Income Tax Severed Letters - 2004-11-26

Ruling

2004 Ruling 2004-0058171R3 - Stock options - exchange

Unedited CRA Tags
7(1.4) 110(1)(d) 7(9) 7(1)(a)

Principal Issues:
Whether subsection 7(1.4) of the Act applies to the exchange of an option for a substituted right which will entitle the employee to acquire a number of shares with a FMV equal the benefit under paragraph 7(1)(a) of the Act?
Whether subparagraph 110(1)(d)(iii) and paragraph 7(9)(b) are met?

Position:
Conditions in paragraphs 7(1.4)(a) and (b) are met. Provided that paragraph 7(1.4)(c) is met, rules in paragraphs 7(1.4)(d) through (f) will apply.
Provided that the Eligible Employee meets the arm's length test in clause 110(1)(d)(iii)(B) of the Act, subparagraph 110(1)(d)(iii) will be met

Reasons:
Analysis of the Act

XXXXXXXXXX 2004-005817

2004 Ruling 2004-0088541R3 - Loss utilization

Unedited CRA Tags
112(1)
Summary Under
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4)

Principal Issues: Loss utilization in a related group of companies.

Position: The loss utilization is acceptable.

Reasons: Consistent with our position in previous rulings and with Department of Finance policy.

2004 Ruling 2004-0089061R3 - Paragraph 149(1)(c) ruling.

Unedited CRA Tags
149(1)(c)

Principal Issues: Whether paragraph 149(1)(c) will apply to exempt the business income earned by a First Nation from its limited partnership interest.

Position: Yes.

Reasons: The First Nation can be considered a public body performing a function of government in Canada within the meaning of paragraph 149(1)(c).

XXXXXXXXXX 2004-008906

2003 Ruling 2002-0179771R3 - Unfunded Supplementary Pension Plan

Unedited CRA Tags
248(1)

Principal Issues: Will the earmarking of specific assets to meet an employer's obligations under a supplemental retirement arrangement result in the creation of an RCA?

Position: No.

Reasons: It is an unfunded arrangement to provide pension benefits that are supplementary to the benefits provided under an RPP.

Ministerial Correspondence

3 November 2004 Ministerial Correspondence 2004-0096631M4 - Indian Post Secondary Education

Unedited CRA Tags
81(1)(a)

Principal Issues: When will PSE assistance paid to status Indians have to be reported ?

Position: The reporting requirement will first apply to amounts paid in the 2006 calendar year.

21 October 2004 Ministerial Correspondence 2004-0094381M4 - Medical Expense

Unedited CRA Tags
118.2(2)

Principal Issues: Does the cost of a weight-loss program qualify as a medical expense?

Position: Possible under 118.2(2)(a) or in exceptional cases under 118.2(2)(e).

Reasons: Legislation

Technical Interpretation - External

25 November 2004 External T.I. 2004-0092851E5 - NPO acquiring a building for office & for rental

Unedited CRA Tags
149(1)(l)

Principal Issues: Will an NPO lose its tax-exempt status if it purchases a building which will house its administration office but the balance of which will be rented out to earn income to cover administrative costs and contribute to salary expense?

Position: Question of Fact

Reasons: The property may have been acquired for the purpose of earning income. Depending upon the nature of the organization and the use to which these profits are put, this may or may not be objectionable.

24 November 2004 External T.I. 2004-0083861E5 - Research Expenses

Unedited CRA Tags
56(1)(o)

Principal Issues: What is the distinction between the words "travelling" and "temporary residing" as those terms are used in paragraph 33 of IT-75R4?

Position: Question of Fact.

Reasons: IT-75R4 and meaning of sojourning.

24 November 2004 External T.I. 2004-0102041E5 - CEDOE - connected persons

Unedited CRA Tags
66(12.6)(b) Reg.1206(5) 1206(1) 1206(4.2)

Principal Issues: whether certain payments to a connected person will be CEDOE

Position: Yes

Reasons: application of the Regulations

24 November 2004 External T.I. 2004-0089101E5 - Medical expenses and PHSP premiums

Unedited CRA Tags
118.2(2)

Principal Issues: 1) The deductibility of PHSP premiums in situations where the employer pays the premium and the employee pays the premium. 2) Are premiums paid in respect of travel coverage or additional medical coverage a qualifying medical expense?

