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11 October 2007 Roundtable, 2007-0251981C6- 2007 TEI Question RRSP Qualified Investment Unedited CRA Tags 204(d) Principal Issues: Will the CRA provide further guidance with respect to specific security investments that would be considered a qualified investment for purposes of the amended definition of "qualified investment" in paragraph (d) of section 204 of the Act? ... The amended definition of "qualified investment" in paragraph (d) of section 204 of the Act uses the broad term "securities", this term should be interpreted using the ordinary meaning of the term as used in the financial community. 2007-025198 TEI dated October 11, 2007 Question from page 6- 2007 Budget measures regarding qualified investments for RRSP Will the CRA be providing further guidance on specific investments that will now be considered a qualified investment for purposes of the amended definition of "qualified investment" in paragraph (d) of section 204 of the Income Tax Act (the "Act")? CRA Response The CRA will not be providing a list of securities that may now be considered qualified for purposes of amended paragraph (d) of the definition of "qualified investment" in section 204 of the Act. ...

Position: No Reasons: Generally, if the criteria upon which an amount is paid to shareholders is solely on the basis of their shareholdings, the amount is not considered incurred by the corporation of the purpose of earning business income. ... In general terms, if the criteria upon which an amount is paid to shareholders is solely on the basis of their shareholdings, the amount is not considered incurred by the corporation for the purpose of earning business income and therefore, not deductible to the corporation. ... An amount included in a shareholder's income under subsection 15(1) of the Act is not subject to withholdings for CPP and EI, and is not considered "earned income" for RRSP purposes. ...

Principal Issues: is the icome from the sale of spare parts to be considered as the selling and servicing of property of the same type as that of products sold and leased? ... You note that the spare parts are required for the servicing of the product and is considered to be an essential part of the business of selling and leasing. In particular you have asked whether for the purposes of subparagraph 1100(16)(a)(ii) of the Regulations, income from the sale of spare parts can be considered as "the selling and servicing of property of the same type and general description". ...

Principal Issues: Whether an individual would be considered a spouse under 242(4) when the couple had lived together for more than a year, separated for more than 90 days and started to live together again for 4 months? ... After meeting this criteria, if they do not live together due to a breakdown in the conjugal relationship, after a period of 90 days of not living together the person is no longer considered the taxpayer's spouse. Should they reconcile after this 90 day period and again start living together in a conjugal relationship they are considered spouses at the point in time where they start cohabiting again. ...

Reasons: The fair market value can only be determined after all of the facts are considered. ... In addition, you ask whether the fair market value of the shares is considered to be the closing value immediately before the "stop trading order" or the opening price after the "stop trading order". ... However, all of the information that is available to the public up until and including the particular time will be considered in determining the fair market value of the shares of the corporation. ...

Principal Issues: Is a "fee" which is calculated by reference to notional interest considered to be subject to withholding under paragraph 212(1)(b)(vii)? Position: No Reasons: Not considered to be "interest" or "in lieu" thereof as there is no borrowing by the payor. ... Also, in the present situation, in that the fee is not related to a borrowing by the Canadian resident corporation, the amount would not be considered to be a payment of, or in lieu of, interest within the meaning of paragraph 212(1)(b) of the Act. ...

Principal Issues: Whether custom grain drying can be considered a "farming" activity? ... It is a question of fact whether a particular activity can be considered to be "farming" for purposes of the definition in subsection 248(1) of the Act. ... It follows that the custom grain drying business would not, in such a situation, be considered a farming business. ...

If an election under subsection 98(3) of the Income Tax Act (the "Act") is not made, (a)at what point is each partner considered to have disposed of its partnership interest? (b)will each partner obtain the increase in the adjusted cost base of its partnership interest pursuant to subparagraph 53(1)(e)(viii) and subsection 66.4(6) of the Act before the partner is considered to have disposed of his partnership interest? Department's Position (a)Provided the assets of the partnership are distributed such that each of the partners has received the appropriate pro-rata undivided interest therein before dissolution of the partnership, the partners will be considered to have disposed of their partnership interest upon dissolution based upon the terms of the partnership agreement, the relevant provincial law and the particular facts of the case. ...

If any LLC is treated as a partnership for the purposes of the Internal Revenue Code (the "Code") such that the shareholders ("partners") rather than the LLC are liable to tax under the Code on the income of the LLC, such LLC will not be considered to be a resident of the U.S. under paragraph 1 of Article IV of the Canada-U.S. ... Where the mind and management of the LLC is situated in the U.S. the LLC will be considered resident in the U.S. for Canadian tax purposes, however it will not be considered a resident of either contacting state under the Convention. ...

Position TAKEN: No Reasons FOR POSITION TAKEN: Cannot be considered a prepayment of rent where the lessee has no right to the possession or use of the lease property. 5-942801 XXXXXXXXXX L. ... Where an amount is received by a landlord from a lessee and the lessee has no right to the possession or use of the lease property, it is our view that the amount received cannot be considered as a prepayment of rent. Consequently, a payment received by a landlord from a tenant for the cancellation of a lease, which is considered to be income under section 9 of the Income Tax Act, is not subject to a reserve under paragraph 20(1)(m). ...