Income Tax Severed Letters - 2001-06-08

Ruling

2001 Ruling 2001-0073483 - Article XIII of the German Convention

Unedited CRA Tags
Art XIII

Principal Issues: Application of Article 13 of the Canada-Germany Income Tax Convention to the disposition of an interest in a Canadian general partnership held by a German limited partnership.

Position: Treaty exempt pursuant to paragraphs 4 and 5 of Article 13 of the Canada-Germany Income Tax Convention.

Reasons: The value of the interest in the Canadian general partnership is not derived principally from immovable properties situated in Canada (paragraph 4 of Article 13 of the Canada-Germany Income Tax Convention). Similar to previous rulings.

Ministerial Correspondence

24 May 2001 Ministerial Correspondence 2001-0076464 - CAPITAL VS. CURRENT EXP.

Unedited CRA Tags
18(1)(a) 18(1)(b)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

April 24, 2001

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your letter of March 8, 2001, on behalf of a constituent who is concerned about the tax treatment of expenditures incurred in respect of moisture-damaged condominium units.

24 May 2001 Ministerial Correspondence 2001-0078654 - Trust Assessment Harris Case

Unedited CRA Tags
152(1)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

May 24, 2001

XXXXXXXXXX

Dear XXXXXXXXXX:

14 May 2001 Ministerial Correspondence 2001-0078644 - ELECTION TO REPORT CAPITAL GAIN - LATE

Unedited CRA Tags
110.6(24) 110.6(2b)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

May 14, 2001

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable Martin Cauchon, Minister of National Revenue, has asked me to reply to your correspondence of March 20, 2001, concerning the deadline to file an election to report a capital gain on property owned at the end of February 22, 1994.

Technical Interpretation - External

6 June 2001 External T.I. 2001-0082765 - CAPITAL GAINS DEDUCTION - QFP - INTERSPOUSAL

Unedited CRA Tags
110.6(1) 73(1)

Principal Issues: What are the tax implications if the wife purchases a half interest in piece of land currently owned by the husband.

Position: General comments given

Reasons: Proposed transaction, tax planning and insufficient information provided.

6 June 2001 External T.I. 2001-0079765 - Pre-production revenue and expenses

Unedited CRA Tags
66.1(6)

Principal Issues: What is the treatment of losses from mining operations, incurred before achieving production in reasonable commercial quantities?

Position: Although pre-production revenue may fall within the ambit of subsection 66(12.1) and a taxpayer's CCEE balance would be reduced, on an administrative basis, there has been a long-standing agreement between industry and the CCRA whereby the CCRA agreed not to object where a Canadian exploration expense was reduced by the related pre-commercial production revenue.

Reasons: Established position.

6 June 2001 External T.I. 2001-0075775 - EMPLOYER - PROVIDED PARKING

Unedited CRA Tags
6(1)a)

Principal Issues: Whether decision in Saskatchewan Telecommunications affects our policy on employer-provided parking.

Position: Our policy is not affected by decision.

Reasons: The decision is based on the court's finding of fact and judge's conclusion is consistent with our policy.

5 June 2001 External T.I. 2000-0055765 F - Revenu gagné en main

Unedited CRA Tags
55(2) 245

Principales Questions: Quel est le revenu gagné en main attribuable aux actions à dividendes discrétionnaires dans la situation présentée?

Position Adoptée: Nul

5 June 2001 External T.I. 2001-0085555 - Paragraph 3(d) of Article XI

Unedited CRA Tags
Art XI

Principal Issues:
Whether paragraph 3(d) of Article XI of the Canada-U.S. Income Tax Convention applies where the debt obligation has been assigned to a third party resident in the U.S.?

Position:
Yes.

Reasons: One of the reasons for the amendment to paragraph 3(d) of Article XI of the Convention in the Third Protocol was to allow for factoring of accounts receivable.

