Income Tax Severed Letters - 2012-02-10

Technical Interpretation - External

3 February 2012 External T.I. 2011-0415771E5 - Taxable capital farm mutual insurance corporation

Unedited CRA Tags
181.3, 181(3), 142.5

Principal Issues: The determination of taxable capital of a farm mutual insurance corporation. In particular, the taxpayer requested clarification of 1) the investment allowance of an insurance corporation; 2) the impact on the determination of taxable capital of reserves in respect of unpaid claims, and unearned premiums; and 3) the impact on taxable capital of the mark-to-market adjustments under section 142.5 of the Act.

Position: General comments provided

2 February 2012 External T.I. 2011-0423231E5 - METC - Yoga Fees & Travel expenses

Unedited CRA Tags
118.2(2)(g), (h)

Principal Issues: 1- Whether yoga fees qualify as eligible medical expenses for the purposes of the medical expense tax credit ("METC") if recommended by a doctor. 2- Whether an individual can claim the travel expenses of more than one accompanying individual as eligible medical expenses for the purposes of the METC.

Position: 1- No 2- No

Reasons: 1- There is no provision in the Act that allows yoga fees to be claimed as eligible medical expenses even if recommended by a doctor. 2- Wording of paragraphs 118.2(2)(g) and (h) of the Act state "one individual who accompanied the patient".

2 February 2012 External T.I. 2011-0431291E5 - Medical expenses - Learning disability

Unedited CRA Tags
118.2(2)(l.42); 118.2(2)(m); 5700(l.1)

Principal Issues: Whether the cost of a laptop computer, computer software and a digital voice recorder, all used to assist with learning disability (reading and writing), would qualify as eligible medical expenses for the purposes of the medical expense tax credit.

2 February 2012 External T.I. 2011-0416871E5 - Paragraph 249(4)(c) election

Unedited CRA Tags
249(4)(c); 249(1). 249.1(1)

Principal Issues: Whether an election under paragraph 249(4)(c) to extend a taxation year as a result of an acquisition of control at the end of the first taxation year of a newly amalgamated entity can result in a taxation year in excess of 53 weeks.

Position: Yes, provided that the amalgamated entity can establish when its first taxation year would have ended.

31 January 2012 External T.I. 2011-0429431E5 - METC - Cosmetic surgery

Unedited CRA Tags
118.2(2)(a); 118.2(2.1); 118.4(2)

Principal Issues: Whether an amount paid by the taxpayer for cosmetic surgery qualifies as a medical expense for purposes of calculating the medical expense tax credit.

Position: Question of fact.

Reasons: An amount paid for a medical or dental service must not be excluded pursuant to subsection 118.2(2.1) of the Income Tax Act. It is a question of fact whether or not a medical or dental service is provided purely for cosmetic purposes and whether or not it is necessary for medical or reconstructive purposes.

27 January 2012 External T.I. 2011-0421551E5 F - Pompiers volontaires

Unedited CRA Tags
118.06; 81(4)
Summary Under
Tax Topics - Income Tax Act - Section 3
modest amounts received by volunteers are not taxable
Words and Phrases
volunteer
Summary Under
Tax Topics - Income Tax Act - Section 118.06 - Subsection 118.06(1)
“volunteer” firefighters are not true volunteers

Principales Questions: Dans la situation décrite, les pompiers auraient-ils le droit de réclamer le crédit d’impôt pour les pompiers volontaires? Si oui, pourraient-ils choisir soit de réclamer ce crédit d’impôt soit de réclamer l’exemption prévue au paragraphe 81(4)?

Position Adoptée: Question de fait. Normalement, l’Employeur est l’entité la mieux placée pour décider si des pompiers fournissent des services à titre de pompiers volontaires.

Raisons: Loi de l’impôt sur le revenu.

26 January 2012 External T.I. 2011-0427561E5 - Geothermal Energy Project

Unedited CRA Tags
Class 43.1 and 43.2; ITR 1219(1)

Principal Issues: Various questions concerning geothermal well drilling and completion costs.

Position: Question of fact.

Reasons: Paragraph 1219(1)(f) of the Regulations includes the cost of drilling and completing wells for temporary, non-production purposes such as exploration and testing. Such costs may include casing and piping costs, but excludes the cost of a well that is or can reasonably be expected to be used for the installation of underground piping that is included in Class 43.1 or 43.2, such as piping used for production purposes.

25 January 2012 External T.I. 2011-0416841E5 - Singapore Pension

Unedited CRA Tags
Canada-Singapore Income Tax Convention, paragraph 56(1)(a), subparagraph 110(1)(f)(i) of the ITA.

Principal Issues: Whether amounts withdrawn from the Singapore Central Provident Fund are taxable in Canada.

