What we heard – Income Tax Folio S3-F10-C3

The table What we heard from you summarizes the comments received from the tax community during the 3-month comment period that followed the publication of this Folio Chapter and that ended on December 31, 2018. It also reflects the action taken in respect of each comment. Any changes made to the Chapter are described in the Chapter History.

What we heard from you
Topic Par.# Comments we received Action taken
Arm’s-length debt 3.10 Amend ¶3.10 to clarify what type of arrangements would, in substance, be considered security arrangements, even if they do not constitute a legally valid security. No change was made to the Chapter. Adding the requested clarification to address what is expected to be rare in the context of registered plans would add unnecessary complexity to an already complex publication.
Promotional Incentives, Contests, Life insurance 3.12 to 3.14 Provide additional clarification in several areas of ¶3.12 to 3.14 dealing with promotional incentives. The Chapter has been updated to add clarification where appropriate.
Artificial increases in FMV of property 3.16 Amend the Chapter to discuss the second requirement of the advantage described in ¶3.16(a) that one of the main purposes of the transaction must be to benefit from the tax-exempt status of the plan. The Chapter has been updated to expand on the general information provided.
Artificial increases in FMV of property 3.16 Amend the Chapter to clarify that financial institutions are not responsible for assessing whether the commercially reasonable and purpose tests in the advantage definition are met. No change was made to the Chapter. A general statement to this effect is provided in ¶3.47.
Artificial increases in FMV of property 3.17 Revise ¶3.17 to reflect the decision of the Tax Court of Canada in Louie v. The Queen (2018 TCC 225). No change was made to the Chapter at this time. This decision is currently under appeal to the Federal Court of Appeal.
Employee-owned securities 3.20 Modify or eliminate the factors relating to eligibility and selling restrictions in ¶3.20. The Chapter has been updated to add clarification where appropriate.
Example 8 3.22 Provide the rationale for the position in example 8. No change was made to the Chapter. All of the examples in ¶3.22 illustrate situations in which the CRA considers that the conditions described in ¶3.16(a) are met and thus give rise to an advantage.
Example 9 3.22 Provide guidance, for purposes of valuing warrants that are not publicly-traded, on what constitutes a valuation method that is appropriate in the circumstances. No change was made to the Chapter. The interpretive purpose of Income Tax Folios makes commentary on valuation matters inappropriate.
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