5 June 2001 External T.I. 2001-0076375 - CAPITAL LOSS - DEPRECIABLE PROPERTY

Unedited CRA Tags
39(1)b)

Principal Issues: Whether a capital loss can be claimed where depreciable property whose cost base was bumped-up, as a result of the capital gains election allowed in 1994 under subsection 110.6(19) of the Act, is disposed of at an amount between its original capital cost and its new bumped-up cost.

Position: No.

Reasons: A capital loss is specifically denied in respect of a loss from the disposition of depreciable property as a result of the application of subparagraph 39(1)(b)(i) of the Act and a terminal loss does not result by virtue of paragraphs 13(7)(e) and (e.1) of the Act. This treatment is generally applied to transactions involving non-arm's length parties, particularly those involving the use of the capital gains deduction. An amendment to the Act is required to obtain the results sought by the taxpayer.

4 June 2001 External T.I. 2000-0047145 F - Revenu protégé - crédit impôt investis

Unedited CRA Tags
55(5)c) 127(5)

Principales Questions:
Est-ce que le montant d'un crédit d'impôt à l'investissement réclamé en vertu du paragraphe 127(5) de la Loi dans le calcul de l'impôt payable réduit le revenu protégé en main d'une société?

Position Adoptée:
Non.

4 June 2001 External T.I. 2001-0084185 - IS A CO-OP AN INDIAN UNDER THE INDIAN ACT

Unedited CRA Tags
81(1)a)

Principal Issues: Does a co-operative incorporated under the Cooperatives Act of Manitoba qualify for the Indian Act exemption?

Position: No

Reasons: A corporation is not an Indian or band under the Indian Act.

4 June 2001 External T.I. 2001-0069155 - two-tiered partnship/qualified farm prop.

Unedited CRA Tags
110.6(1)

Principal Issues:
Is land held in second tier partnership qualified farm property

Position: No

Reasons: The second-tier partnership is not owned by an individual.

1 June 2001 External T.I. 2001-0075455 F - Remaniement et capital versé

Unedited CRA Tags
86(1) 86(2.1)

Principales Questions:
Dans la situation présentée, la réduction visée par le paragraphe 86(2.1) de la Loi ramène-t-elle le capital versé des nouvelles actions à celui des anciennes actions?

Position Adoptée:
Oui.

31 May 2001 External T.I. 2001-0075355 - STANDBY CHARGE

Unedited CRA Tags
6(2)

Principal Issues:

1 - How is the gain or loss on the disposition of a company leased vehicle handled for the purposes of the standby charge?
2 - Do the leased costs used in determining the standby charge include PST and GST?
3 - Can a standby charge be reduced when an employee is on vacation and the leased vehicle and car keys are stored at the worksite?

Position:

1 - General discussion
2 - Yes.
3 - Depends on the circumstances.

Reasons:

31 May 2001 External T.I. 2001-0066215 F - Clause de survie

Unedited CRA Tags
70(6)

Principales Questions: L'existence d'une clause de survie dans un testament empêche-t-elle systématiquement l'application du paragraphe 70(6) de la Loi?

Position Adoptée: L'existence d'une clause de survie classique de 30 ou 60 jours prévue dans un testament n'empêchera pas, en soit, l'application du paragraphe 70(6) de la Loi si le conjoint survivant survit le testateur au-delà du délai prévu par cette clause.

31 May 2001 External T.I. 2001-0080335 - TRANSFER OF PROPERTY FROM TRUST TO BENEF.

Unedited CRA Tags
107(2) 54 "DISPOSITION"

Principal Issues: Whether disposition occurs on transfer of property from trust to beneficiaries

Position: Question of fact.

Reasons: S. 54 defines disposition to include transfer of property from trust to beneficiaries except where there is a change in legal ownership without a change in beneficial ownership.

30 May 2001 External T.I. 2001-0077135 - TUITION CREDIT - REVIEW PROGRAM

Unedited CRA Tags
118.5(1) 118.6(2)

Principal Issues:
Whether a Review Program at a Canadian University aimed at candidates wishing to write the CMA final exams qualifies for the tuition credit and the education credit.

