Income Tax Severed Letters - 2012-01-20

Ruling

2011 Ruling 2011-0425041R3 - Withholdings on purse winnings of racehorse owners

Unedited CRA Tags
ITA 153(1)(g); Regulation 105(1)

Principal Issues: Are racehorse track operators required to withhold purse winnings paid to nonresident horse owners when the owners' horse places in a winning position?

Position: No.

Reasons: Ownership interest in a horse which wins a race is not a service provided to the track operator by a horse owner.

Technical Interpretation - External

13 January 2012 External T.I. 2010-0389831E5 - US Workers'

Unedited CRA Tags
110(1)(f)(i), 56(1)(d), 56(1)(v), 248(1), Article XVIII

Principal Issues: Whether amounts received from a United States Workers' Compensation Program are taxable in Canada.

Position: No

Reasons: The amounts received are exempt under paragraph 1 of Article XVIII - Pensions and Annuities of the Canada-U.S. Tax Convention.

12 January 2012 External T.I. 2011-0415991E5 - OETC Eligibility & evacuation from foreign country

Unedited CRA Tags
122.3

Principal Issues: Whether employees otherwise qualify for OETC pursuant to 122.3(1) when evacuated back to Canada during the qualifying period when they are teleworknig in connection with the foreign worksite from a location in Canada, or not working in Canada but "on call" to return to the foreign worksite at the request of the employer.

Position: Questions of fact.

Reasons: Eligibility for the OETC depends on whether all or substantially all of the duties of employment are performed by the employee outside of Canada.

12 January 2012 External T.I. 2011-0413761E5 - Interest

Unedited CRA Tags
20(1)(c); 20(3)

Principal Issues: Under the circumstances, is interest on borrowed money paid to an RRSP, for which the taxpayer is the beneficiary, deductible?

Position: Yes

Reasons: The borrowed money will be used by the taxpayer for the purpose of earning income from a business or property.

11 January 2012 External T.I. 2011-0429081E5 - Class 17

Unedited CRA Tags
Class 17 - Schedule II of the Income Tax Regulations

Principal Issues: Whether a property acquired after February 28, 2000 has to be "unused" in order to be included in Class 17 under paragraph (a.1)?

Position: No.

Reasons: The law. The March 16, 2001 draft version of paragraph (a.1) of Class 17 was amended in 2005

11 January 2012 External T.I. 2011-0410641E5 - Ordering of tax credits and charitable gifts

Unedited CRA Tags
118.1(1) & (3); 118.92

Principal Issues: 1. When claiming a tax credit pursuant to subsection 118.1(3), can an individual accumulate charitable gifts made over five consecutive taxation years and claim them together with charitable gifts made in the sixth consecutive year? 2. Can an individual reduce the amount of charitable donations tax credit claimed in any particular year in order to maximize a tax credit claimed under section 118.62 or 121?

Position: 1. Yes. 2. Yes.

Reasons: 1. The "total charitable gifts" of an individual for a taxation year generally include gifts made by the individual in that year, or in any of the five immediately preceding taxation years, to the extent that the gifts were not included in a subsection 118.1(3) claim for a prior taxation year. 2. The amount of the credit available under subsection 118.1(3) is based on an amount actually claimed by the taxpayer, which is not to exceed the amount determined by formula.

10 January 2012 External T.I. 2011-0431271E5 - Calculation of stub period income from JVs

Unedited CRA Tags
34.2, 34.3

Principal Issues: Whether the revised administrative policy allows for participant taxpayers of joint ventures to compute income for a stub period based on a formulaic method as similarly provided under legislation for members of partnerships.

Position: No.

Reasons: Consultations took into account the administrative feasibility and tax policy considerations. It was concluded that the CRA's administrative policy would not include a formulaic approach.

10 January 2012 External T.I. 2011-0409011E5 - Principal business test in 1100(12)(b) of the Regs

Unedited CRA Tags
1100(12)(b)

Principal Issues: Whether one should take into consideration the business of the partnership when determining whether all of the corporations that are partners in a partnership meet the principal business test set out in paragraph 1100(12)(a) of the Regulations for purposes of determining whether a partnership qualifies for the exemption under paragraph 1100(12)(b) of the Regulations.

