Income Tax Severed Letters - 2012-08-17

Ruling

2012 Ruling 2011-0425211R3 - Reduction of capital

Unedited CRA Tags
84(2), 84(4.1), 53(2), 40(3)
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2)
PUC distribution of Spinco indirectly holding foreign affiliates

Principal Issues: Whether subsection 84(2) applies to a reduction of capital

Position: Yes

Reasons: Complies with the law and CRA administrative positions.

Technical Interpretation - External

10 August 2012 External T.I. 2012-0453041E5 - Income recognition-mutual fund beneficiary

Unedited CRA Tags
104(13), 104(23), 104(24)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(13)
recognition of distributed trust income deferred until beneficiary year in which trust year ends

Principal Issues: Timing of income recognition by a spousal trust which has invested in a mutual fund.

Position: It is a question of fact. However, generally, the beneficiary will recognize the income in the beneficiary's taxation year in which the relevant trust taxation year ends.

Reasons: Pursuant to paragraph 104(13)(a) of the Income Tax Act.

26 July 2012 External T.I. 2011-0428651E5 - Settlement - general damages

Unedited CRA Tags
6(1)(a); 56(1)(a)(ii); 153(1)(c); 248(1)

Principal Issues: Is a payment for general damages upon termination subject to income tax and withholding?

Position: In this case likely yes.

Reasons: It appears that the general damages amount received relates to termination of employment. As such, the general damages payment would be considered a retiring allowance and included in income under subparagraph 56(1)(a)(ii) of the Act. Withholding is required under 153(1)(c) of the Act. However, if it is determined that a portion of the general damages payment relates to settlement of the non-termination grievances, this portion of the payment will be taxable under paragraph 6(1)(a) of the Act and subject to withholding. If it is determined that a portion of the general damages can be traced to events or actions unrelated to or separate from the loss of employment, this portion of the payment will be treated as non-taxable.

18 July 2012 External T.I. 2012-0438721E5 - Deductibility of Professional Membership Dues

Unedited CRA Tags
ITA 8(1)(i)(i)

Principal Issues: Are membership fees paid to a particular organization deductible pursuant to subparagraph 8(1)(i)(i) of the Act?

Position: No

Reasons: Membership fees in the particular organization are not for the maintenance of a professional status recognized by statute.

26 June 2012 External T.I. 2011-0427911E5 - Reimbursement of moving expense

Unedited CRA Tags
6(1)(a); 62(1); 248(1)

Principal Issues: Is the employer reimbursement for costs related to moving a taxpayer's household goods to Canada a taxable benefit under paragraph 6(1)(a) of the Act?

Position: In this case, no.

Reasons: As noted in IT-470R, "where an employer reimburses an employee for the expenses incurred by the latter in moving the employee and the employee's family and household effects either because the employee has been transferred from one establishment of the employer to another or because of having accepted employment at a place other than where the former home was located, this reimbursement is not considered as conferring a taxable benefit on the employee."

26 June 2012 External T.I. 2011-0409551E5 - Income Transferred to a Charity

Unedited CRA Tags
2(1), 3, 118.1

Principal Issues: 1.Whether an employee that has transferred to their employer, a portion of their income earned abroad, is entitled to deduct all of the amounts paid from their taxable income for the year? 2. Whether a registered charity should issue an official donation receipt to an employee that transfers amounts to a charity in order to adhere to their employer’s guidelines?

Position: 1 & 2 Question of fact.

Reasons: 1. The terms of employment may in effect provide that all services performed by the employee shall be performed as an employee of the corporation and that all income from such services shall be accounted for by the corporation. 2. A registered charity may issue an official donation receipt where the amounts are considered a gift.

26 June 2012 External T.I. 2011-0427381E5 - Fitness Membership

Unedited CRA Tags
6(1)(a)

Principal Issues: Is an employer provided fitness membership a taxable benefit to an employee?

Position: In this case no.

Reasons: IT-148R3 and CRA Guide T4130 provide that a fitness membership will generally not be a taxable benefit to an employee where the employer makes an arrangement with a facility to pay a fee for the use of the facility, the fitness contract is between the fitness provider and the employer and the fitness membership is made available to all employees.

22 June 2012 External T.I. 2011-0416701E5 - Legal Fees

Unedited CRA Tags
s 9, 18(1), 18(12), 248(1)

Principal Issues: Whether legal fees incurred with respect to structural defects with a taxpayer's principal residence are deductible as a business expense.

Position: No.

Reasons: The legal fees are not expenses incurred to earn income from a business or property pursuant to paragraph 18(1)(a) of the ITA. Legal fees were personal expenses under paragraph 18(1)(h) of the ITA.

7 June 2012 External T.I. 2011-0417671E5 - Balance in a health spending account

Unedited CRA Tags
S. 6(1)(a)(i) and 248(1)

Principal Issues: Is an individual entitled to a refund of the balance in a health spending account when the plan is cancelled?

Position: The employee should have no right to any balance in the account for the HSA to qualify as a private health services plan.

Reasons: If the HSA is to qualify as a PHSP, it must be one of insurance with an element of risk. An HSA that provides for a refund of unused credits would not be considered to have the required element of risk.

Technical Interpretation - Internal

29 June 2012 Internal T.I. 2012-0441601I7 - "directly or indirectly"

Unedited CRA Tags
95(2)(a)(ii)(A)
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(B)

Principal Issues: Whether, subparagraph 95(2)(a)(ii) (as it applies to taxation years that begin before 2009) would apply to include the interest payment on Loan 1 received by a non-resident corporation in computing its income from an active business?

Position: No

Reasons: There is only one payment of interest in this case from a non-resident corporation which does not carry on an active business.