30 May 2001 External T.I. 2001-0072375 - safe income distribution

Unedited CRA Tags
55(2) 55(5)(f)

Principal Issues:
1) Whether subsection 55(2) of the Act would apply to the full amount of the deemed dividend or only the amount, if any, that is in excess of the safe income on hand that is otherwise attributable to the shares owned by the shareholder.

2) Whether the payment of a safe dividend by way of a transfer of property affects the application of subsection 55(2) where such payment does not result in an equal "distribution" of each type of property owned by Opco immediately before the payment.

Position:
1) Full amount unless paragraph 55(5)(f) designation is made.
2) Possibly depending on facts.

Reasons: The Law.

30 May 2001 External T.I. 2001-0080815 - Part IV tax controlled corporations

Unedited CRA Tags
186(1) 186(4)(a) 129(1)

Principal Issues:
In a given fact situation whether
(1)the two corporations are connected ?
(2) the dividend recipient is liable to pay Part IV tax if the dividend payor is connected and has or not received a dividend refund ?
(3) a deemed dividend is to be treated the same way as an ordinary dividend for the purposes of Part IV and of dividend refund ?
(4) the individual shareholder ultimately could be the only person to pay tax on a dividend ?

Position:
(1) Yes.
(2) Yes, if the dividend payor is entitled to a dividend refund unless the dividend recipient can claim losses to offset the Part IV tax - No, if the dividend recipient is not entitled to a dividend refund.
(3) Yes.
(4) Generally, yes.

Reasons:
(1) The law - Ss. 186(2) and (4).
(2) The law.
(3) See case Placements Serco Ltée 88 DTC 6125.
(4) Provided that no Part IV tax is payable by the particular corporation.

28 May 2001 External T.I. 2001-0071765 - Association

Unedited CRA Tags
256(1)

Principal Issues: In a situation where corporations, each controlled (de jure and
de facto) by a different corporation, own an interest in a general partnership varying between 7% and 24 %; whether one of the corporations could become associated to one or more of the others, pursuant to subsection 256(1), if one of the corporations increased its interest in the partnership to 25% or more ?

Position: No.

Reasons: Increasing the partnership interest does not, by itself, change who controls any of the corporations de jure or de facto for the purpose of the association rules in section 256.

28 May 2001 External T.I. 2001-0077775 - HEART TRANSPLANT

Unedited CRA Tags
118.2(2)(L.1)

Principal Issues: whether expenses are medical expenses

Position: -question of fact

Reasons: 118.2(l.1) also (g) and (h)

25 May 2001 External T.I. 2001-0081525 - TORNADO RELIEF

Unedited CRA Tags
12(1)x) 12(2.2) 13(7.1) 13(4)

Principal Issues:
Income tax treatment of assistance received by victim of XXXXXXXXXX .

Position TAKEN:
The income tax treatment differs depending on whether it is received for business or personal reasons. Relief is available under various provisions of the Act.

Reasons:
The income tax treatment of assistance is based on specific rules in the Act. Assistance received for personal losses is generally without tax consequences. Assistance received for business losses is generally without tax consequences where the taxpayer spends an equal amount on repairs or replacements. However, in some instances, amounts must be included in income, for example, under paragraph 12(1)(x) or subsection 13(1). Relief available under subsections 12(2.2), 13(7.1) and 13(7.4) of the Act.

22 May 2001 External T.I. 2001-0072585 - AN NPO AND INDIAN TAXATION

Unedited CRA Tags
81(1)a) 149(1)l) 227.1

Principal Issues: We were provided with some limited information about a corporation and its employees. Some of the employees are Indians. A number of queries were raised.

Position: General comments and some CCRA publications were provided.

Reasons: Limited information was provided.

18 May 2001 External T.I. 2000-0040405 F - Revenu protégé - options

Unedited CRA Tags
55(2)

Principal Issues:
Comment est calculé le revenu protégé en main attribuable à des actions acquises lors de l'exercice d'options, lorsqu'un montant a été inclus dans le revenu de l'actionnaire en vert du paragraphe 15(1) lors de l'octroi des options?

Position:
Seulement une fraction du revenu protégé en main qui serait par ailleurs attribuable aux actions peut être attribué aux actions.

