Income Tax Severed Letters - 2004-12-17

Principales Questions:
Est-ce que des agents laïques de pastorale sont admissibles à la déduction pour résidence des membres du clergé en vertu de l'alinéa 8(1)c)?

Position Adoptée:
Non.

Raisons:
Les agents de pastorale ne rencontrent pas le test de statut au sous-alinéa 8(1)c)(i) car ils ne sont pas des ministres réguliers d'une confession religieuse. Donc, ils ne sont pas admissibles à la déduction relative à la résidence des membres du clergé.

XXXXXXXXXX 2004-009322
L. J. Roy, CGA
Le 16 décembre 2004

Principal Issues: Can survivor benefits under a pension plan be divided between a spouse and a former spouse?

Position: Yes, depending on the circumstances.

Reasons: The division of "survivor benefits" under a pension is not a division of "member benefits" as contemplated under the regulations that apply to registered pension plans. However, the provisions for survivor benefits allow for more than one beneficiary. Accordingly, a pension could simply be modified to allow multiple beneficiaries. In our view a division may also be made if the beneficiary was not changed in the plan and the division is done in accordance with the conditions set out in IT-499. However, a division may not be possible if these conditions are not satisfied.

Principal Issues: Will shares of a non-resident corporation that was delisted from the TSX Venture Exchange but are listed on the NASDAQ OTC Bulletin Board be a qualified investment for an RRSP?

Position: Most likely no but it will be a question of fact.

Reasons: The corporation would not be a public corporation and the shares are not listed on a prescribed stock exchange.

Principales Questions: Comment traiter les transactions en devises étrangères

Position Adoptée: Voir ci-dessous.

Raisons: Voir ci-dessous

Principales Questions: Un syndicat rembourse à même son fonds d'administration des cotisations syndicales à des particuliers qui sont des membres actuels ou qui étaient membres du syndicat au 31 décembre 2001.
1)La position suivante exprimée dans l'opinion 9530937 du 18 mars 1996 est-elle toujours valide? :
si le montant remboursé à un syndiqué au cours d'une année est supérieur à ses cotisations payées de l'année, l'excédent réduira le montant des cotisations syndicales autrement déductibles par ce syndiqué pour une année d'imposition ultérieure.
2) Les individus qui sont retraités ou qui ont quitté leur emploi et qui ont reçu un remboursement du syndicat en 2004, doivent-ils ajouter dans le calcul de leur revenu les sommes reçues à titre de remboursement de cotisations syndicales?
3) Le syndicat est-il tenu, en 2004, de produire un feuillet à chacun des individus qui a reçu un remboursement de cotisations syndicales?

Position Adoptée: 1) Non. 2) Oui 3) Oui.

Raisons: 1) et 2) Application des dispositions de l'alinéa 6(1)j) et de l'alinéa 8(1)i) de la Loi
3) Feuillet T4A.

Principal Issues: 1) Whether an entity, certified by the Minister of Human Resources, may issue a T2202A for amounts paid by an individual to acquire a passport allowing the individual to attend a package of seminars within a specified period? 2) In what taxation year should the entity issue the T2202A form if the seminars are taken in different taxation years? 3) In determining the amount to be entered on the T2202A where the seminars are taken in different taxation years, should the entity prorate the amount paid by the individual for the passport on the T2202A or reflect the cost of the course taken by the students?

Position: 1) Yes, provided that all conditions in subsection 118.5(1) are met. 2) The T2202A should reflect the amount paid by the student for the seminars attended in the taxation year. 3) The T2202A should reflect the amount determined by the entity in respect of the actual amount received by her in respect of the seminars taken in the period.

Reasons: 1) Individual entitled to a deduction for the tuition paid for the seminars taken. 2) The credit may only be taken in respect of seminars taken in the taxation year. 3) Both methods are correct but the amount put on the T2202A cannot exceed the amount received by the entity.

Principales Questions: Quelle sont les règles applicables lorsque le REÉR d'un particulier est saisi pour le paiement de ses dettes?

Position Adoptée: Il y a imposition des sommes lorsqu'elles sont reçues pour le paiement des dettes du particulier. L'émetteur du régime a l'obligation d'effectuer les retenues à la source lors du paiement.

Raisons: La Loi est claire à cet effet.

2004-009362
XXXXXXXXXX Michelle Desrosiers
Notaire, M.Fisc.
Le 9 décembre, 2004

Principal Issues: What are the tax consequences if a Canadian resident receives a deferred annuity contract (on the wind-up of a pension) in satisfaction of benefits accumulated in a U.K. pension in respect of services rendered before the annuitant became a resident of Canada?

Position: The value of the contract will be taxable at the time it is issued. The contract will also be subject to annual taxation under section 12.2 of the Act. There may also be a mismatch of the timing of U.K. tax and Canadian tax if any U.K. tax is exigible.

