The CRA was represented by Fiona Harrison, Manager of the
Resources Section at the CRA's Income Tax Rulings Directorate,
and Jeff Sadrian, National Director of the CRA's Large Business
In the course of the presentation, the CRA discussed a
variety of issues (see the "Tax Administration Panel" conference slides), including "red
tape" reduction, the CRA's trust audit project, Regulation
105 waivers, ABIL claims, and omission penalties under s. 163(1).
The CRA confirmed that it determines audit priorities based on the
"highest risk", and that it is continuing its
"intelligence-based risk assessment" of taxpayers to
determine which files will be selected for audit.
Other highlights included:
Folios – The CRA
considers many existing Interpretation Bulletins to be
out of date. The CRA intends to reorganize the information in the
existing publications in new Folio chapters (i.e., all
information relating to specific subjects will be
"grouped" together). The CRA plans to update the Folios
on an on-going basis, and the first 10-12 Folio chapters are likely
to be published before the end of 2012.
Entity Classification - In a
reversal of an earlier position (see, for example, CRA Document
No. 2011-0415141E5 "Tax status of a German Family
Trust" (August 4, 2011)), the CRA will once again accept
requests for rulings on the classification of foreign
Inter-Provincial Trusts – Where a
trust claims to be resident, and pays tax, in one
province, and the trust is later reassessed as resident in another
province, the CRA will reassess the trust only for the difference
between the tax paid in the first province and the tax owing in the
U.S. LLCs – The CRA continues to
disagree with the Tax Court's decision in TD Securities (USA) LLC. v. The Queen(2010 TCC 186). The CRA's view is that a
fiscally-transparent U.S. LLC does not qualify as a resident of the
U.S. for the purposes of the Canada-U.S. Tax Treaty, and
is not a "qualifying person" under Article XXIX-A of the
Section 56(2) – The CRA stated
that it is aware of "elaborate arrangements" utilized to
divert business income to family members. The CRA stated that,
where such arrangements include the use of a trust, section 56(2)
may be applied in respect of distributions from the trust provided
the requirements of the provision are otherwise met (see Neuman v. The Queen (98 D.T.C. 6297 (S.C.C.)).
In other words, the CRA may apply s. 56(2) to the actions of a
(The Tax Administration Panel conference slides are
republished with permission of the Canadian Tax
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