Position: No, provided the amount is a pension benefit.

Reasons: Canada-Singapore Income Tax Convention Article XVII provides that pensions and annuities arising in a contracting state are only taxable in that state, i.e., Singapore.

24 January 2012 External T.I. 2011-0409721E5 - Employee taxable benefits

Unedited CRA Tags
6(1)(a)

Principal Issues: Does a taxable benefit arise if employees are given the opportunity to purchase computer software at a discount from the software company as a result of the employer purchasing new software for the office computers?

Position: Yes

Reasons: Economic benefits received by employees in respect of their employment will be considered a taxable benefit even if the benefit is not provided by the employer

24 January 2012 External T.I. 2011-0397691E5 - Group Sickness or Accident Insurance Plan

Unedited CRA Tags
Subparagraphs 6(1)(a)(i)

Principal Issues: Whether premiums paid for a plan that provided benefits in addition to accident or sickness was a "group sickness or accident insurance plan" for purposes of 6(1)(a)(i)?

Position: No

Reasons: A plan that provides benefits other than sickenss or accident is not a "group sickness or accident insurance plan" as contemplated by 6(1)(a)(i).

24 January 2012 External T.I. 2011-0405071E5 - Sale of residential investment property

Unedited CRA Tags
39(1), 40(1), 54, 248(1), 74.2, 74.1, 74.5

Principal Issues: Allocation of a capital gain resulting from the sale of a residential investment property owned jointly by spouses, following a marriage breakdown, in a case where one spouse releases his or her interest in the proceeds of disposition directly to the other spouse in partial payment of an equalization payment, as required under a court order.

Position: The capital gain is allocated between the spouses based on their respective ownership interests in the property at the time of disposition. Proceeds of disposition are not reduced by the release of one spouse's interest in the proceeds of disposition to the other spouse by reason of a court order or otherwise.

Reasons: Wording of section 54, paragraph 40(1)(a), subsection 248(1) definition of "disposition", court jurisprudence

23 January 2012 External T.I. 2011-0404951E5 - Reporting of Long/Short Term Disability Benefits

Unedited CRA Tags
6(1)(a), 6(1)(f), 6(3), 56(1), 60(j.1), 153(1), Regs. 200(1) & 200(2)

Principal Issues: The appropriate reporting of long and short term disability benefits

Position: Depends on whether the amount is a periodic payment pursuant to a disability insurance plan, salary or wages, or retiring allowance.

Reasons: The law.

17 January 2012 External T.I. 2011-0421371E5 - Permanent Establishment - NR corporation in Canada

Unedited CRA Tags
2(3)(b), 253, Article V of Canada-US Tax Convention

Principal Issues: Given the facts outlined below, would a company in the United States ("USCo") have a permanent establishment in Canada for corporate tax purposes and/or for GST/HST purposes?

Position: Question of fact.

Reasons: Overview of relevant Treaty Articles provided.

12 January 2012 External T.I. 2011-0421791E5 F - Usufruit de terres boisées acquises avant 1987

Unedited CRA Tags
69(1), 110.6(1), 110.6(1.3), 110.6(2.1), 248(3)a) e) et f), 251(1)b) et les dispositions du Code civil
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(3) - Paragraph 248(3)(a)
gift of bare ownership resulted in deemed disposition to deemed s. 248(3)(a) personal trust
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1.3) - Paragraph 110.6(1.3)(c)
property acquired before 18 June 1987 will qualify if s. 110.6(1.3)(c)(i) or (ii) satisfied

Principales Questions: 1. Est-ce que les terres boisées de Père se qualifient de biens agricoles admissibles?
2. Si un usufruit est constitué par Père, est-ce qu'il y a disposition au moment du don de la nue-propriété de Père à Enfant?

Position Adoptée: 1. Possiblement si toutes les conditions énoncées au paragraphe proposé 110.6(1.3) sont respectées.
2. Oui.

Raisons: 1. Définition de bien agricole admissible à 110.6(1.3) et 110.6(2.1)
2. Le don de la nue-propriété constitue la disposition d'un bien au sens de la Loi.

10 January 2012 External T.I. 2011-0431461E5 - Administrative policy for participants of JVs

Unedited CRA Tags
34.2

Principal Issues: Examples of the application of the revised administrative policy.

Position: See document.

Reasons: 2011-042958

9 January 2012 External T.I. 2011-0414061E5 - Remote mine site premium allowance

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

Principal Issues: Whether a remote mine site premium allowance paid to employees to recognize the unique challenges of working at a remote work site may be excluded from income under subsection 6(6) or elsewhere under the Act.

Position: Allowance not excluded from income based on description provided.

