Income Tax Severed Letters - 2021-05-26

Ruling

2021 Ruling 2020-0868661R3 F - Section 84.1 – Leveraged Buyout

Unedited CRA Tags
84.1; 110.6(1); 110.6(2.1); 186(2); 186(4); 251(1); 251(2)
Summary Under
Tax Topics - Income Tax Act - Section 84.1 - Subsection 84.1(1)
s. 84.1 did not apply to a leveraged buyout financed by the target
Summary Under
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c)
ruling that buyout was an arm’s length transaction

Principal Issues: Gesco holds all of the issued and outstanding shares of the capital stock of Opco. The shares of the capital stock of Gesco are held by Mr.X (XXXXXXXXXX%), Ms.Y (XXXXXXXXXX%) and Mr.Z (XXXXXXXXXX%). Ms.Y will incorporate Nouco which will acquire all the shares of the capital stock of Gesco held by Mr.X. Nouco will borrow money from Gesco to buy the shares. Mr.X and Ms.Y are not related persons within the meaning of subsection 251(2). Whether section 84.1 applies so that a dividend will be deemed to have been paid to M.X by Nouco and to have been received by Mr.X from Nouco at the time of disposition.

Position: No. Mr.X and Nouco are dealing with each other at arm’s length.

Reasons: Question of Fact

Technical Interpretation - External

3 May 2021 External T.I. 2020-0850231E5 - CEWS - Amount of Wage Subsidy to be Claimed

Unedited CRA Tags
125.7(2); 125.7(5)
Summary Under
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(2)
an eligible employer can make a CEWS claim for less than all its employees

Principal Issues: Whether an eligible entity can submit a CEWS application for a lesser amount than the amount determined under subsection 125.7(2) of the Act.

Position: A qualifying entity may choose not to calculate an amount under subsection 125.7(2) of the Act in respect of an eligible employee for a week in a qualifying period.

Reasons: See below.

22 March 2021 External T.I. 2020-0839061E5 - Atlantic Investment Tax Credit

Unedited CRA Tags
Definition of "qualified property", "prescribed building", "prescribed machinery or equipment", "investment tax credit," "specified percentage" in ss. 127(9), ss. 127(11), ss. 4600(1) and 4600(2) of the Regulations.

Principal Issues: Whether the cost of a new waste conversion plant and its equipment would be eligible for the Atlantic investment tax credit?

Position: Depends on the particular facts and circumstances.

Reasons: See below.

Technical Interpretation - Internal

3 May 2021 Internal T.I. 2021-0875571I7 - CERS - Boat Slips as Immovable Property

Unedited CRA Tags
125.7

Principal Issues: Is a boat slip in a marina real or immovable property such that rental expenses for the boat slip qualify for the CERS?

Position: Question of fact.

Reasons: Whether the boat slip is real or immovable property is a factual inquiry and depends on whether the boat slip can be considered to be a fixture or structure.

29 March 2021 Internal T.I. 2020-0865791I7 - CEWS - eligible remuneration

Unedited CRA Tags
125.7(1) "eligible remuneration"
Summary Under
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(2)
remuneration not paid by journal entry
Summary Under
Tax Topics - Income Tax Act - Section 125.7 - Subsection 125.7(1) - Eligible Remuneration - Paragraph (c)
eligible remuneration that is returned to the eligible employer as a capital contribution or shareholder loan adjustment is excluded for CEWS purposes
Summary Under
Tax Topics - General Concepts - Payment & Receipt
remuneration not considered to be paid by journal entry

Principal Issues: Whether certain amounts are eligible remuneration as defined in 125.7(1).

Position: It depends.

Reasons: Eligible remuneration excludes amounts that can reasonably be expected to be paid or returned, directly or indirectly, in any manner whatever, to the employer.

March 29, 2021