Income Tax Severed Letters - 2011-02-04

Ruling

2010 Ruling 2009-0350711R3 - Debt restructuring and forgiveness

Unedited CRA Tags
80; 39(2); 40(2)(e.1); 53(1)(f.11)

Principal Issues: 1. Will paragraphs 40(2)(e.1) and 53(1)(f.11) apply to the disposition of a Loan issued by Opco to LP to a related Newco such that (i) the capital loss realized by the LP will be deemed to be nil, and (ii) the ACB to Newco of the Vanilla Loan 2 will be increased by an amount equal to the amount of the loss so denied? 2. Will subsection 39(2) apply where a debt is exchanged for a different debt or modifications are made to a debt?

Position: 1. and 2. Yes.

Reasons: 1. The transactions respect the law. 2. In the first case, the original debt is paid and in the second one, the modifications are important, consequently, a new debt results.

Ministerial Correspondence

20 January 2011 Ministerial Correspondence 2010-0391021M4 - Overseas Employment Tax Credit

Unedited CRA Tags
Subparagraph 122.3(1)(b)(i)

Principal Issues: The Overseas Employment Tax Credit provides an economic advantage to only those employers carrying on the qualifying activities described in subparagraph 122.3(1)(b)(i), and the list of qualifying activities therein should be expanded to include all other trades, professions, suppliers and service providers.

Position: Referred to Department of Finance

Reasons: Matter of tax policy

16 August 2010 Ministerial Correspondence 2010-0374481M4 - Lifelong Learning Plan

Unedited CRA Tags
ITA 146.02(1), 118.6(3)

Principal Issues: Why non-disabled part-time students cannot participate in the Lifelong Learning Plan.

Position: Definition of eligible amount requires that the designated person (the student) is enrolled as a full-time student in a qualifying educational program. The definition of full-time student in subsection 146.01(1) extends full-time student status to part-time students meeting certain disability conditions. Policy issue referred to Finance.

Reasons: Conditions of subsection 146.02(1) of the Act.

Technical Interpretation - External

27 January 2011 External T.I. 2010-0380081E5 - Trailing commissions

Unedited CRA Tags
6; 9(1); 14; 56.4

Principal Issues: What is the correct tax treatment of a payment for the transfer of the right to trailing commissions?

Position: The payment may be an eligible capital amount to the vendor and an eligible capital expenditure for the purchaser.

Reasons: Whether the transaction is on account of capital or income is a question of fact that must be determined in each case based on the particular circumstances of the vendor and the purchaser.

27 January 2011 External T.I. 2010-0385371E5 - Foreign retirement income

Unedited CRA Tags
56(1)(a)

Principal Issues: 1. Is the foreign retirement income subject to tax under subparagraph 56(1)(a)(i) of the Act?

Position: Question of Fact.

Reasons: The foreign retirement plan as described is akin to a mutual fund. Only payments received out of a superannuation or pension plan are subject to tax under subparagraph 56(1)(a)(i). A detailed review of the plan and plan contract would need to be undertaken before a definitive response could be given.

27 January 2011 External T.I. 2010-0384901E5 - Article V, Paragraph 6(a) Canada-US Tax Convention

Unedited CRA Tags
Paragraph 6(a), Article V, Canada-US Tax Convention
strict interpretation of exception for merchandise facility

Principal Issues: Is a third party storage facility, where inventory of a U.S. resident is stored, and from where Canadian orders are shipped, deemed not to be a permanent establishment pursuant to the paragraph 6(a) of Article V of the Canada - US Tax Convention

Position: Yes

Reasons: Such a facility is deemed by paragraph 6(a) of Article V of the Canada - US Tax Convention not to constitute a permanent establishment if it is used solely for the purpose of storage, display, or delivery of goods belonging to the U.S. resident.

26 January 2011 External T.I. 2010-0389151E5 - HomeShare program and GIS

Unedited CRA Tags
ITA 81(1)(h); Old Age Security Act section 2 and 12

Principal Issues: Is a payment received by a caregiver from the British Columbia HomeShare program included in income for purposes of the calculation of the Guaranteed Income Supplement?

Position: No.