Position: Yes.

Reasons: The courts have indicated that a partner is deemed to carry on the business of a partnership.

10 January 2012 External T.I. 2010-0389021E5 - Application of Paragraph 149(1)(l)

Unedited CRA Tags
149(1)(l)

Principal Issues: Does the Corporation qualify for the exemption from tax provided by paragraph 149(1)(l) of the Act?

Position: General comments only.

Reasons: This is a question of fact.

9 January 2012 External T.I. 2011-0427011E5 - METC- learning disability assessment

Unedited CRA Tags
118.2(2)(a); 118.4(2)

Principal Issues: Whether fees paid for a Learning Disability Assessment qualify as a medical expense for purposes of the medical expense tax credit (METC).

Position: Question of fact. The requirements of paragraph 118.2(2)(a) do not appear to be met; however, if the requirements of paragraph 118.2(2)(o) are met, the cost of the assessment may qualify if it is for diagnostic purposes.

Reasons: Psychometrists do not appear to be medical practitioners in the province of Ontario; therefore their services are not "medical services" under paragraph 118.2(2)(a). However, fees paid for a Learning Disability Assessment may qualify as medical expenses if the requirements of paragraph 118.2(2)(o) are met.

4 January 2012 External T.I. 2011-0414731E5 F - Interaction between 84.1 and 83(2) ITA

Unedited CRA Tags
83(2); 84.1(1)b); 84(7)
Summary Under
Tax Topics - Income Tax Act - Section 83 - Subsection 83(2)
no s. 83(2) election available for s. 84.1(1)(b) deemed dividend paid to non-shareholder
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(7)
s. 84(7) might contradict CRA position that no s. 83(2) election on s. 84.1 dividend to non-shareholder

Principales Questions: Whether the CRA would accept that a private corporation be allowed to make a 83(2) election with respect to the amount of a 84.1 deemed dividend paid to a person that is not a shareholder of the particular private corporation.

Position Adoptée: No.

Raisons: Previous positions.

17 November 2011 External T.I. 2011-0415831E5 - Definition of shareholder per subsection 15(1)

Unedited CRA Tags
15(1); 248(1)

Principal Issues: Whether member of a provincial society or non-share capital corporation is a shareholder for purposes of subsection 15(1).

Position: Yes

Reasons: Wording of the relevant provisions and application of prior positions.

2 November 2011 External T.I. 2011-0407681E5 - Taxation of dual resident

Unedited CRA Tags
222.6(1)

Principal Issues: (1) Whether a dual resident of Canada and XXXXXXXXXX must fill out a T1142 if she is a beneficiary of a foreign trust and received a distribution in the year. (2) Does a dual resident have to pay tax on foreign rental income if she earns less than XXXXXXXXXX in foreign rental income? (3) Is it relevant that the income is in respect of property that had formerly been used by the dual resident's mother, for her own personal use?

Position: (1) Yes. (2) Yes. (3) No.

Reasons: (1) A dual resident of Canada and XXXXXXXXXX is considered a resident of Canada and liable to tax on all of her worldwide income and must generally file form T1142 if she is a beneficiary of a trust and has received a distribution in the year. The only exceptions from the requirement to file form T1142 is if the trust is an excluded trust, or the distribution is from an estate. 2) As a resident of Canada the dual resident will be taxed on her worldwide income, including all foreign rental income. (3) The fact that the income came from property that was previously used by the dual resident's mother is not in itself relevant to the treatment of the income; however, if the income is an income distribution from an estate of a deceased individual that income will be exempt in the year of the distribution and before the estate is fully administered

Conference

10 May 2011 Roundtable, 2011-0398421C6 - CLHIA-May 2011- Q6 Life Insurance and Partnership

Unedited CRA Tags
53(1)(e)(iii), 53(2)(c)(v), 89(1) "capital dividend account" paragraph (d)

Principal Issues: Confirmation of the income tax effect of a particular arrangement which involves the use of life insurance proceeds within a partnership to fund the disposition of a partnership interest held by a corporate partner.