Reasons: Allowance as described is includable in income under paragraph 6(1)(b), unless the allowance is actually in respect of expenses incurred by the employee for board and lodging or transportation to and from the remote work site as required under subsection 6(6), or is in respect to any of the other exceptions described in subparagraphs 6(1)(b)(i) through (xi).

Technical Interpretation - Internal

2 February 2012 Internal T.I. 2011-0429691I7 - Out of court settlement

Unedited CRA Tags
3, 9, 12, 14

Principal Issues: What should the proper income tax treatment be of the taxpayer's out of court settlement?

Position: General comments only.

Reasons: Unable to ascertain all relevant facts.

1 February 2012 Internal T.I. 2011-0426431I7 - Amount for Eligible Dependant

Unedited CRA Tags
118(5)

Principal Issues: 1. Application of the restrictions under p. 118(5)(b)

Position: 1. The restrictions must be interpreted in the context of the requirement to pay support in respect of a particular person

Reasons: 1. The wording of the legislation

1 February 2012 Internal T.I. 2011-0422101I7 - Late refund of overpayment

Unedited CRA Tags
152(3.1); 152(4); 152(4.2); 164(1); 164(1.5)

Principal Issues: 1. Can the taxpayer be reassessed and is the individual taxpayer entitled to receive a refund from the reassessment?
2. Does subsection 152(4.2) and/or paragraph 164(1.5)(b) of the Act apply to the particular situation?

Position: 1. Yes.
2. No.

Reasons: 1. The request for reassessment was within the normal reassessment period and therefore, the reassessment could be made in accordance with subsection 152(4). Paragraph 164(1.5)(a) allows the Minister to issue the refund because the taxpayer's original return of income was filed within 10 calendar years after the end of the taxation year in respect of which the refund is sought.
2. Subsection 152(4.2) only applies "at any time after the end of the normal reassessment period" and the request for reassessment was made within the normal reassessment period. Therefore, subsection 152(4.2) and paragraph 164(1.5)(b) of the Act would not apply to the particular situation.

31 January 2012 Internal T.I. 2011-0406831I7 - Composition of a Corporation's Instalment Base

Unedited CRA Tags
s. 157, 191.3; Reg. 5301

Principal Issues: Whether Part VI.1 tax should be part of the instalment base of the transferor or transferee when calculating estimated tax payable for the current year.

Position: Transferee.

Reasons: The amount payable under section 157 is determined by reference to an instalment base, which is defined to mean the aggregate of amounts payable under Parts I, I.3, VI, and XIII.1 by the corporation for its taxation year preceding the particular taxation year. A corporation that was required to pay Part VI.1 tax in its preceding year would have to include that tax in its instalment base when calculating the estimated taxes payable for the current year.

27 January 2012 Internal T.I. 2011-0428831I7 F - Crédit d'impôt pour frais médicaux

Unedited CRA Tags
118.2(2); 118.2(2)q); 118.2(3)
Summary Under
Tax Topics - Income Tax Act - Section 118.2 - Subsection 118.2(3) - Paragraph 118.2(3)(b)
taxpayer could claim credit for years where he was no longer entitled to claim repaid Quebec drug benefit against private plan due to being out of time
Summary Under
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.2)
application under s. 152(4.2) for drug claim deductions that later emerged

Principales Questions: Un contribuable peut-il réclamer le CIFM pour des frais médicaux engagés alors que le délai pour présenter une réclamation auprès de son assureur est échu? Si l'assureur le rembourse en partie pour les frais médicaux engagés en 2010 et 2011, comment le contribuable doit-il réclamer le CIFM? Enfin, comment devons traiter le remboursement des cotisations auprès de la RAMQ qui avaient initialement donné droit au CIFM aux termes de l'alinéa 118.2(2)q)?

Position Adoptée: Oui. Le contribuable devra faire une demande auprès du ministre pour que ses déclarations de revenus des années passées soient modifiées. Le CIFM pour les années 2010 et 2011 devra refléter les frais médicaux engagés dans chacune de ces années. Le remboursement des cotisations auprès de la RAMQ viendra réduire le montant du CIFM que le contribuable sera en droit de recevoir.

Raisons: Loi de l'impôt sur le revenu.

25 January 2012 Internal T.I. 2011-0429921I7 - Late-Filed Election to Split Pension income

Unedited CRA Tags
s. 60.03; 152(3.1), (4) & (4.2); 153(2); 220(3.201)

Principal Issues: Whether the Minister could accept a late-filed election to enable a pensioner to split eligible pension income with a pension transferee.

Position: It depends on the facts.

Reasons: Whether the Minister could accept a late-filed election is determined by the pension transferee's normal reassessment period and the deadline for late-filing the joint election.