Reasons:
PBR des actions est augmenté du montant du PBR des options.

17 May 2001 External T.I. 2001-0081585 - BARTER NETWORK

Unedited CRA Tags
3 9

Principal Issues:
Any income tax considerations of community network engaging in barter transactions.

Position TAKEN:
Transactions are subject to Income Tax Act. Provided copy of and general guidance based on IT-490, Barter Transactions, and copy GST/HST News No. 34 Fall 1999.

Reasons: N/A

4 May 2001 External T.I. 2001-0077455 - CANADA COUNCIL FOR THE ARTS AWARDS

Unedited CRA Tags
56(1)(n) R. 7700

Principal Issues: The income tax treatment of the Walter Carsen Prize for Excellency in the Performing Arts, the Virginia Parker Prize, and the Sylva Gelber Foundation Award.

Position: Questions of fact.

Reasons: The primary issue to be decided with respect to any prize awarded by the Canada Council for the Arts is whether it qualifies as a "prescribed prize," in which case it will be excluded from income under paragraph 56(1)(n) of the Income Tax Act. Section 7700 of the Income Tax Regulations describes a "prescribed prize," as any prize that is recognized by the general public and that is awarded for meritorious achievement in the arts, the sciences or service to the public but does not include any amount that can reasonably be regarded as having been received as compensation for services rendered or to be rendered.

Technical Interpretation - Internal

1 June 2001 Internal T.I. 2001-0066297 F - CREDIT EQUIVALENT - PENSION ALIMENTAIRE

Unedited CRA Tags
118(5) 56.1(4)

Principales Questions:

Est-ce qu'un particulier qui a la garde partagée de ses enfants pourrait réclamer le crédit équivalent pour personne entièrement à charge pour le deuxième enfant lorsqu'une ordonnance de la Cour prévoit que ce particulier paie une pension alimentaire pour ses deux enfants et qu'un accord écrit signé par les deux conjoints est fait subséquemment pour indiquer que la pension alimentaire, dont le montant total n'est pas modifié, est versée uniquement à l'égard du premier enfant?

Position Adoptée:

28 May 2001 Internal T.I. 2001-0066147 F - ALIMENTS - MACHINES DISTRIBUTRICES

Unedited CRA Tags
67.1(1) 67.1(2)c)

Principales Questions:

Est-ce que le paragraphe 67.1(1) de la Loi s'applique aux montants payés par un employeur pour des aliments et des boissons qu'il achète pour remplir les machines distributrices installées dans le local pour dîner des employés? Les employés paie un montant raisonnable pour acheter un aliment ou une boisson et ils ne reçoivent aucune facture. Les employés ne reçoivent aucun avantage imposable à cet égard.

Position Adoptée:

22 May 2001 Internal T.I. 2001-0083987 F - EMPLOYEUR PAYE IMPOT POUR EMPLOYÉ

Unedited CRA Tags
6(1)a)

Position Adoptée:
Oui.

RAISON POUR POSITION ADOPTÉE:
Il s'agit du remboursement d'une dépense personnelle de l'employé.

16 May 2001 Internal T.I. 2001-0076767 - PAYMENT TO DISABLED - PDD PROGRAM

Unedited CRA Tags
56(1)(u) 81(1)(h)

Principal Issues:
Does a payment made to a parent of a disabled person under a provincial program a non-taxable receipt to the recipient?

16 May 2001 Internal T.I. 2001-0081167 - EQUIVALENT-TO-SPOUSE CREDIT

Unedited CRA Tags
118(1)b)

Principal Issues:
1. How long does the dependent have to reside with parent / guardian in order to qualify for equivalent-to-spouse credit?
2. Must the taxpayer live alone (i.e., single, divorced, separated, or widowed) at the same time as supporting the dependent person?

Position TAKEN:
1. Question of fact.
2. Yes.

Reasons:
1. Dependent on the particular circumstances.
2. Subparagraph 118(1)(b)(i) states that "at that time" the conditions in clauses (A) through (D) must all be met.