Reasons: Payments made under the HomeShare program that meet the requirements of paragraph 81(1)(h) under the Act are exempt from tax. Income under the Act is used to determine a person's entitlement to the Guaranteed Income Supplement.

26 January 2011 External T.I. 2010-0388581E5 - Gifts received during employment

Unedited CRA Tags
5(1); 6(1)

Principal Issues: 1. Are gifts received from a customer subject to income tax? 2. Where the gift is donated to an employer's social committee and then awarded to another employee, is the original recipient of the gift subject to income tax on the gift? 3. Where the gift is donated to an employer's social committee and then awarded to another employee, is the person receiving the gift from the social committee subject to tax on the gift?

Position: 1. Yes 2. Yes 3. No, as long as the social committee is not funded by the employer.

Reasons: 1. Other remuneration received by virtue of employment is included in income in accordance with section 5 or 6 of the Act. 2.& 3. Gifts received by virtue of employment are included in income in accordance with section 5 or 6 of the Act even if the gifts are donated to the social committee. In accordance with CRA's administrative policy, gifts received by an employee from an employer's social committee are not a taxable benefit as long as all employees have a chance to "win" the gift and the employer does not fund the social committee for purposes of the activity awarding the gift.

25 January 2011 External T.I. 2010-0382541E5 - Taxable Benefits - Rent Free Housing

Unedited CRA Tags
6(1)(a), 6(6)

Principal Issues: Is there a taxable employment benefit to an employee when an offsetting service is provided to the employer?

Position: Question of Fact. Likely Yes

Reasons: The determination of who is the primary beneficiary is ultimately a question of fact that must be determined on a case-by-case basis. In the situation described it appears that the Employee is the primary beneficiary and in receipt of a taxable employment benefit determined as the fair market value of the free accommodation.

20 January 2011 External T.I. 2010-0382431E5 - Shareholder Loans

Unedited CRA Tags
15(2), 15(2.6), 20(1)(j), 80.4(2), 248

Principal Issues: Whether personal loans from a company repaid with dividends each fiscal year by a shareholder, would meet the exemption under 15(2.6).

Position: Maybe

Reasons: It is a question of fact if the loans meet the criteria for repayments within one year, and are structured under bona fide terms.

20 January 2011 External T.I. 2010-0386661E5 - Reporting US income for a Canadian holding company

Unedited CRA Tags
95(1), 233.4, 91(1), 91(4)

Principal Issues: 1. How should a Canadian holding company report its US subsidiary's income in its T2 return even though no dividend has been paid? 2. Whether US tax paid by a US subsidiary could be deducted from Canadian tax payable if a Canadian holding company reports its US subsidiary's income in its T2 return?

Position: 1. Where a non-resident corporation is a "controlled foreign affiliate" ("CFA") of a taxpayer, the taxpayer must include its share of the "foreign accrual property income" ("FAPI") of the CFA for Canadian tax purposes. 2. A deduction may be available where the taxpayer has included a FAPI amount under subsection 91(1) of the Act in computing income in respect of a share of the capital stock of a CFA of the taxpayer.

Reasons: 1. Subsection 91(1) of the Act 2. Subsection 91(4)

19 January 2011 External T.I. 2010-0390831E5 - Compute LRIP - corporation becomes non-CCPC

Unedited CRA Tags
89(8) LIR

Principal Issues: Whether a future income tax asset should be included in variable A of the formula in subsection 89(8). Whether a future income tax liability should be included in variable D of the formula in subsection 89(8).

Position: No to both questions.

Reasons: Wording of the Act.

14 January 2011 External T.I. 2004-0098601E5 - Foreign currency borrowings and ss 214(7) and (8).

Unedited CRA Tags
214(7); 214(8); 261(2)

Principal Issues: Would foreign exchange fluctuations affecting the Canadian dollar value of a non-convertible, non-exchangeable, foreign currency denominated obligation, originally issued without a discount, result in the obligation not being an "excluded obligation" described in paragraph 214(8)(c) of the Act?

Position: No.

Reasons: In our view, pursuant to subsection 261(2) of the Act, the discount and yield tests for a non-convertible, non-exchangeable, foreign currency obligation as set out in paragraph 214(8)(c) of the Act are to be carried out by converting each of "the amount for which the obligation was issued" and the "principal amount" into Canadian currency using the relevant spot rate for the day of issue.

