Income Tax Severed Letters - 2012-03-16

Ruling

2011 Ruling 2011-0411821R3 - Interest deductibility and loss carry backs

Unedited CRA Tags
20(1)(c); 87(2.11); 245
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c)
cross-border downstream loan to distribute cross-border PUC
Summary Under
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2.11)

Principal Issues: Will Amalco be entitled to deduct interest, pursuant to paragraph 20(1)(c), on borrowed money previously used by its predecessor to fund a return of capital? 2. Will subsection 87(2.11) apply to the amalgamation? 3. Will subsection 245(2) be applied to the transactions?

Position: 1. Yes 2. Yes 3. No

Reasons: 1. The requirements of the provision are met. 2. The requirements of the provision are met. 3. The transactions are not avoidance transactions.

Ministerial Correspondence

12 March 2012 Ministerial Correspondence 2012-0436861M4 - Volunteer Firefighters Tax Credit

Unedited CRA Tags
118.06

Principal Issues: 1. Certification of eligible volunteer firefighting services.

Position: 1. The fire department is responsible for certifying each volunteer's hours for the purposes of claiming the VFTC.

Reasons: 1. The legislation.

6 March 2012 Ministerial Correspondence 2011-0431621M4 - FBAR Filing Requirements

Principal Issues: The impact on U.S.-Canadian citizens, residing in Canada, in respect of U.S. income tax and FBAR reporting requirements.

Position: General comments provided.

Reasons: These requirements are a matter of U.S. domestic policy.

Technical Interpretation - External

9 March 2012 External T.I. 2011-0416611E5 - disposition under paragraph 38(a.3)

Unedited CRA Tags
38(a.3)
Summary Under
Tax Topics - Income Tax Act - Section 53 - Subsection 53(1) - Paragraph 53(1)(e) - Subparagraph 53(1)(e)(i)

Principal Issues: calculation of ACB of a partnership interest where the partnership has disposed of property that qualifies under paragraph 38(a.3)

Position: Paragraph 38(a.3) provides an exemption from income tax for taxable capital gains that arise on certain donations of property. Since clause 53(1)(e)(i)(A) does not explicitly state that the Act is to be read without reference to paragraph 38(a.3), there is no authority for adding exempt capital gains pursuant to this paragraph to the ACB of the partnership interest.

Reasons: The law.

8 March 2012 External T.I. 2012-0434821E5 - CCA Class of MRI equipment

Unedited CRA Tags
20(1)(a), 1104(2), class 8, 50 Schedule II

Principal Issues: Whether MRI equipment is included in Class 50

Position: No

Reasons: While it is a question of fact such property is special purpose equipment that is not included in any other class. Such property would generally fall into class 8.

8 March 2012 External T.I. 2011-0429481E5 - Single-tier alignment conditions

Unedited CRA Tags
249.1(8), 249.1(8)(e), 34.2(11)
Summary Under
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(8)

Principal Issues: Whether a single-tier fiscal period alignment election can be made to end on a particular day that is after the day on which the fiscal period would have otherwise ended.

Position: No.

Reasons: The preamble to subsection 249.1(8) and paragraph 248(1)(e). Subsection 249.1(8) requires, inter alia, the particular day that may be elected to end the fiscal period of a partnership must be after March 22, 2011 and before the day on which that fiscal period would otherwise end.

7 March 2012 External T.I. 2011-0421301E5 F - Bien agricole admissible

Unedited CRA Tags
110.6(1); 110.6(1.3); 110.6(2)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1) - Qualified Farm or Fishing Property - Paragraph (a)
logging is not farming business if main focus is logging rather than growing, nurturing and harvesting trees
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1.3) - Paragraph 110.6(1.3)(a)
general discussion of s. 110.6(1.3)(a) tests

Principales Questions: La terre agricole que possède la contribuable peut-elle être considérée comme un bien agricole admissible?

Position Adoptée: Question de fait. Il semblerait que oui.

Raisons: Les critères prévus aux paragraphes 110.6(1) et 110.6(1.3) semblent être satisfaits.

7 March 2012 External T.I. 2011-0427551E5 F - Établissement stable

Unedited CRA Tags
126
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 5
presence of employee in Dominican Republic who did not habitually exercise general authority to contract did not constitute a PE

Principales Questions: Est que la seule présence d'un employé de Socan dans le Pays Donné ferait en sorte de créer un établissement stable dans ce pays selon l'article V de la Convention.

Position Adoptée: Bien qu'il s'agisse d'une question de faits, il semble que non.

Raisons: Dans la Situation Donnée, l'employé ne dispose pas dans le Pays Donné de pouvoirs qu'il y exerce habituellement lui permettant de conclure des contrats au nom de Socan.

6 March 2012 External T.I. 2012-0436791E5 - Golf Transfer Fee

Unedited CRA Tags
18(1)(a), 18(1)(l)

Principal Issues: Whether a Golf transfer fee paid to a golf course was a deductible expense or an addition to the Adjusted Cost Base of the Golf share.

Position: The golf transfer fee is a non-deductible expense to the corporation.

Reasons: Legislation.

6 March 2012 External T.I. 2011-0420751E5 - Ability to Object to a Denial of a Dividend Refund

Unedited CRA Tags
s. 129(1), 152(1); 152(1.2); 165
Summary Under
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1.2)
Summary Under
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1)

Principal Issues: Whether the denial of the dividend refund can be disputed upon the receipt of a nil assessment.

Position: Yes.

