Income Tax Severed Letters - 2000-07-21

Principales Questions:
Est-ce que le revenu d'une société qui offre des services de location d'espaces de bureau et d'une salle de conférence, de secrétariat, de réception, de système téléphonique, de photocopies, d'entretien ménager et autres services similaires est un revenu tiré d'une entreprise exploitée activement ?

Position Adoptée:
Commentaires généraux.

Principales Questions: Demande d'agrément à titre d'association agréée.

Position Adoptée: Liste d'informations nécessaires pour l'analyse.

Principal Issues: What are the Canadian income tax implications under paragraph 128.1(4)(b) of the Act where an emigrating individual owns rights to acquire shares of a Canadian corporation (employer) under the terms of a debt agreement.

Position: No deemed disposition under subparagraph 128.1(4)(b)(iii) on emigration.

Reasons: The law.

Position Adoptée:

Principal Issues: Would a change in the statutory and taxation year end used by a foreign affiliate for purposes of tax reporting in the country in which the affiliate is resident, result in a change to the affiliate's "taxation year" for purposes of the Act and Regulations.

Position: Generally yes.

Reasons: The definition in subsection 95(1) is vague. However, the context of foreign affiliate legislation and Regulations supports this interpretation.

Principal Issues: Where a former Canadian resident exercises a Canadian stock options relating to Canadian employment while he or she resides in Chile, will the stock option benefit be taxed in Canada?

Position: Yes.

Reasons: The amount would be taxed in Canada under paragraph 2 of Article 15 of the Canada-Chile Income Tax Convention.

Principal Issues: Does the Act confer a right on a person (who owes taxes under the joint and several liability provision of subsection 160.2(2)) to collect such taxes from the deceased annuitant's estate?

Position: No.

Reasons: There is no provision in the Act that provides for this.

Principal Issues: Est-ce que la mesure transitoire prévue au paragraphe 23(6) de l'avis de voies et moyens visant à modifier la Loi de l'impôt sur le revenu présenté le 5 juin 2000, relativement à l'application du sous-alinéa 55(5)(e)(iv) de la Loi, serait applicable en l'espèce ? / Whether the grandfather rule provided under subsection 23(6) of the Notice of Ways and Means Motion to amend the Income Tax Act tabled June 5, 2000, and related to subparagraph 55(5)(e)(iv) of the Act would be applicable to the particular situation?

Position: Oui. La mesure transitoire s'appliquerait si la les propositions législatives sont adoptées telles quelles. / Yes. Grandfather rule would apply in the particular situation, if the provisions of the Act are amended as proposed.

Reasons: Question de fait. / Question of fact.

Principal Issues: Requirements under 215 where amount of paid-up capital cannot be accurately computed by a minority shareholder.

Position: Must comply with Act.

Reasons: The law.

Principal Issues: IC82-6R2 lays out a procedure for the representative of an estate to follow in order to obtain a clearance certificate to enable the estate's property to be distributed. The estate is considered to be terminated on the rep's chosen date notwithstanding that the actual termination date will occur later. The rep is regarded as holding the estate's property on behalf of the beneficiaries after the chosen date. The question arises as to when the beneficiaries should report any income earned after that date. E.g. not until received?

Position: The beneficiaries should report income to the same extent they would if they held the property directly.

Reasons: If the estate is considered to be wound up on the chosen date, the rep thereafter merely holds the property as agent for the beneficiaries pending receipt of a ss.159(2) clearance certificate.

Principal Issues:
1. Can retiring allowances be used in the determination of a municipal officer's tax-free expense allowance?
2. Will any portion of a retiring allowance that is based on the tax-free allowance received as part of an officer's remuneration also be tax-free?

Position:
1. No.
2. No.

Reasons:
1. The Agency's policy position on the calculation of tax-free expense allowances is based on our understanding that the amount would be calculated with respect to remuneration and non-accountable expense allowances received in a year which specifically relate to the services performed and/or the expenses incurred in the year in the performance of those services. It was not envisioned that the 81(3) tax exemption would be based on amounts paid as a retiring allowance. A retiring allowance does not fit into the intended meaning of the term "salary or [other] remuneration" as the term is used in that provision or as contemplated for the purposes of applying the Agency's policy position.
2. The basis on which a retiring allowance is determined does not limit its taxability.