14 January 2011 External T.I. 2010-0381591E5 - Self Employed Artist Expenses

Unedited CRA Tags
3, 9(1), 10, 18(1)(a), 18(12), 67, 111, 150

Principal Issues: Can an artist claim previously unreported expenses against future income?

Position: Question of Fact

Reasons: The determination of whether a taxpayer has a business activity throughout a period without earning income in any year is an objective determination to be made from all the facts.
Where it is determined that the taxpayer's activity is a business, amendments may be made to the ten (10) prior Income Tax and Benefits Returns to include any otherwise deductable unclaimed reasonable business expenses.
Generally speaking, where reasonable business expenses are greater than income, a non-capital business loss may be created. Interpretation Bulletin IT-232, "Losses - Their Deductibility in the Loss Year or in Other Years" provides general guidance for applying the non-capital losses created in one taxation year to net business income in prior and subsequent taxation years.

11 January 2011 External T.I. 2010-0385231E5 F - Class 43.2

Unedited CRA Tags
66.1(6), 1104(13), 1219(1)
digester producing gas from municipal sludge for thermal production could qualify
biomass boiler using wood chips from poplars grown by taxpayer did not qualify

Principales Questions: In hypothetical situation 1, whether a digester used to produce biogas from sludge from a municipal sewage facility could qualify as class 43.2 property, pursuant to any of subparagraphs (d)(viii), (ix) and (xiii) of class 43.1? In hypothetical situation 2, whether a wood boiler generating heat energy from the consumption of chopped wood, grown solely for that purpose (sometime referred to as "energy crop"), could qualify as class 43.2 property pursuant to subparagraph (d)(ix) of class 43.1 or on the basis of CRA's technical interpretation 2008-0276761E5?

Position Adoptée: Situation 1. May qualify. Situation 2. Would not qualify.

Raisons: Situation 1. Pursuant to subparagraph (d)(xiii) of class 43.1, if specified conditions are met. Situation 2. The technical interpretation is not applicable in this situation and such energy crop does not appear to meet NRCan's definition of wood waste.

11 January 2011 External T.I. 2010-0388681E5 - Expropriation

Unedited CRA Tags
44

Principal Issues: Whether a letter received is sufficient to confirm that a purchase of a property will be an involuntary disposition for the purposes of section 44 of the ITA.

Position: We cannot provide a binding opinion except in the form of a ruling.

Reasons: The taxpayer should contact local TSO for a review of all relevant facts and documentation.

10 January 2011 External T.I. 2010-0368381E5 - Equivalent-to-Spouse Credit -shared custody

Unedited CRA Tags
118(1)(b), 118(1)(b.1), 118(4), 118(5), 118(5.1)

Principal Issues: 1. Can each parent claim a child under line 305 as an equivalent-to-spouse? [i.e. Mother claims child X; Father claims child Y.]
2. If so, does this child claimed as equivalent-to-spouse have to be the same child as claimed under Child Tax Credit?
3. What documentation would be needed for the above scenario exists?

Position: 1. Generally, yes
2. Yes
3. Keep any agreements for future queries

Reasons: Legislation and previous positions

10 January 2011 External T.I. 2010-0365421E5 - Maternity & Parental Leave for Self Employed

Unedited CRA Tags
96(1); 103(1.1); paragraph 2 Partnership Act [RSBC 1996]

Principal Issues: How does a general partner show no self-employed income from a [50/50] general partnership during the benefit period under the [new] initiative "Employment Insurance Benefits for Self-Employed People (EIBforSEP)"?

Position: Any such agreed allocation of partnership income is generally acceptable, subject, of course, to the anti-avoidance provisions in section 103.

Reasons: Previous files

10 January 2011 External T.I. 2010-0364021E5 - Home Buyers' Plan

Unedited CRA Tags
146.01; 1(g) and (h) [Alberta] Partnership Act R.S.A. 2000

Principal Issues: For the Home Buyers' Plan (HBP), is an individual eligible if the taxpayer resides in a home that the taxpayer rents from his or her partnership?

Position: No

Reasons: The taxpayers, being the partners of the partnership, own a percentage interest in the manager's quarters [the quarters being partnership property]. Therefore, the taxpayers will be considered to have an owner-occupied home.

