered to be spouses or former spouses pursuant to the above comments in respect of subsection 252(4) of the Act, the tax-deferred rollover provisions of subsection 73(1) of the Act will be applicable assuming the other requirements of that provision are satisfied and that the transferor does not elect in his return of income for the year in which the property was transferred not to have the provisions of subsection 73(1) of the Act apply. ...

., paid in error) is not considered salary or wages of the officer or employee receiving it, nor is it an advance to him or her. ... Where overpayments were made due to calculation errors and such overpayments are required to be repaid, paragraph 9 indicates that the overpayment in these circumstances would not be considered as taxable employment income. ... Paragraph 9 of cancelled IT-222R indicates that a payment or overpayment made by mistake to an employee or officer who is not entitled to receive it (i.e., paid in error) is not considered salary or wages of the officer or employee receiving it, nor is it an advance to him or her. ...

In order to reach that decision, the Court had to conclude that the situs of the debtor (being on a reserve) is not the sole factor to be considered in exempting income from taxation since unemployment insurance benefits are not paid from a reserve. ... The Department now views the Indian Act exemption as applying to employment income as follows: (1)Employment income of an Indian for duties performed on a reserve will be exempt from income tax. (2)Employment income of an Indian for duties performed off a reserve will normally be exempt from income tax where (a) the employer is resident on a reserve, and (b) the Indian lives on a reserve, except where it can reasonably be considered that one of the main purposes for the existence of the employment relationship is to establish a connecting factor between the income in question and a reserve. (3)Employment income of an Indian for duties performed off a reserve will normally be exempt from income tax where (a)the duties of the employment are principally performed on a reserve, and (b)the employer is resident on a reserve, or (c)the Indian lives on a reserve, except where it can reasonably be considered that one of the main purposes for the existence of the employment relationship is to establish a connecting factor between the income in question and a reserve. (4)Employment income of an Indian for duties performed off a reserve will normally be exempt from income tax where (a)the employer is an Indian band which has a reserve, a tribal council representing one or more Indian bands which have reserves, or an Indian organization controlled by one or more such bands or tribal councils and dedicated exclusively to the social, cultural or economic development of Indians who for the most part live on reserves, (b)the duties of employment are part of the non-commercial activities of the band, council or organization, and (c)the band, council or organization is resident on a reserve. ...

Your concern is whether the common-law spouse of an individual could be considered a "supporting person" as defined in paragraph 122.2(2)(b) of the Act. ... An individual will be considered a supporting person of the child in a situation where one of the extended meanings of child apply in respect of the relationship between that individual and the eligible child. ... If this can be established, then the child would be considered "an adopted child of the taxpayer" and thus fall into the extended meaning of "child" under paragraph 252(1)(d) of the Act. ...

The Department now views the Indian Act exemption as applying to employment income as follows: (1)Employment income of an Indian for duties performed on a reserve will be exempt from income tax. (2)Employment income of an Indian for duties performed off a reserve will normally be exempt from income tax where (a) the employer is resident on a reserve, and (b) the Indian lives on a reserve, except where it can reasonably be considered that one of the main purposes for the existence of the employment relationship is to establish a connecting factor between the income in question and a reserve. (3)Employment income of an Indian for duties performed off a reserve will normally be exempt from income tax where (a)the duties of the employment are principally performed on a reserve, and (b)the employer is resident on a reserve, or (c)the Indian lives on a reserve, except where it can reasonably be considered that one of the main purposes for the existence of the employment relationship is to establish a connecting factor between the income in question and a reserve. (4)Employment income of an Indian for duties performed off a reserve will normally be exempt from income tax where (a)the employer is an Indian band which has a reserve, a tribal council representing one or more Indian bands which have reserves, or an Indian organization controlled by one or more such bands or tribal councils and dedicated exclusively to the social, cultural or economic development of Indians who for the most part live on reserves, (b)the duties of employment are part of the non-commercial activities of the band, council or organization, and (c)the band, council or organization is resident on a reserve. ... However, you should note that we have been advised by Marg Toews of the Vancouver Office of the Department of Indian and Northern Affairs that none of the locations referred to above would be considered on reserve. ...

It is our understanding that individuals otherwise entitled to disability insurance benefits under Tier 1 of the USRRA will not be entitled to the equivalent benefits under the SSA and therefore, as indicated in paragraph 1 of the bulletin, the portion of Tier 1 benefits considered to be social security benefits is the amount of the social security benefits that a railroad employee or beneficiary would have been entitled to receive if the employee's service had been covered under the SSA. ... Disability insurance benefits paid under the SSA up to the age of 65 are not considered to be income and therefore are not subject to tax in Canada. ... Since disability benefits paid under the SSA up to the age of 65 were not considered a "superannuation or pension benefit", the issue of whether paragraph 6(1)((f) of the Act could apply to such benefits was also taken into consideration. ...