Income Tax Severed Letters - 2021-05-19

Technical Interpretation - Internal

17 May 2021 Internal T.I. 2020-0870041I7 - CERS - Meaning of Qualifying Property

Unedited CRA Tags
125.7(1), 248(1)
Summary Under
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Qualifying Property
a property can be bifurcated into a qualifying property and a residence for CERS purposes
Words and Phrases
real property

Principal Issues: 1. What is the definition of "real or immovable property"? For the purposes of the CERS, does the definition of "qualifying property" depend on legal title? 2. Can a property that contains a "self-contained domestic establishment" be a "qualifying property"?

Position: 1. Generally speaking, "real or immovable property" consists of land and buildings permanently affixed to the land. A single legal title may, depending on the circumstances, contain more than one "qualifying property". Similarly, a particular property may be a “qualifying property” for more than one eligible entity. 2. Yes. The fact that a property contains a "self-contained domestic establishment" will not necessarily preclude it from being a "qualifying property".

Reasons: 1. Ordinary meaning, the law and jurisprudence. The definition does not require a qualifying property to be a separate legal property; consistent with intent of the legislation. 2. Jurisprudence and previous positions.

11 May 2021 Internal T.I. 2020-0869981I7 - CERS - Hairdressers and barbers - qualifying rent

Unedited CRA Tags
125.7
Summary Under
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Qualifying Rent Expense
hair stylists’ chair rents might qualify as rent for CERS purposes

Principal Issues: Whether a barber or hairdresser (“Stylist”) who rents or leases space, a chair, or both, from the owner of a barbering or hairdressing establishment (“the Salon”) is eligible for the CERS

Position: Possibly.

Reasons: Depending on the arrangement, “chair rent” could refer to rent paid for the space occupied by the stylist in a salon, rather than rent paid only for a chair. This space could be a qualifying property, and “chair rent” could be considered rent for the use of, or right to use, qualifying property.

3 May 2021 Internal T.I. 2020-0852571I7 - CEWS - Pandemic insurance proceeds

Unedited CRA Tags
125.7
Summary Under
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Qualifying Revenue - Paragraph (c)
business interruption insurance proceeds generally are not excluded as extraordinary revenue

Principal Issues: Are amounts received by an eligible entity from a business interruption insurance policy included in an entity's qualifying revenue as defined in subsection 125.7(1)?

Position: Generally, yes.

Reasons: Insurance proceeds meant to replace all or a portion of an eligible entity's lost revenues or profits would generally be considered qualifying revenue.

15 February 2021 Internal T.I. 2021-0879231I7 - Application of paragraph 12(1)(x) to a forgivable

Unedited CRA Tags
12(1)(x), 20(1)(hh), 12(2.2), 9(1)
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x)
loans under a COVID program are income when received as to the forgivable portion

Principal Issues: Does paragraph 12(1)(x) apply to a forgivable portion of a conditionally non-repayable contribution under the Regional Relief and Recovery Fund (RRRF)?

Position: Yes.

Reasons: The forgivable portion of a conditionally non-repayable contribution is included in the recipient's income in the year received pursuant to paragraph 12(1)(x). The amount of the forgivable portion of the contribution included in income under paragraph 12(1)(x) that is subsequently repaid pursuant to a legal obligation to repay the amount, can be deducted in the year in which the repayment is made by virtue of paragraph 20(1)(hh). Depending on the facts and circumstances, the amount of the conditionally non-repayable contribution may be included in income under paragraph 12(1)(x) but only if such amounts are not otherwise included in income under section 9 or another provision of the Act.