Income Tax Severed Letters - 2003-05-09

Principal Issues: Whether disposition of water rights, originally capitalized to the cost of the associated farmland, would be considered a disposition of land or eligible capital property; If it is ECP, could any of the original cost be reallocated to the CEC pool; Could a 14(1.01) election me made with respect to the disposition?

Position: Given the change in Albert legislation, proceeds would probably result in an eligible capital amount; Prior to change in law, costs were correctly capitalized to the land, and there is no provision in the Act allowing these costs to be reallocated to CEC; Question of fact whether 14(1.01) election could be made.

Reasons: Meets the mirror image test in subsection 14(5) in that, now that these 14(1) rights can be sold separately from the land, the purchaser could make a reasonable argument that they are eligible capital property; Since these rights were correctly considered to be part of the land, there is no mechanism to transfer the costs to the CEC pool because of a change in the provincial legislation; All of the facts of a particular situation must be considered before any definitive comments can be made on subsection 14(1.01).14(5)

Principal Issues:
Whether certain bakery equipment is included in Class 43 of Schedule II of the Regulations.

Position: Question of fact.

Reasons:
Provided the equipment was acquired after February 25, 1992 and would otherwise have been included in Class 29, it will qualify for inclusion in Class 43.

Principales Questions:
Est-ce que l'expression " l'ensemble des bénéficiaires " utilisée au sous-alinéa 110.6(14)c)(ii) de la Loi vise tant les bénéficiaires éventuels pouvant être désignés par le fiduciaire que les bénéficiaires déjà nommés au moment de la vente des actions ?

Position Adoptée:
Seulement les bénéficiaires déjà nommés au moment de la vente des actions.

Principales Questions:
1. Un contribuable peut-il continuer à déduire les intérêts sur de l'argent emprunté lorsqu'il n'a plus la source de revenu s'y rapportant?
2. Quel est le sens du mot revenu à l'alinéa 20(1)c) de la Loi.

Principal Issues:
1. Will a severance payment received by a Canadian resident from his or her former U.S. employer be taxable as a retiring allowance?
2. Will the income taxes paid to the U.S. be eligible for the foreign tax credit?

Position:
1. Yes.
2. Yes.
REASONS:
1. Retiring allowance included in income under 56(1)(a)(ii) of the Act.
2. The foreign tax credit will apply in accordance with section 126 of the Act.

XXXXXXXXXX 2003-000639

Principal Issues:
Where an NPO is reorganized from a corporation with share capital to a corporation without share capital, various questions are asked pertaining to the NPO's status.

Position: In order to respond to each question, we would need all of the facts.

Reasons:
An advance income tax ruling should be requested. General information provided..

Principal Issues: Whether a certain unit trust resident in Canada owns a participating interest in a non-resident entity in the situation outlined in the letter?

Position: Yes

Reasons: Paragraph (d) of the definition of "participating interest" would apply.

Principal Issues: Can a retiring allowance be transferred to a RRIF?

Position: No.

Reasons: Paragraph 60(j.1) only allows rollovers to RPPs and unmatured RRSPs.