Position: 1) Provided that the plan qualifies as a PHSP then premiums paid by the employer are not included in income of the employee and accordingly, such amounts would not be deductible as a medical expense for the employee. However, PHSP premiums paid through payroll deductions or directly by the employee would be a qualifying medical expense. 2) Premiums paid for travel coverage or supplementary medical coverage would be deductible provided that the underlying plan qualifies as a PHSP.

Reasons: The determination is a question of fact.

24 November 2004 External T.I. 2004-0090591E5 - Leasing Property Rules

Unedited CRA Tags
18(1)(h) Reg. 1100(15) Reg. 1100(17)

Principal Issues: Whether the leasing property rules in subsection 1100(15) of the Regulations would apply to a business of earning rental income from the use of a motor home.

Position: Yes.

Reasons: The motor home would be depreciable property principally used to earn rental income.

24 November 2004 External T.I. 2004-0082021E5 - Research Expenses

Unedited CRA Tags
56(1)(o)

Principal Issues: Are certain expenses deductible as research expenses if a temporary base is established overseas?

Position: If a temporary base has been established overseas amounts paid for meals and lodging in that place are considered personal expenses and are not deductible as research expenses.

Reasons: IT-75R4 and meaning of sojourning.

23 November 2004 External T.I. 2004-0101211E5 - Donations of Cultural Property

Unedited CRA Tags
118.1(1 39(1)(a)(i.1) 8.1(11)

Principal Issues: 1. Can a donor include in "total cultural gifts" for the year, as defined in subsection 118.1(1), an amount in respect of a gift of cultural property where the property is not certified by the Canadian Cultural Property Export Review Board until after the gift is completed? 2. Similarly, where certification occurs after the gift is completed, will subparagraph 39(1)(a)(i.1) apply in computing the donor's capital gain?

Position: 1. Yes, provided that the requirements of that definition are otherwise satisfied. 2. Yes.

Reasons: Words of the Act and the Cultural Property Export and Import Act.

22 November 2004 External T.I. 2004-0100771E5 - Lease; bargain purchase option

Unedited CRA Tags
49

Principal Issues: Income tax treatment of lease with bargain purchase option

Position: If it is a lease (not a sale) at law and not a sham, treated as 2 properties - a lease and an option to purchase

Reasons: ITTN 21 - ITA

17 November 2004 External T.I. 2004-0102361E5 - Transfer RRIF to Spousal Trust

Unedited CRA Tags
146.3(2)(e) 146.3(14 146.3(14.1) 60(l)

Principal Issues: Is it possible under the Income Tax Act to transfer property on a tax-deferred basis from an individual's RRIF to a joint spousal trust?

Position: No.

Reasons: Subsections 146.3(14), 146.3(14.1) and paragraphs 146.3(2)(e) and 60(l) describe the transfers that can made from an RRIF on a tax-deferred basis and a transfer to a joint spousal trust is not included.

1 October 2004 External T.I. 2004-0090031E5 - RRSP Withdrawal and the Home Buyers Plan

Unedited CRA Tags
146.01

Principal Issues: General questions regarding withdrawal of amounts under the Home Buyers Plan

Position: Questions of fact

Reasons: Based on the legislation, the definition of "regular eligible amount" paragraph (c), (d), and (e).

2004-009003
XXXXXXXXXX Kimberly Duval
(613) 957-2747
October 1, 2004

Technical Interpretation - Internal

22 November 2004 Internal T.I. 2004-0094771I7 - Health and Welfare Trusts

Unedited CRA Tags
18(9)

Principal Issues: Whether subparagraph 18(9)(a)(iii) of the Act applies to the employer's contribution to a H&WT.

Position: Yes.

Reasons: The contributions to the H&WT are consideration for insurance in respect of a period after the end of the year in which the contributions are made.

2 November 2004 Internal T.I. 2004-0070161I7 - RRIF payments received by a status Indian

Unedited CRA Tags
81(1)(a) 146

Principal Issues: What portion, if any, of payments received by a status Indian from an RRIF will be tax exempt.

Position: The RRIF payments will be taxed in the same manner as payments from the particular registered plan from which property was transferred to the RRIF.

Reasons: Based on connecting factors test.