Reasons: The Canada- U.K. treaty does not provide any specific relief (so paragraph 110(1)(f) of the Act does not apply). The domestic provisions of the Act will apply to the receipt of the annuity contract and its continued holding.

Principales Questions: Eight individuals own all of the issued and outstanding shares of a corporation ("OPCO"). The eight individuals deal with each other at arm's length. OPCO is controlled by a group of three individuals. One of the members of the control group ("A"), owning 18.75% of the OPCO shares, would dispose of all of his or her OPCO shares in favour of another corporation ("HOLDCO") for fair market value consideration (other than shares of the capital stock of HOLDCO). All of the issued and outstanding shares of HOLDCO would be owned, at any relevant time, by the remaining seven individuals that own shares in the capital stock of OPCO. Whether section 84.1 would apply in the given fact situation. More specifically, whether A would be deemed not to deal at arm's length with HOLDCO pursuant to paragraph 84.1(2)(b) of the Act.

Position Adoptée: A would not be deemed not to deal at arm's length with HOLDCO pursuant to paragraph 84.1(2)(b) of the Act. However, paragraph 251(1)(c) of the Act provides that, at a particular time, it is a question of fact whether unrelated persons are dealing with each other at arm's length. Such determination can only be made following the review of all facts relating to a particular situation. With respect to the given fact situation, it is impossible to establish whether A and HOLDCO would deal with each other at arm's length. Consequently, it is impossible to confirm that section 84.1 would not apply in the given fact situation.

Raisons: Wording of the Act.

Principal Issues: Does the Income Tax Act impose a requirement that an employer directly transfer a portion of a remuneration payment to an RRSP if the employee so directs?

Position: No.

Reasons: The law only allows for relief from withholding if such a transfer does occur; it does not mandate such a transfer.

Principal Issues: 1. Whether an equalization of property payment pursuant to a court order on the marriage breakdown is deductible by the payer spouse.
2. Whether a reimbursement by the taxpayer of his former spouse's legal fees which were incurred to enforce the spouse's right to the taxpayer's pension on the dissolution of their marriage is deductible for the purposes of the Act?
3. Whether the interest paid on an obligation arising from a court order for an equalization of matrimonial property falling under the jurisdiction of the Family Law Act of Ontario is deductible under paragraph 20(1)(c)?

Position: 1. No.
2. No.
3. No.

Reasons: 1. Payments made to a former spouse in satisfaction of property rights arising from marriage are of a capital nature. As such, these payments cannot be considered to be "support" for purposes of the Act, which means that there is no deduction available to the payer spouse under the Act.
2. A taxpayer may deduct eligible legal expenses paid to collect or establish a right to a pension benefit. Eligible legal expenses under paragraph 60(o.1) do not include legal expenses relating to a division or settlement of property arising out of, or on a breakdown of, a marriage.
3. Interest is simply payable in respect of an amount owed to the former spouse and the amount is neither "borrowed money" for the purposes of subparagraph 20(1)(c)(i) nor an amount payable for property acquired for the purposes of subparagraph 20(1)(c)(ii).

XXXXXXXXXX 2004-007557
C. Lalonde
December 6, 2004

Principales Questions: 1. Est-ce que la contribuable doit inclure dans le calcul de son revenu aux fins de l'impôt le montant relatif aux intérêts reçus en 2004 ?
2. Est-ce que les frais d'avocats et d'experts constituent des dépenses déductibles dans le calcul de son revenu aux fins de l'impôt ?

Position Adoptée: 1. Oui .
2. Non.

Raisons: 1. Ce sont des revenus d'intérêts en vertu de l'alinéa 12(1)c) de la Loi.
2. Ce ne sont pas des dépenses déductibles puisqu'elles n'ont pas été engagées en vue de tirer un revenu d'une entreprise ou d'un bien (18(1)a)) et qu'elles constituent plus des dépenses en capital non déductibles (18(1)b)).

Principal Issues: The income tax consequences of registering title to property (principal residence) to include an (adult) child's name with joint tenancy.

Position: Question of fact. In adding another name to the property, there may or may not be a disposition, depending on whether or not there is a change in beneficial ownership. However, in a true joint tenancy arrangement, there has been a disposition of an interest in the property to the recipient at fair market value.

Reasons: Paragraph (e) of the definition of "disposition" in subsection 248(1) of the Act.
2004-010197
XXXXXXXXXX Karen Power, CA
(613) 957-8953
December 2, 2004

Principal Issues: Are rights identical?

Position: In this fact situation - No.

Reasons: The law.

Principal Issues: Computation of RDTOH where a dividend refund has not actually been received.

Position: RDTOH is reduced pursuant to paragraph 129(3)(d).

Reasons: The law.