Section 114 - Individual resident in Canada for only part of year

Cases

The Queen v. Taylor, 91 DTC 5131 (FCA)

In 1983 a resident of California paid $325,226 in foreign non-business income taxes, became a resident of Canada on November 1, 1983, and earned $8,600 in interest and rental income for the balance of 1983. Because section 114 effectively deemed the January-October period to be a separate taxation year from the November-December period, the non-business income taxes for the January-October period were not deductible from her income for the November-December period.

The Queen v. Bergelt, 86 DTC 6063, [1986] 1 CTC 212 (FCTD)

The taxpayer ceased to be a resident of Canada in September 1980 when he moved to California to work as a senior controller with a U.S. company ("Daon"), notwithstanding that (1) his wife remained behind in Vancouver in order that she could supervise the completion of renovation work on their Vancouver home before its intended sale, (2) his U.S. pay cheque was deposited to a Canadian bank account, and (3) in November and December of 1980 he made several trips to Vancouver before deciding in mid-December to accept an offer of Daon's Canadian parent of a position in Canada.

Griffiths v. The Queen, 78 DTC 6286, [1978] CTC 372 (FCTD)

A retired Canadian executive who amicably separated from his wife and moved to a Carribean island in order to live in, and sail, his yacht, thereupon ceased to be a resident of Canada, notwithstanding that he retained substantial investments in Canada and made occasional visits there.

Beament v. Minister of National Revenue, 52 DTC 1183, [1952] CTC 327, [1952] 2 S.C.R. 486

On the outbreak of the Second World War, the taxpayer, before going for service overseas, ceased renting a room in his parents' house, and stored his belongings in a storage room in their house. While in the United Kingdom he married an Englishwoman and maintained a matrimonial home there, Cartwright J. held that the taxpayer was not resident or ordinarily resident in Canada during the portion of 1946 prior to the taxpayer's return to Canada notwithstanding what may have been a continuing intention on the part of the taxpayer to return to Canada.

See Also

Grant v. The Queen, 2006 DTC 3071, 2006 TCC 373, aff'd 2007 DTC 5351, 2007 FCA 174

On December 24, 1998, the taxpayers borrowed an aggregate of approximately U.S.$1 billion from the CIBC, and lent the same sum to a U.S. subsidiary of the CIBC ("CIHI"), with the notes from CIHI being pledged to secure the borrowing from CIBC. The taxpayers ceased to be resident of Canada on December 30 1998, on December 31, 1998, the taxpayers paid accrued interest on the CIBC borrowing using the proceeds of a bridge loan, and early in 1999 the CIBC borrowing was repaid from the proceeds of repayment of the CIHI notes. In rejecting a submission on behalf of the taxpayers that 6/7 of the interest paid by them on December 31 was reasonably attributable to a period of Canadian residence and, therefore, could be deducted under s. 114(c), Woods J. found that s. 114(c) was restricted to deductions that were specifically allowed in computing taxable income, and noted that the effect of the above submission was that taxpayers would be able to claim interest deductions on a cash basis under s. 114(a) or on a accrual basis under s. 114(c) and that cash basis taxpayer (such as the taxpayers before her) could claim interest expense on an accrual basis and yet report the related interest income on a cash basis.

Administrative Policy

17 January 2017 Internal T.I. 2016-0647161I7 - Capital gains of a partnership

a year-end income allocation by a non-resident partnership to an immigrant included offshore capital gains realized pre-immigration

Is an individual taxpayer who is a member of a U.S. partnership (“Partnership”) and who immigrated to Canada during a taxation year, thereby becoming a Canadian resident, required to report a capital gain realized by the Partnership from a disposition of U.S. real property occurring prior to the taxpayer becoming a resident of Canada? CRA responded:

[T]he computation and allocation of the partnership’s income (including capital gains) to the members is made at the end of the partnership’s fiscal period.

… [T]he capital gain was realized by the Partnership sometime in 2015 and allocated to the Taxpayer at the end of 2015 when the Taxpayer was a resident in Canada. Therefore, pursuant to section 114, the income of the Partnership, including the capital gain realized by the Partnership, must be reported by the Taxpayer on the Taxpayer’s 2015 Canadian income tax return.

… [W]hile addressing the importation of losses into Canada, subsection 96(8) does not prevent the recognition of gains in Canada.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 - Subsection 96(8) - Paragraph 96(8)(c) no reciprocal application to pre-immigration capital gains 83

S5-F1-C1 - Determining an Individual’s Residence Status

The date upon which a Canadian resident individual leaving Canada will become a non-resident ... will usually coincide with the latest of the dates on which:

  • the individual leaves Canada;
  • the individual's spouse or common law partner and/or dependants leave Canada (if applicable); or
  • the individual becomes a resident of the country to which he or she is immigrating.

An exception to this will occur where the individual was resident in another country prior to entering Canada and is leaving to re-establish his or her residence in that country. In this case, the individual will generally become a non-resident on the date he or she leaves Canada, even if, for example, the individual's spouse or common law partner remains temporarily behind in Canada to dispose of their dwelling place in Canada or so that their dependants may complete a school year already in progress.

85 C.R. - Q.20

A non-resident, who is a member of a partnership not carrying on business in Canada, will be taxed under Part I for his share of the income of the partnership for fiscal periods that ended after he became a resident.

84 C.R. - Q.35

A non-resident who only occasionally visits Canada to perform directorship duties will not thereby be considered to be employed in Canada throughout the period after he left Canada.

Articles

Christine Hung, "Taxation of an Immigrating Partner's Income from a Foreign Partnership in the Year of Immigration", Canadian Current Tax, Vol. 9, No. 9, June 1999 [9]

"The immigrant partner is required to include in his or her income for Canadian tax purposes only that part of the foreign partnership income earned by the partnership after the partner has immigrated to Canada."