Income Tax Severed Letters - 2024-01-03

Technical Interpretation - Internal

19 September 2023 Internal T.I. 2022-0950421I7 - Part-Year Resident - Federal Surtax & Prov Tax

Unedited CRA Tags
Subsections 2(1), 2(2), 2(3), sections 114, 115, subsections 120(1), 120(3), 120(4), section 250 of the Act, Regulation 2600, 2601(1), 2601(5)(a)

Principal Issues: If an individual who is factually a resident of Canada ceases to be resident during the year, would the taxable capital gain arising from disposition of taxable Canadian property during the part of the year that the individual becomes non-resident be subject to federal surtax under subsection 120(1) of the Act or would it be subject to provincial income taxes?

Position: The taxable capital gain would be subject to provincial tax; federal surtax would be nil.

Reasons: Federal surtax under subsection 120(1) of the Act applies where an individual has income for the year that is not income earned in a province. Regulation 2601(1) provides that the income earned in a province by an individual who resides in a particular province on the last day of the taxation year and has no income from a business with a permanent establishment (“PE”) outside the province is the individual’s “income for the year”. In the case of a part-time resident, the “last day of the taxation year” refers to the last day that the individual resided in Canada in accordance with Regulation 2601(5)(a). As a result of Regulation 2601(1) and 2601(5)(a), the individual’s income earned in a province, comprising of the taxable capital gain determined under paragraph 120(3)(a) would be subject to provincial tax and not subject to federal tax under subsection 120(1).

9 March 2023 Internal T.I. 2022-0950431I7 - BC MCFD - Youth transition payments

Unedited CRA Tags
Section 3, 5 and 9; Paragraphs 56(1)(u) and 81(1)(h)

Principal Issues: Whether the proposed payments from the Government of British Columbia MCFD to former foster care providers in the province would meet the income exclusion requirements of paragraph 81(1)(h).

Position: Question of fact. The proposed payments will not constitute income from a source, and therefore, will not be taxable under the Act. Furthermore, the proposed payments for specified adults, without a developmental disability, would not meet the income exclusion requirements of paragraph 81(1)(h).

Reasons: The proposed payments are not income from a source since it is likely that the activity of providing care to the specified adults has a personal element, and is not being carried on in a sufficiently commercial manner to constitute a source of income from a business. Furthermore, the proposed payments for specified adults without a disability are not based on a means, needs, or income test, and would not fall under paragraph 56(1)(u).