Position: In the absence of a review of all the facts and circumstances relating to the particular situation, it is not possible for us to provide our views in a definitive manner. General comments provided.

Reasons: Confirmation of the income tax effect of a particular arrangement would normally be undertaken only in the context of an advance income tax ruling request.

Technical Interpretation - Internal

13 January 2012 Internal T.I. 2011-0414111I7 F - Deemed Interest Incomes - Exception 17(8)

Unedited CRA Tags
17(8)a)(ii)
Summary Under
Tax Topics - Income Tax Act - Section 17 - Subsection 17(8) - Paragraph 17(8)(a) - Subparagraph 17(8)(a)(ii)
CFA 1's purchased debt of CFA 2 did not qualify as a loan or advance
Words and Phrases
loan advance

Principales Questions: Whether the acquisition of an existing debt fits into the notion of "making a loan or advance"?

Position Adoptée: No, according to jurisprudence

Raisons: The acquisition of a debt is inconsistent with the notion of "making a loan or advance." For a loan to exist there must be a lender/borrower relationship between parties. According to the definitions of "loan" that Courts have held in their decisions, -- mainly from "Words and Phrases"; Permanent Edition; Volume 25A; Page 79 -- there must be an express or implied agreement whereby one person advances or delivers money to another and the latter agreed to return at a future time a sum equivalent to that which he borrows.
The acquisition of a debt doesn't create a lender/borrower relationship but a creditor/debtor relationship as there is no money delivered by one party or any money solicited by the other party.

13 January 2012 Internal T.I. 2011-0428371I7 - Paragraph 110.6(14)(b)

Unedited CRA Tags
110.6(14)(b), 110.6(2.1), 251(5)(b)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(14) - Paragraph 110.6(14)(b)

Principal Issues: Whether certain share put/call rights contemplated in a unanimous shareholder agreement would be considered an integral part of the purchase and sale agreement such that the saving provision in paragraph 110.6(14)(b) of the Act will apply.

Position: No

Reasons: The put/call rights were not referred to in the purchase and sale agreement.

9 January 2012 Internal T.I. 2011-0424881I7 - Deemed Resident

Unedited CRA Tags
250(1)

Principal Issues: If a person who was deemed resident in Canada by former paragraph 250(1)(e) in a taxation year when they accepted employment as described in the post-amble to paragraph 250(1)(c), would that person continue to be deemed to be resident in Canada under paragraph 250(1)(c) in every taxation year after the repeal of paragraph 250(1)(e).

Position: Yes.

Reasons: The post-amble of paragraph 250(1)(c) does not distinguish between deemed and factual residents.

22 December 2011 Internal T.I. 2011-0410531I7 - ACB calculation of shares acquired prior to 1972

Unedited CRA Tags
ITAR 26(8)

Principal Issues: Whether the receipt of one share for every share held in the form of a stock dividend should be treated the same as a 2 for 1 stock split in determining the adjusted cost base of shares acquired prior to 1972

Position: No.

Reasons: Reasons outlined below.

14 December 2011 Internal T.I. 2011-0422561I7 - XXXXXXXXXX : Treaty exemption for non-resident employees

Unedited CRA Tags
110(1)(f)(iv) ITA, and Art 15(2)

Principal Issues: Whether a non-resident individual who is a Canadian citizen and works in Canada for less than 183 days is eligible for exemption from Canadian tax pursuant to paragraph 2 of Article 15 of the Canada-Switzerland Income Tax Convention ("Convention")?

Position: No. (The non-resident employee's income earned in Canada is not exempt from Canadian tax).

Reasons: The employer is XXXXXXXXXX which is a resident of Canada for the purposes of the Convention, thus the conditions for exemption in subparagraph (b) of Article 15(2) of the Convention are not satisfied. The Swiss branch of XXXXXXXXXX is not the employer, since it is not a separate legal entity.