6 January 2011 External T.I. 2009-0328781E5 - Tracking Property

Unedited CRA Tags
142.2

Principal Issues: Various issues on the application of the tracking property rules.

Position: See below.

Reasons: See below.

6 January 2011 External T.I. 2010-0377851E5 - adoption expense credit

Unedited CRA Tags
118.01

Principal Issues: Are moving expenses included under paragraph (g) of the definition of "eligible adoption expenses" in subsection 118.01(1) of the Act for the adoption expense tax credit?

Position: No.

Reasons: Moving expenses would not be considered a reasonable expense related to the adoption.

5 January 2011 External T.I. 2008-0305252E5 - Taxation of Post-Doctoral Fellowships

Unedited CRA Tags
56(1)(n); 56(1)(o);56(3);118.6

Principal Issues: 1. Whether a post-doctoral fellowship is exempt from tax.

Position: 1. Generally, no.

Reasons: 1. In our view, post-doctoral fellows receive either employment income or research grants.

23 December 2010 External T.I. 2010-0383801E5 - Deadline to file a subsection 185.1(2) election.

Unedited CRA Tags
165(1), 185.1, 185.2, 220(3.2), Reg. 600

Principal Issues: Can a subsection 185.1(2) election be filed late when an appeal of the notice of assessment in respect of the Part III.1 tax is unsuccessful.

Position: No.

Reasons: The subsection 185.1(2) election is not prescribed in Regulation 600 for the purposes of subsection 220(3.2).

15 December 2010 External T.I. 2010-0358461E5 - Spousal Trusts

Unedited CRA Tags
70(5), 70(6), 104(2) and 248(8)

Principal Issues: 1. Would the application of subsection 104(2) of the Act to the two trusts preclude the application of subsection 70(6) to the properties transferred on a tax deferred basis to the trusts? 2. If subsection 104(2) is applied to the trusts as noted above, would only one T3 return need to be filed? 3. If a valid declaration affecting a life insurance policy on the life of the taxpayer provides that the proceeds thereof are payable to the named persons, who are the trustees of the two trusts referred to above, and directs that the insurance proceeds are to be held by the trustees, and invested and distributed in accordance with the provisions in the wills and that such proceeds are to be added to the capital of one or both, of such trusts, would the addition of the insurance proceeds into one or both of the trust funds in and of itself preclude the application of subsection 70(6) of the Act in respect of other properties transferred to the trusts?

Position: 1. It depends on the facts; 2. A T3 return must be filed for each trust; and 3. It depends on the facts in each case.

Reasons: 1. legislation; 2. legislation and administration of ITA; and 3. legislation.

15 December 2010 External T.I. 2010-0371391E5 - Distribution to NR Beneficiary by a NR Trust

Unedited CRA Tags
107(5), 107(2.1), 116(6), 116(6.1), 116(5.02)

Principal Issues:
1) Would 107(2.1) apply to the distribution?
2) What would be the ACB of the property to the NR beneficiaries
3) Would 116 apply to require the trust to obtain a Certificate of Compliance with regards to the distribution

Position:
1) Yes
2) FMV
3) Depends

Reasons:
1) Pursuant to proposed amendments to 107(5) released by DFIN on July 16/2010 and effective distribution after Feb 27/2004
2) FMV pursuant to 107(2.1)
3) New definition of taxable Canadian property in 248(1) included in Bill C-9 that received Royal Assent Mar 4/2010

15 December 2010 External T.I. 2009-0349911E5 F - Calcul du PBR d'une participation dans une SEC

Unedited CRA Tags
53(1)e), 53(1)e)(vi), 53(2)c)(v), 40(3.1), 40(3.11), 248(28)
no ACB bump for gains realized in the year until Day 1 of following year
withdrawal equalling capital gain realized in year by LP triggered negative ACB gain to limited partner

Principales Questions: Comment se calcule le PBR d'une participation pour un commanditaire dans une société en commandite?

Position Adoptée: En vertu de l'alinéa 53(1)e), lors du calcul du PBR de la participation d'un associé dans une SEC, seul le revenu ou la perte de la société de personnes pour les exercices déjà terminés sera pris en compte. Par ailleurs, en vertu du sous-alinéa 53(2)c)(v), il faut déduire dans le calcul du PBR, toutes sommes reçues à un moment donné, au titre de l'attribution de sa part des bénéfices ou du capital de la société de personnes.

