Income Tax Severed Letters - 2023-12-13

Technical Interpretation - External

6 October 2023 External T.I. 2021-0905311E5 - NPO and sale of property

Unedited CRA Tags
149(1)(l); 149(1)(5)

Principal Issues: Would the Society be exempt from tax on the capital gain realized on the proposed sale of its clubhouse property?

Position: Not likely.

Reasons: The Society appears to have been originally organized and operated in conformity with paragraph 149(1)(l). However, the Society appears to have begun, at some point in time, actively pursuing a profit from the operation of XXXXXXXXXX and therefore would not meet the conditions of paragraph 149(1)(l) or 149(5).

Conference

15 September 2020 IFA Roundtable Q. 6, 2020-0853561C6 - Subsection 212.3(9) & The GAAR

Unedited CRA Tags
18(4), 212(2), 212.3(9), 245(2).
Summary Under
Tax Topics - Income Tax Act - Section 212.3 - Subsection 212.3(9) - Paragraph 212.3(9)(b) - Subparagraph 212.3(9)(b)(ii)
reinstatement arguably occurs on distributing shares of sub capitalized with daylight loan
Summary Under
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4)
circular transactions to effect a s. 212.3(9)(b)(ii) PUC reinstatement abused that provision

Principal Issues: Whether an in-kind capital distribution of FA shares on shares of another FA to a Canco may give rise to a PUC reinstatement under subsection 212.3(9), while the shares so received by the Canco are subsequently contributed back to a third FA of the group in consideration for shares of that third FA such that subsection 212.3(2) does not apply to that investment in application of subparagraph 212.3(18)(b)(ii)?

Position: General comments; the GAAR may be considered to apply.

Reasons: See below.

5 May 2021 IFA Roundtable Q. 7, 2021-0887521C6 - Section 247, FAPI & Subsection 80.4(2)

Unedited CRA Tags
15(1), 15(9), 80.4(2), 91(1), 212(2), 215(1), 214(3)(a), 247(2), Regulation 4301(c)
Summary Under
Tax Topics - Income Tax Act - Section 214 - Subsection 214(3) - Paragraph 214(3)(a)
non-interest-bearing loan from a CFA to a NR sister of the Canadian taxpayer generates a deemed dividend to the sister under ss. 80.4(2) and 214(3)(a) – plus FAPI to CFA
Summary Under
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2) - Paragraph 247(2)(a)
a non-interest-bearing loan from a CFA to a NR sister of the Canadian taxpayer would generate imputed interest and FAPI to CFA, plus s. 80.4(2) application to sister
Summary Under
Tax Topics - Income Tax Act - Section 80.4 - Subsection 80.4(2)
a non-interest-bearing loan from a CFA to a NR sister of the Canadian taxpayer generated double tax (FAPI and Pt. XIII tax)

Principal Issues: 1) Whether subsection 247(2) applies in computing a foreign affiliate's FAPI in the context of a transaction where a non-interest-bearing loan is made by the foreign affiliate to another non-resident person. 2) If subsection 247(2) applies in the described situation, whether subsection 80.4(2) would also apply to deem a benefit to arise.

Position: 1) Yes. 2) Yes.

Reasons: 1) The CRA's long-standing view that subsection 247(2) could, in general, apply to a transaction between a foreign affiliate and another non-resident person in computing the foreign affiliate's FAPI in respect of a taxpayer. 2) There is no conflict between the two provisions and they both apply concurrently in the present case.

Technical Interpretation - Internal

27 October 2023 Internal T.I. 2020-0868031I7 - Disposition of Foreign Currency

Unedited CRA Tags
39(1), 39(1.1), 39(2)
Summary Under
Tax Topics - Income Tax Act - Section 39 - Subsection 39(1.1)
s. 39(1.1) extends to individuals’ FX bank deposits/ not a carve-out from s. 39(2)
Words and Phrases
currency money

Principal Issues: Whether subsection 39(1.1) applies to currency held on deposit with a financial institution.

Position: Generally, yes.

Reasons: When currency is used to describe a type of property being disposed of in subsection 39(1.1), “currency” includes deposits of currency held in a chequing or current account at a bank which can be withdrawn by the depositor at any time.