Reasons: Subsection 152(1.2) provides for the ability to object to the determination that no dividend refund is payable.

5 March 2012 External T.I. 2011-0416691E5 - Foreign Tax Credit and Tuition Tax Credit

Principal Issues: Can a taxpayer choose not to take the education or tuition tax credit and claim a foreign tax credit instead?

Position: The education and tuition tax credits are permissive and not mandatory. However, the formula for determining the carry forward of the credit will grind down the carry forward to the extent of tax payable whether or not the education credit is taken or not.

Reasons: Calculation under 118.61(1).

23 February 2012 External T.I. 2011-0421821E5 F - Test à l'alinéa 110.6(1)e) de la définition d'AAPE

Unedited CRA Tags
110.6(1)e), 110.6(1)f)(i)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1) - Qualified Small Business Corporation Share - Paragraph (e)
replaced shares need not be owned for a period of 24 months prior to their replacement – but only for the portion of the 24 months before the time of disposition and ending at the replacement time

Principales Questions: Est- ce que les actions remplacées doivent être détenues pendant une période de 24 mois précédant le moment de remplacement des actions, afin que les actions de remplacement ( qui sont détenues moins de 24 mois avant le moment de disposition) puissent être qualifiées d'actions admissibles de petite entreprise au sens de la définition au paragraphe 110.6(1) de la Loi de l'impôt sur le revenu (la "Loi"), si toutes les autres conditions de cette définition sont par ailleurs respectées?

Position Adoptée: Non. Les tests prévus aux sous-alinéas 110.6(1)e)(i) et (ii) de la Loi doivent être respectés pour la partie de la période commençant 24 mois avant le moment de la disposition et se terminant au moment du remplacement.

Raisons: Notes explicatives de mai 1991 entourant le test prévu à l'alinéa 110.6(1)e) concernant les actions remplacées.

13 February 2012 External T.I. 2011-0426471E5 - Travel Expenses

Unedited CRA Tags
18(1)(h)
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(h)

Principal Issues: Are the travel expenses incurred to return a business owner home from vacation for urgent business matters deductible?

Position: No

Reasons: Paragraph 18(1)(h) only allows travel expenses that are incurred by the taxpayer while away from home in the course of carrying on the taxpayer's business

Conference

7 October 2011 Roundtable, 2011-0399411C6 F - Société de personnes - 103(1.1)

Unedited CRA Tags
103(1), 103(1.1)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 103 - Subsection 103(1.1)
potential application of s. 103(1.1) where adult children form partnership with money gifted by parent and share pro rata to capital

Principales Questions: Est-ce que le paragraphe 103(1.1) de la Loi de l'impôt sur le revenu ( la "Loi") pourrait s'appliquer dans un cas où un parent fait un don d'argent à ses enfants majeurs et que les enfants majeurs conviennent tous d'investir en commun ces sommes dans une société de personnes pour fins d'éducation, dans la mesure où les sommes investies par chacun des associés dans la société de personnes?

Position Adoptée: Question de faits. La répartition du revenu de la société de personnes doit reconnaître la contribution en capital de même que la contribution non-monétaire de chaque associé. Sinon, les paragraphes 103(1) ou 103(1.1) pourraient s'appliquer.

Raisons: Application des paragraphes 103(1) et 103(1.1) de la Loi.

Technical Interpretation - Internal

9 March 2012 Internal T.I. 2011-0421491I7 - At-Risk Amount and Paragraph 111(4)(e)

Unedited CRA Tags
111(4), 96(2.2)
Summary Under
Tax Topics - Income Tax Act - Section 96 - Subsection 96(2.3)

Principal Issues: Whether a bump to the ACB of an interest in a partnership pursuant to paragraph 111(4) would result in an increase to the at-risk amount in respect of that partnership?

Position: The application of subsection 96(2.3) would reduce the ACB of the partnership interest to the amount of the ACB before the bump under paragraph 111(4)(e).

Reasons: It ensures that the at-risk amount of a partnership will not be increased as a result of the notional disposition and reacquisition of that partnership under paragraph 111(4)(e).

5 March 2012 Internal T.I. 2010-0384681I7 - Preamble to subsection 20(1) of the Income Tax Act

Unedited CRA Tags
20(1)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1)

Principal Issues: In the preamble to subsection 20(1) of the Act, what does the word "source" refer to?

Position: The word "source" in the preamble to subsection 20(1) of the Act refers to the "taxpayer's income for a taxation year from a business or property" referred to earlier in the preamble and not to the expenses described in the paragraphs (a) - (ww) which follow.

2 March 2012 Internal T.I. 2011-0422811I7 - Loan received in capacity as an employee

Unedited CRA Tags
80.4, 189(1)
Summary Under
Tax Topics - Income Tax Act - Section 80.4 - Subsection 80.4(1)

Principal Issues: Whether a director receives a loan in his capacity as an employee in the circumstances described.

Position: No

Reasons: The amount of the loan appears to be in excess of what would reasonably be loaned to a director in his capacity as an employee in these circumstances.

14 February 2012 Internal T.I. 2012-0435241I7 - Prepaid Rent and Escalating Rent Payments

Unedited CRA Tags
Legislation 18(1)(a), 18(9)(a)(ii)
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Incurring of Expense

Principal Issues: 1.Whether prepaid rent is deductible in the year paid. 2. Whether escalading annual rent payments are deductible on a straight line basis.

Position: 1. No; 2. No

Reasons: Legislation