Raisons: Application de la Loi. Les dispositions 53(1)(e) et 53(2)(c)(v) et du paragraphe 40(3.1) de la Loi sont claires et sans ambiguïtés. Confome aux Nouvelles techniques no 5.

13 December 2010 External T.I. 2010-0352911E5 - Beneficiary's Liability for Tax from RRSP Proceeds

Unedited CRA Tags
s. 146(8.8), 160.2(1)

Principal Issues: Whether a beneficiary is liable for tax arising from the proceeds from an RRSP belonging to a deceased annuitant.

Position: Yes.

Reasons: Subsection 146(8.8) provides that funds from the RRSP are deemed to be a benefit to the annuitant immediately before his death. Accordingly, the estate is liable to pay the tax. Subsection 160.2(1) provides that the beneficiary is jointly and severally with the estate to pay the portion of the annuitant's tax that is attributable to the benefit.

15 October 2010 External T.I. 2010-0364291E5 - 60(j.1)(ii) Predecessor Employer

Unedited CRA Tags
60(j.1)

Principal Issues: Whether the years of service with a predecessor school board that had amalgamated to form the current new school board may be included in calculating the amount under 60(j.1)(ii)?

Position: Yes

Reasons: The service will likely fit under 60(j.1)(iv). Rulings has previously opined that there was generally no loss of employment on school board amalgamations.

7 October 2010 External T.I. 2010-0369031E5 - TFSA - Mortgage Investment Corporation

Unedited CRA Tags
4900(1)(c), 207.01(1),207.01(4), 207.04, 207.05, 248(1)

Principal Issues: 1. Whether the shares of a Mortgage Investment Corporation ("MIC") are a prohibited investment for a trust governed by a Tax Free Savings Account ("TFSA"), where the holder of the TFSA owns directly or indirectly 10% or more of the shares of a MIC.

Position: Yes

Reasons: Pursuant to 207.01(1) of the Income Tax Act, where a TFSA holds investments in entities with which the holder of a TFSA does not deal at arm's length, including entities with which the TFSA holder has a significant interest, the investment will be a prohibited investment.

6 October 2010 External T.I. 2010-0357521E5 - Request to deduct RRIF losses from taxable income.

Unedited CRA Tags
ITA 146.3

Principal Issues: Taxpayer incurred losses inside his RRIF and is requesting a special ruling allowing him to deduct these losses from his taxable income.

Position: No.

Reasons: There is no provision in the Income Tax Act which allows a taxpayer to deduct losses incurred in a RRIF against taxable income.

20 September 2010 External T.I. 2010-0367191E5 - Qualified Investment - RESP

Unedited CRA Tags
204

Principal Issues: 1.Whether shares listed on a designated stock exchange are a qualified investment for an RESP? 2. Whether bonds and other debt obligations of a corporation whose shares are listed on a designated stock exchange are a qualified investment for a RESP?

Reasons: Based on the wording of the Act in section 204, definition of "qualified investment".

2 September 2010 External T.I. 2010-0371701E5 - HBP - Contribution Deduction, and Attribution

Unedited CRA Tags
146(5)(a)(iv.1), 146(8), 146(8.3), 146.01(1)

Principal Issues: Are contributions made to an RRSP in the 89-day period immediately before an HBP withdrawal from that RRSP fully deductible if the taxpayer had at least $25,000 in that RRSP before the 89-day period? Does the spousal attribution rule in subsection 146(8.3) apply to an amount withdrawn under the HBP?

Position: Yes. No.

Reasons: Subparagraph 146(5)(a)(iv.1) only restricts the deduction if the amount remaining in an RRSP after the HBP withdrawal from that RRSP is less than the contributions made in the 89-day period immediately before the HBP withdrawal. Subsection 146(8.3) can only apply if an amount is required to be included in income under subsection 146(8) or paragraph 146(12)(b). Since eligible HBP withdrawals do not have to be included in income, attribution does not apply to these withdrawals.