Principal Issues: Le fait qu'une société de personnes compte parmi ses associés une autre société de personnes dont les dispositions de l'alinéa 249.1(1)b) de la Loi se sont appliquées avant qu'elle devienne membre de la première société de personnes entraînera-t-il l'application des dispositions de l'alinéa 249.1(1)b) de la Loi pour la première société de personnes?

Position: Le fait qu'une société de personnes compte parmi ses associés une autre société de personnes dont les dispositions de l'alinéa 249.1(1)b) de la Loi se sont appliquées au cours d'un exercice terminé avant qu'elle devienne membre de la première société de personnes n'entraînera pas, en soi, l'application des dispositions de l'alinéa 249.1(1)b) de la Loi à cette première société de personnes.

Reasons: Le libellé du sous-alinéa 249.1(1)b)(ii) de la Loi. Les modifications proposées dans l'avis de motion de voies et moyens du 5 juin 2000 relativement à l'alinéa 249.1(1)b) de la Loi portent uniquement sur le préambule de cet alinéa sans modifier le sous-alinéa 249.1(1)b)(ii) de la Loi.

Principal Issues: Is an allowance eligible for the special work site exemption as either a remote work location, or as a special work site to which the exception to clause 6(6)(a)(i)(B) applies for a distance less than 80 kilometres.

Position: 1. The location is not a remote work location.
2. Not a special work site.
3. Residence is less than 80 Km. from work site. From the facts provided, it is reasonable for the individual to return home on a daily basis.

Reasons: 1.There are established communities within 80 km. of the work site.
2. The individual's period of employment at the site is more than two years.
3. The position is based on the information available.

Principal Issues: whether Canadian film or video production tax credit may be reduced or eliminated?

Position: yes, depending on facts of case

Reasons: definition of "Canadian film or video production" in 1106(3)Regs
"investor rules" in 125.4 "assistance" in 125.4

Principales Questions:

Dans une situation où un associé a déclaré un gain réputé provenir de la disposition de sa participation dans une société en commandite (SEC) conformément au paragraphe 40(3.1) de la Loi au cours d'une année d'imposition et où, par la suite, le paragraphe 98(6) de la Loi s'est appliqué lors du remplacement de SEC par une autre société de personnes en nom collectif (SENC), est-ce que l'associé pourrait choisir un montant à titre de perte réputée subie lors de la disposition de sa participation, tel que le prévoit le paragraphe 40(3.12) de la Loi, à l'égard de sa participation dans SENC ?

Position Adoptée:

Principales Questions: Une société constituée en vertu de la Partie 1A de la Loi sur les compagnies (Québec) peut-elle être une organisation sans but lucratif au sens de la Loi de l'impôt sur le revenu ?

Position Adoptée: Oui, si elle rencontre les conditions à cette fin.

Principales Questions : demande de précisions au sujet du document 1999-000868.

Position Adoptée : les quotas peuvent être transférés un à un aux fins du paragraphe 85(1), afin de considérer que le dernier des deux biens transférés soit celui qui cause le gain en capital présumé calculé en vertu du paragraphe 14(1.1); ce gain est alors sujet aux règles de la DGC applicables aux biens agricoles admissibles.

Principal Issues: Whether certain income earning activities are taxable and whether reimbursement of members' travel costs from income earned would impair status of club as an NPO

Position: Not taxable as long as not a business (i.e. not for profit) - reimbursement is OK as long as costs are reasonable and incurred in course of club activities

Reasons: General criteria in IT - 496

Principal Issues: Can an RRSP or RRIF write-off an investment in a Canadian-controlled private corporation because the annuitant claims the shares are worthless?

Position: No.

Reasons: The trustee of the RRSP or RRIF must determine what the fair market value of the shares are and the plan has to retain the shares until the shares are cancelled, sold or withdrawn from the plan or the corporation is wound-up.

Principal Issues: 1) Can stock options be transferred to an employee's wholly-owned corporation? 2) Can shares of the wholly-owned corporation be acquired by the employer without any tax ramifications to the employee?

Position: 1) Yes. 2) Probably not.

Reasons: 1) Paragraphs 7(1)(c) and (d) contemplate such transfers. 2) Series of transactions appear to be avoidance transactions and subsection 245(2) may apply.

Principal Issues:

Principal Issues: