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Guglich (613) 957-2102 SEP 11 1989 Dear Sirs: This is in reply to your letter of August 2, 1989, wherein you requested our views as to whether in the two situations you described the corporation would be considered for purposes of paragraph 125(7)(e) of the Income Tax Act (the "Act") to employ in the business of leasing real property more than five full time employees throughout the year. ... Consequently, X Co. and Y Co. will not be considered for purposes of subparagraph 125(7)(e)(i) of the Act, to employ more than five full-time employees in their leasing business and would not be considered to be carrying on an active business. ...

It is our opinion that as long as the amount is paid after the employee has left his employment, the sum of money in lieu of the month's notice will be considered a retiring allowance. 3. As Interpretation Bulletin T-337R2 states, a payment will be considered a retiring allowance if it is in recognition of long service or in respect of loss of an office or employment. ... These constitute the payments that will be considered as retiring allowances. 4. ...

It Is your opinion. therefore, that XXXX (B) You have also considered the application of section 30 to this situation. ... Although paragraph 51(1)(a) deems that this conversion is not a disposition of property, this has application only to the debenture holder. since the repayment of a debt is not a disposition of property by XXXX Subparagraph 54(c)(vii) excludes from the definition of disposition of property" the issuance of XXXX Subsection 39(2) was designed to include gains and allow losses in situations such as the repayment of a debt, where a disposition of property could not be considered to have taken place. ... Canadian residents could be deemed to have à gain. 21(1)(a) We understand that amendments to the Act to deny such gains and losses are currently being considered. ...

In our view, the one time fee paid by a 24(1) The transaction cannot be considered an outright purchase due to the various restrictions on the use of the software listed in the license agreement. ... As indicated in the 1986 letter, telephone hotline services, where the person providing the information or advice on such hotlines is outside Canada, will not be considered to be rendered in Canada. ... However, in order that it will not be considered part of the computer software license fee which is subject to Canadian withholding tax, the payment for these services must be optional and reasonable in relation to the software license fee. having read your letter and the 24(1) agreement, we can find no reason to believe that the hotline services are optional services that are rendered for a separate fee. ...

You have requested we confirm that taxes withheld by the U.S. on tier 2 benefits and the portion of tier 1 benefits under the railroad retirement plan which do not represent social security benefits will be considered as foreign taxes paid for purposes of calculating the foreign tax credit in Canada. ... The second portion of tier 1 benefits is not considered to be a U.S. social security benefit and is treated as any other amount received out of a pension plan and is therefore "equivalent to a tier 2 benefit". ... It is our view that the taxes paid on the portion of the tier 1 benefits which are the "equivalent to tier 2 benefits" and the tier 2 benefits will be considered as taxes paid to the United States for purposes of calculating the foreign tax credit which may be applicable to a Canadian resident. ...

Air conditioning equipment, prescribed by a physician for use by victims of multiple sclerosis, would not be considered to be equipment of a "prescribed kind" under subparagraph 110(1)(c)(xii) of the Income Tax Act (the "Act") because of the restrictions set out in paragraph 5700(c) of the Income Tax Regulations. ... Since commission income of an employee-sales person is considered to be employment income, received for services rendered in the year, commission income would be considered as "salary or wages" for purposes of the definition of a "salary deferral arrangement". ...

Plan to employees upon their retirement, resignation or death would be considered a "retiring allowance" as defined in subsection 248(1) of the Income Tax Act (the "Act") As the plan you describe is already in effect, it should be referred to your local District Taxation Office for its income tax implications. ... Where an unfunded plan (which is not otherwise a salary deferral arrangement) provides for a lump sum payment upon resignation or retirement of an employee, the payment is considered to be a retiring allowance. Should the payment be made on the death of an employee (prior to retirement) to his estate or beneficiaries, it would be considered a death benefit. ...

., will the amount of the deduction be considered as a prescribed benefit for the purposes of regulation 231(6) of the Income Tax Regulations? b) If a limited partner of a limited partnership is entitled to exchange his partnership unit for partnership property that has a fair market value equal to the fair market value of the partnership unit at the time of disposition, will the fair market value of the Partnership property so distributed be considered a prescribed benefit for the purposes of regulation 231(6) of the Income Tax Regulations? DEPARTMENT'S POSITION a) Where shares issued by a corporation that are eligible as qualifying investments in RRSP, RRIF and DPSP are contributed to and held in such registered deferred income plans by a taxpayer, those shares will be considered "prescribed property" for the purposes of subsection 231(7) of the Regulations and hence will be excluded from the definition of "tax shelter" in subsection 237.1(1) of the Act. b) The determination of whether a limited partner's ability to exchange his partnership unit for partnership property that has a fair market value equal to the fair market value of the partnership unit at the time of disposition would have the effect of reducing the impact of any loss he may sustain is a determination that can only be made based on the facts of a particular situation. ...

Interest in money borrowed to purchase an income averaging annuity contract ("IAAC") prior to November 13, 1981, is considered to be borrowed for the purpose of earning income from property. ... This may, in your view, create an unfair situation whereby the interest is an investment expense subject to CNIL rules, but the annuity income, not being considered property income, is not considered investment income for CNIL purposes. ...

Generally, a plan under which contributions are made by an employer to a custodian in connection with benefits to be received on retirement or substantial change in services would be considered a "retirement compensation arrangement" ("RCA") under subsection 248(1) of the Income Tax Act (the "Act"). ... Furthermore, it is our view that a payment received upon retirement by an employee that represents unused sick leave credits would generally be considered a retiring allowance under subsection 248(1) of the Act unless the payment is made under a funded plan. In the latter situation the plan would be considered an RCA. Finally, it should be noted that the determination of whether a foreign pension plan is an RCA, SDA or an unregistered pension plan can only be made after a detailed examination of all the relevant terms and conditions. ...