14 June 2010 External T.I. 2010-0356641E5 - Home Buyers' Plan (HBP)

Unedited CRA Tags
54, 146.01(1), 248(1)

Principal Issues: Whether adding a guarantor to help secure financing of a qualifying home would disqualify eligibility for the HBP.

Position: Provided general comments. No, adding a guarantor would not disqualify eligibility for the HBP provided all conditions required for the HBP are met.

Reasons: Adding a guarantor is not one of the conditions required for qualification under the HBP.

Conference

8 October 2010 Roundtable, 2010-0373271C6 F - Sec. 86 - Reorganization of the Capital of a Corp.

Unedited CRA Tags
86(1)

Principales Questions: One of the requirements of subsection 86(1) is that the disposition of the shares must be "in the course of a reorganization of the capital of a corporation." For this requirement to be met, whether there must absolutely be amendments to the articles of the corporation?

Position Adoptée: The general position of the CRA is that, in the context of subsection 86(1), a reorganization of the capital of a corporation should normally require amendments to the articles of a corporation.

Raisons: Wording of the Act and previous positions.

8 October 2010 APFF Roundtable, 2010-0373181C6 F - Non-arm's length relationship

Unedited CRA Tags
251(1)

Principales Questions: Whether a non-profit organization and a registered charities deal at arm's length with each other where persons are members of the board of directors of both corporations?

Position Adoptée: No position was taken.

Raisons: Except where paragraph 251(1)(a) or (b) applies, determining whether two entities deal at arm's length with each other at a particular time is a question of fact.

Technical Interpretation - Internal

25 January 2011 Internal T.I. 2011-0392901I7 - Reassessments - discretionary adjustments

Unedited CRA Tags
CTA 80(11); 80(25)

Principal Issues: Can subsection 80(11) of the Ontario Corporations Tax Act ("CTA") be used to process a taxpayer request for reassessment?

Position: Depends

Reasons: The Ontario Minister is not required to reassess a taxation year under subsection 80(11). Based on the Ministry of Revenue's long standing practice as noted in Ontario Interpretation Bulletin 3009, the Minister will not process any taxpayer requested adjustments when a year is statute-barred. For years that are not statute-barred, the Minister will only process an adjustment to a discretionary deduction if there is no change to income tax payable for the year and no increase to capital tax payable. The Minister is not required to reassess a taxation year if another Canadian taxing authority has done so.

19 January 2011 Internal T.I. 2010-0387441I7 - Reassessment Period for Loss Carry Backs

Unedited CRA Tags
S.111; S.152(3.1)(a), (4)(b)(i), (6)(c)

Principal Issues: What is the reassessment period for applying loss carry backs in respect of a public corporation?

Position: Seven years

Reasons: The combined effect of subparagraph 152(4)(b)(i) and paragraph 152(6)(c).

19 January 2011 Internal T.I. 2010-0387201I7 - Reassessment Period for Loss Carry Backs

Unedited CRA Tags
S.111; S.125(7); S.152(3.1)(a), (4)(b)(i), (6)(c)

Principal Issues: What is the reassessment period for a public corporation with respect to the loss carry backs.

Position: Seven years.

Reasons: The combined effect of subparagraph 152(4)(b)(i) and paragraph 152(6)(c).

19 January 2011 Internal T.I. 2010-0358751I7 - Property Disposed on Business Discontinuance

Unedited CRA Tags
s. 15(1), 84(2), 152(3.1) & (4), 159(3) & (3.1), 160, 160.4(1) ITA; s. 171(3) ETA.

Principal Issues: Whether s. 160.4(1) ITA has a similar application to s. 171(3) ETA.

Position: No; but where s. 160 does not apply directly against a shareholder, s. 15(1) or 84(2), combined with s. 160, could be a viable alternative.

Reasons: S. 160.4(1) of the ITA applies where an insolvent corporation has restructured, while s. 171(3) of the ETA applies where a registrant has ceased commercial activity. Appropriation of property under the ITA is dealt with under s. 15(1) and 84(2).

January 19, 2011

17 January 2011 Internal T.I. 2010-0383701I7 - Information return for the purpose of Reg. 229(1).

Unedited CRA Tags
ITA subsections 162(7), (7.01), (7.1), and (8), 248(1)(a) "prescribed", and 244(16); subsections 229(1) and (2) of the Regulations.

Principal Issues: Whether the T5013 Summary and all the related T5013 information slips are prescribed information returns for purposes of subsection 229(1).

Position: Yes.

Reasons: The information is required by paras. (a) to (f) of subsection 229(1).

14 January 2011 Internal T.I. 2010-0383261I7 F - Fin d'exercice d'une société de personnes

Unedited CRA Tags
249.1(1)b)(ii), 249.1(3), 249.1(4), 249.1(7), 96(1), 104(2), 248(1).
CRA could under s. 249.1(7) authorize changed partnership year ends that did not extend beyond calendar year limitation in 249.1(1)(b)(ii)

Principales Questions: 1. Est-ce qu'une société de personnes, qui génère du revenu de biens et qui a toujours eu antérieurement une fin d'exercice au 31 décembre, pourrait avoir une fin d'exercice se terminant à une date autre que le 31 décembre au cours de l'année 1? 2. Cette même société de personnes pourrait-elle avoir par la suite une fin d'exercice le 30 juin, à compter de l'année suivante ?

Position Adoptée: 1. Non. Si les activités de XXXXXXXXXX génèrent du revenu de biens, la société de personnes devrait avoir une fin d'exercice au 31 décembre de l'année 1, et même si le ministre acceptait dans la situation donnée une fin d'exercice antérieure au 31 décembre, la société de personnes aura toujours comme résultat d'avoir une seconde fin d'exercice au 31 décembre. 2. Pour les mêmes raisons qu'au point 1, la société de personnes devrait avoir une fin d'exercice le 31 décembre au cours de l'année 2, si les associés demeurent les mêmes.

Raisons: 1. Application du sous-alinéa 249.1(1)b)ii) et sa préséance sur 249.1(7). 2. Mêmes motifs qu'au point 1.

10 January 2011 Internal T.I. 2010-0359091I7 - Fellowships-T4As

Unedited CRA Tags
56(1)(n)(i); 56(1)(o); 56(3); 118.5

Principal Issues: Is the award classified as a research grant or a scholarship/fellowship for the issuance of T4As?

Position: Depends

Reasons: The treatment depends upon the primary purpose for which the fellowship was granted as determined by reference to the terms and conditions attached to the award.

7 January 2011 Internal T.I. 2010-0384911I7 - Education & Textbook Tax Credits

Unedited CRA Tags
118.6(1), 118.6(2.1)

Principal Issues: If an individual received reimbursement from their employer for one of four courses taken at a designated educational institution, can the "program" consist of the remaining three courses that will allow the individual to claim the education and textbook tax credits.

Position: No, the program consists of all the courses and work at a designated educational institution during the year. Since the individual received reimbursement for one of the courses, they cannot claim the education and textbook tax credits on the remaining courses in which no reimbursement was received.

Reasons: The definition in subsection 118.6(1) of a "qualifying education program"

7 January 2011 Internal T.I. 2010-0382411I7 F - Rénovation - dépenses courantes ou en capital

Unedited CRA Tags
9(1); 18(1)(b)

Principal Issues: L'immeuble des contribuables a subi des dommages à cause de la moisissure et les contribuables ont fait des rénovations importantes dont la valeur relative du travail par rapport à la valeur du bien total est significative. La question est de savoir si la répartition des dépenses par les contribuables (entre les dépenses courantes et celles de nature capitale) est raisonnable.

Position: Question de fait.

Reasons: Même si l'ARC a établi des lignes directrices sur ce sujet dans un bulletin d'interprétation, c'est une appréciation saine de toutes les caractéristiques qui doit fournir la réponse correcte. Néanmoins, la méthode adoptée par les contribuables n'est ni soutenue par le bulletin d'interprétation ni soutenue par la jurisprudence.

5 January 2011 Internal T.I. 2010-0386951I7 F - Résident temporaire - PFCE

Unedited CRA Tags
122.6; 122.61(1).
tax residency is referred to in (a) but not in (e)(ii)

Principales Questions: Est-ce que la condition énoncée au sous-alinéa 122.6e)ii) de la Loi de l'impôt sur le revenu, à la définition de particulier admissible, en ce qui a trait à l'exigence d'avoir "résidé au Canada durant la période de 18 mois précédent le moment" réfère au concept de résidence aux fins fiscales?