16 May 2001 Internal T.I. 2001-0082207 - Impact of Shih Decision; Residency Status

Unedited CRA Tags
2

Principal Issues: Whether decision in Shih v. The Queen contradicts emphasis given to spouse/dependants and family dwelling as residential ties in residency determinations.

Position: No.

Reasons: Judge in Shih made clear that those are always important factors. Case decided on its facts; also, Judge fully accepted testimony of taxpayer that his only reason for having a connection to Canada was to educate his children.

10 May 2001 Internal T.I. 2001-0077537 - CHRISTIAN SCIENCE; MEDICAL PRACTITIONERS

Unedited CRA Tags
118.4 (2)

Principal Issues:
Whether Christian Science practitioners qualify as "medical practitioners" under the Act.

Position:
Depends on whether laws of jurisdiction where services were performed authorize the services that they provide

Reasons:
Paragraph 118.4(2)(a) of the Act provides that, for the purposes of section 118.2 of the Act, a reference to a "medical practitioner," etc. means, for a service rendered, a person who is authorized to practice as such according to the laws of the jurisdiction in which the service is rendered. Accordingly, one must look to provincial (or state, etc.) legislation to determine whether payments to a medical practitioner will qualify for the medical expense tax credit.

10 May 2001 Internal T.I. 2001-0065677 F - SIGNIFICATION DE "MOMENT DONNÉ"

Unedited CRA Tags
6(21)

Principales Questions:
À quel moment donné doit-on calculer la perte relative au logement selon le paragraphe 6(21) de la Loi ?

Position Adoptée:
Il s'agit d'un terme très général. Peut être à peu près n'importe quand selon la situation présentée.

8 May 2001 Internal T.I. 2001-0079857 - WORKERS' COMPENSATION PREMIUMS

Unedited CRA Tags
18(1)(a) 18(1)(c)
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose

Position: Yes.

8 May 2001 Internal T.I. 2001-0081707 - XXXXXXXXXX . QUESTIONS

Unedited CRA Tags
5(1) 8(1)(g)

Principal Issues: (1) Whether overpayment made to employee in error should be included on employee's T4 slip. (2) Whether employees of a placement agency who work as drivers for a trucking company can claim expenses for meals and lodging under paragraph 8(1)(g) of the Act.

Position: (1) Probably not. (2) No amount may be claimed under this provision

Reasons: (1) If overpayment arose due to honest error, and employee is required to repay the overpayment, then it is not salary or wages, even if the amount is not repaid by the employee in the year. (2) Principal business of employer must be the transportation of goods, equipment or passengers. This is not the principal business of the placement agency. Consistent with other opinions.

7 May 2001 Internal T.I. 2001-0078027 - Loans to Non-residents

Unedited CRA Tags
17(2) 17(15)

Principal Issues: Will subsection 17(2) apply to a "second loan" where the "first loan" bears a market rate of interest?

Position: Not if the proposed amendments to subsection 17(15) become law.

Reasons: Under proposed changes to subsection 17(15), such a loan would be an "exempt loan or transfer". Subsection 17(2) does not apply where the amount owing arose as a result of an exempt loan or transfer.

31 March 2001 Internal T.I. 2001-0076437 - Thin Capitalization Rules

Unedited CRA Tags
18(4)

Principal Issues: Overview of thin capitalization rules

Position: See overview

Reasons: See overview

3 November 2000 Internal T.I. 2000-0023997 - Non-resident bearing loans immigrant to NRT

Unedited CRA Tags
94 75(2) 104

Principal Issues:
1.validity of a trust set up by an immigrant to Canada
2. application of the attribution rules
3. transfer pricing issues related to the non-interest bearing loans made by the non-resident settlor

Position:
1. the trust may not be valid when the impact of the letter of wishes on the trust is considered
2. 75(2) may apply as a result of the control exercised by the settlor through the letter of wishes
3. the transfer pricing rules may apply as a result of the lack of interest charged on the loans

Reasons:
the analysis is specific to this particular trust such that reference to the reasons given in the document should be considered