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Kutkevicius (613) 957-2093 Attention: XXX March 31, 1992 Dear Sirs: Re: Subsection 1100(16) of the Income Tax Regulations This letter is in response to your letter of March 19, 1991 in which you requested a technical interpretation of subsection 1100(16) of the Income Tax Regulations (the "Regulations") in the following hypothetical situation: XXX Question You have requested our comments on whether the manufacturing operations of Corporation ABC will prevent the principal business of Corporation ABC from being considered to be as described by subparagraph 1100(16)(a)(ii) of the Regulations. ... The determination of whether the principal business of Corporation ABC is as described in subparagraph 1100(16)(a)(ii) may be considered a question of fact. ... The determination of whether a business of a corporation may be considered the principal business of the corporation as described in subparagraph 1100(16)(a)(ii) generally will involve an examination of the criteria described in Interpretation Bulletin IT-371. ...

Where an individual is considered to be resident in Canada for the purposes of the Act while temporarily living and employed in the U. ... Such salary or wages would form part of his earned income for the purposes of the computations under section 146 of the Act, notwithstanding that he might be considered to be a resident of the U. ... For a taxation year in which such an individual is no longer considered to be resident in the U. ...

Also, if the partnership leases assets from the parent corporation of the corporate partner for use in its active business, are these assets considered to be used in an active business of the corporate partner? ... Accordingly, assets leased by the partnership for use in its active business will be considered to be used in an active business carried on by the corporate partner. If these assets are owned by a corporation related to the corporate partner they will be considered to be “assets used principally in an active business carried on primarily in Canada by the corporation or by a corporation related to it”, as described in subparagraph c(i) of the definition of QSBCS in subsection 110.6(1) of the Act. ...

However, it is the Department's position that an officer will be considered to have retired or lost an office even though he may continue as a director at nominal compensation (see paragraph 4(a) of IT-337R2). However, if a taxpayer remains as an officer of the corporation, he/she will not be considered to have retired. ... Where a low or no salary was received before retirement and an amount received after retirement can reasonably be considered to be deferred compensation, it is taxable as income from office or employment when received. ...

It is your opinion that if a company was entitled to a deduction under paragraph 20(l)(c) on money borrowed to make an outright purchase of equipment, then the equipment would meet the "available for use" rules under paragraph 13(27)(a), even where the property was under preliminary testing, since the property would also considered to be "used for the purpose of earning income". ... Also, in the first paragraph of that letter we clearly indicated that the testing activity of a piece of equipment for the purpose of bringing it on line would not be considered to be "the time at which the equipment is first used... for the purpose of earning income" for the purposes of paragraph 13(27)(a) of the Act, and that a more direct relationship must exist between the use of the property and the process of earning income. Accordingly, it is our conclusion that the deductibility of interest on borrowed money to acquire depreciable property, whether acquired on an outright basis, or whether or not the property is under preliminary testing, would not be a factor in determining whether the particular property is considered to be "first used for the purpose of earning income" pursuant to paragraph 13(27)(a) of the Act. ...

Accordingly, it is the Department's position that reasonable administration fees paid by an annuitant of a plan to the trustee of a plan are considered to be deductible expenses in computing income from property. ... Services such as investment counselling, commissions, acquisitions fees or brokerage fees etc., are not considered to be included as part of the administration fee. ... In the event that the annuitant of the plan paid the mortgage administration fees personally, he would not be entitled to a tax deduction but would be considered to have made a gift to the plan. ...

24 August 1992 Income Tax Severed Letter 9221275- Capital Cost Allowance- Recapture- Ceasing Business Unedited CRA Tags 13(1), 20(1)(a) 922127 24(1) Glen Thornley (613) 957-2101 Attention: 19(1) August 24, 1992 Dear Sirs: Re: Recaptured Capital Cost Allowance This is in reply to your letter of July 7, 1992 concerning whether recaptured capital cost allowances are considered active business income or income from property (inactive). ... You ask if the recapture of capital cost allowances in these circumstances will be considered active business income or income from property and thus inactive business income. ... In this situation the income that does qualify as income from a business because it arises from the recapture of capital cost allowance will be considered to be income from the same category of business as that to which the source originally related. ...

The answer to your question is dependant on whether or not the loan or mortgage in question can be considered to be received in the circumstances described in subsection 80.4(1) of the Act. It is our view that a third party loan will be considered to be received by virtue of employment and thus subject to subsection 80.4(1) of the Act, if the employer is involved in the initial granting of the loan. In our view the employer will be considered to be involved in the initial granting of the loan if one of the following criteria is satisfied: 1) the employer is involved in the negotiation of the loan, 2) the employer guarantees the loan, 3) the employer recommends in writing to the lender that the loan be made to the employee, 4) the employer provides a letter of introduction to the lender which outlines the amount and terms of the subsidy which the employer has agreed to pay to the employee, or 5) there is a written agreement before the loan is received that the employer will make a payment to the lender in respect of all or any part of the interest on the loan. ...

3) Would a taxpayer who contracted to have a hotel suite managed by a management company on his behalf be considered to be “personally active on a continuous basis”? ... As the income from a partnership would be considered income from a business or property paragraph 20(1)(e) will apply to the individual. In addition, as the individual calculates income based upon the calendar year, for purposes of subparagraph 20(1)(e)(iii) of the Act, the number of days in the individual's year will be 365 and thus no pro-rating will occur. 3) In our opinion, where a taxpayer contracts to have a hotel suite managed by a management company on his behalf, he will not generally be considered to be “personally active on a continuous basis”, however, a determination would have to be made based on the relevant facts of each situation. ...

If the maintenance is optional but the amount of the charge therefor is unreasonable in relation to the software license fee, the unreasonable portion will be considered part of the licence fee and, thus, subject to Part XIII tax. ... If the payment is considered to be a payment for services and thus not subject to Part XIII tax, it will also not be subject to the withholding requirements set out in subsection 105(1) of the Income Tax Regulations unless the services are rendered in Canada. With regard to the provisions of services by way of a telephone or electronic mail hotline, it is our view that where the person providing information or advice on such hotlines it outside Canada, the services will not be considered to be rendered in Canada. ...