Position Adoptée: Non.

Raisons: L'expression "ayant résidé au Canada durant la période 18 mois précédant ce moment" qu'on retrouve au sous-alinéa 122.6 e)(ii) de la Loi à la définition de "particulier admissible" signifie que le particulier doit habiter physiquement le Canada pendant les 18 derniers mois. La notion de résidence au Canada aux fins de la Loi de l'impôt sur le revenu est prévue à l'alinéa 122.6c) de la définition de "particulier admissible".

5 January 2011 Internal T.I. 2009-0350871I7 - Disposition of farm property

Unedited CRA Tags
70(5), 70(6), 70(6.2), 73(1), 74.2, 248

Principal Issues: Income tax consequences of transferring ownership of farm property from sole ownership by the taxpayer to joint tenancy with his spouse.

Position: General comments provided.

Reasons: Question of fact whether there is a disposition of property [par. 248(1)] which depends on whether there is a change in beneficial ownership of the property. However, there is generally a presumption that the holder of legal title of a property is also the beneficial owner of the property, unless the facts support otherwise.

16 December 2010 Internal T.I. 2010-0380461I7 F - Cotisations versées à régime d'assurance-salaire

Unedited CRA Tags
6(1)f); Paragraphe 200(1) et alinéa 200(2)f) du Règlement
any net benefit under wage replacement plan to be reported by employer on T4 unless it has no control

Principales Questions: 1. Est-ce qu'un employé peut déduire les cotisations non utilisées qu'il a versées à un régime d'assurance-salaire, dans les cas suivants:
a) l'employeur verse directement à l'employé les prestations en vertu d'un régime qu'il finance en partie;
b) l'employé reçoit les prestations d'un fiduciaire en vertu du régime qui est financé en partie par l'employeur et où ce dernier contrôle certaines modalités et détermine l'admissibilité aux prestations ?
2. Dans les deux cas précédemment mentionnés, comment indiquer dans la déclaration de revenus le montant de prestations d'assurance-salaire reçues par un contribuable dans le cadre d'un tel régime, ainsi que le montant de la déduction quant aux cotisations versées par ce dernier?

Position Adoptée: 1. Oui, dans les deux cas.
2. Dans les deux cas, le montant brut des prestations d'assurance-salaire reçues par un contribuable dans le cadre d'un tel régime doit être indiqué à la ligne 101 de la déclaration de revenus et la déduction des cotisations non utilisées versées par le contribuable à la ligne 232 de sa déclaration de revenus.

Raisons: 1. Application des sous-alinéas 6(1)f)(iv) et (v).
2. Nous avons discuté informellement avec Dian Hardiman, de la section des politiques et recherches législatives, qui a confirmé que les prestations d'assurance-salaire versées par un employeur à son employé doivent être indiquées sur un feuillet de renseignement T4 et que les lignes 101 et 232 de la déclaration de revenus de l'employé doivent être utilisées.

9 December 2010 Internal T.I. 2010-0379801I7 - Additions to taxable income to utilize FTCs

Unedited CRA Tags
s.110.5, 126, 152(3.1), (4), (6)

Principal Issues: Whether a reassessment to allow an addition to taxable income under s.110.5 to permit the company to deduct unutilized foreign tax credits is statute barred

Position: The s.110.5 adjustment needs to be made in the year the return is filed. The CRA is not required to make the adjustment.

Reasons: The wording of subsections 152(4) and 152(6).

25 January 2010 Internal T.I. 2009-0319951I7 - Article 15 & definition of permanent establishment

Unedited CRA Tags
Article 15 of Canada's Income Tax Convention
PE to be determined under treaty of residence of employee rather than employer

Principal Issues: When interpreting paragraph 2(c) of Article 15 of Canada's income tax conventions, is the term "permanent establishment" to be determined under the treaty between Canada and the employer's country of residence, or between Canada and the employee's country of residence?

Position: The employee's country of residence.

Reasons: While there are strong arguments in favour of both sides, the better view is to refer to the treaty between Canada and the employee's country of residence to determine if the employer has a permanent establishment in Canada for purposes of Article 15.