The CRA issued a couple of interesting technical interpretations in the last few months.
Foreign Entity Classification
The CRA will no longer issue technical interpretations on foreign entity classification (CRA technical dated August 04, 2011, 2011-0415141E5) because whether the foreign entity is a trust, corporation or partnership is a “question of fact”. Is this CRA-sponsored FUD (fear, uncertainty, doubt) that is meant to discourage offshore planning?
Purification
In a technical dated August 22, 2011 (2011-0415161E5), the CRA reiterated that the asset tests for the capital gain deduction refer to the gross fair market value of the assets, and so it is not possible to “purify” a corporation by netting liabilities against certain assets or by making journal entries that have the same effect. If a corporation has excess cash, then, to purify it, the cash must be removed via legally-effective transactions (eg the payment of a dividend by resolution).
