Income Tax Severed Letters - 2005-06-10

Principal Issues: Tax treatment of foster care payments.

Position: Not taxable.

Reasons: Excluded by 81(1)(h)

Principal Issues: Do various expenses incurred qualify as medical expenses for purposes of the medical expense tax credit in section 118.2 of the Act?

Position: Some appear to qualify, some do not appear to qualify and others require more information, which determinations should be made by the taxpayer's Tax Services Office.

Reasons: General comments provided. Correspondence referred to the TSO.

2005-012666
XXXXXXXXXX Renée Shields
(613) 948-5273
June 7, 2005

Principal Issues: Canco leases an airplane from USco for use in the shareholder's business travel. 1. Whether the lease payments and operating expenses (such as fuel, maintenance, insurance and pilot's salary) are deductible. 2. Whether withholding tax applies to the lease payments.

Position: 1. Whether or not the expenses are deductible is a question of fact. 2. No, withholding tax does not apply to the lease payments.

Reasons: 1. Reasonable costs incurred in providing air travel are deductible to Canco to the extent that they are laid out to earn income from a business or property, therefore, operating costs related to the personal use of an aircraft by the shareholder are not deductible by Canco. 2. Payments made by Canco to arm's length USco for the lease of an aircraft for use in Canada are not subject to withholding tax pursuant to subparagraph 212(1)(d)(xi).

Principal Issues: Whether legal fees relating to inappropriate termination notice and negotiating a settlement are deductible under paragraph 8(1)(b) or paragraph 60(o.1).

Position: No

Reasons: Employment was always maintained and salary was fully paid by the employer. No legal expenses were incurred to "collect or establish a right to salary or wages owed" as required by paragraph 8(1)(b).
Retiring allowances are not salaries or wages, as defined under subsection 248(1), and therefore legal fees paid for the purpose of obtaining these payments cannot be deducted under paragraph 8(1)(b).
Legal Fees incurred to try to obtain a retiring allowance may in some instances be deducted under paragraph 60(o.1), however, only to the extent the retiring allowance has been included in taxable income. No such retiring allowance was received or reported in income.

Principal Issues: Whether the proposed employment of a doctor at a XXXXXXXXXX clinic in XXXXXXXXXX would qualify for an overseas employment tax credit.

Position: No. The doctor would not be employed by a specified employer as defined for an OETC.

Reasons: The terms of employment specify that the doctor would be an employee of the Ministry of Health and Social Welfare of the government of XXXXXXXXXX

Principales Questions: Quand survient le "jour anniversaire" d'un "contrat de placement" qui est une "créance visée par règlement" lorsque la date d'émission du contrat est le 1er janvier d'une année donnée ?

Position Adoptée: Le "jour anniversaire" est le 31 décembre.

Raisons: Conformément au paragraphe 12(11), le "jour anniversaire" est le jour qui est un an après la veille de la date d'établissement du contrat, soit le 31 décembre.

2005-012264
XXXXXXXXXX Guy Goulet, CA, M.Fisc.
(613) 957-9768
Le 31 mai 2005

Principal Issues: In a given fact situation, whether income from crushing nickel ore on surface would be included in the gross resource profits of a taxpayer for a particular taxation year under clause 1204(1)(b)(iii)(A) of the Regulations?

Position: Yes.

Reasons: In the given fact situation, the crushing activities would be part of the processing of ore.

2005-012129
XXXXXXXXXX Guy Goulet, CA, M.Fisc.
(613) 957-9768
Le 24 mai 2005

Principales Questions:
Quel est le traitement fiscal d'indemnités qui seront versées à un employé pour congédiement injustifié?
Quel est le traitement fiscal des intérêts pré-jugement et post-jugement?
Est-ce que le remboursement de prestations d'assurance-emploi doit réduire le montant imposable des indemnités versées à l'employé?

Position Adoptée:
Les indemnités versées en remplacement du salaire et autres avantages d'emploi sont du revenu d'emploi.
Les intérêts (incluant les intérêts pré-jugement et les intérêts post-jugement) sont imposables en tant que revenu d'intérêts en vertu de l'alinéa 12(1)c) s'ils sont des intérêts de par leur nature.
Non.

Raisons:
Réintégration rétroactive de l'employé dans son emploi.