Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether paragraph 69(1)(b) could apply in a situation were A Co, a CCPC, owns intellectual property, and has granted a non-exclusive license for the use of the intellectual property to B Co, a related CCPC. A Co does not charge any fee to B Co for the use of the intellectual property
Position TAKEN:
Paragraph 69(1)(b) could apply to A Co.
Reasons FOR POSITION TAKEN:
Position taken in other files: It is our view that the word "anything" as used in paragraph 69(1)(b) is a broad term which includes products and other tangibles as well as intangible property, such as the right to use property.
XXXXXXXXXX 1999-000928
M. Azzi
Attention: XXXXXXXXXX
April 17, 2000
Dear Sirs:
Re: Paragraph 69(1)(b) of the Income Tax Act (the "Act")
This is in reply to your letter of November 24, 1999, wherein you requested our views on the application of paragraph 69(1)(b) of the Act in a situation involving a right to use intellectual property.
In the situation you describe, A Co, a Canadian-controlled private corporation ("CCPC"), owns intellectual property, and has granted a non-exclusive license for the use of the intellectual property to B Co, a related CCPC. You further indicate that A Co does not charge any fee to B Co for the use of the intellectual property.
Written confirmation of the tax implications inherent in particular transactions is given by this directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3, dated December 30, 1996. Where the particular transactions are completed, the enquiry should be addressed to the relevant tax services office. However, we are prepared to offer the following general comments.
Paragraph 69(1)(b) of the Act applies in any situation where, inter alia, "a taxpayer has disposed of anything...to a person with whom the taxpayer was not dealing at arm's length for no proceeds or for proceeds less than the fair market value thereof at the time the taxpayer so disposed of it". It is our view that the word "anything" as used in paragraph 69(1)(b) of the Act is a broad term which includes products and other tangibles as well as intangible property, such as the right to use property. Accordingly, it is our view that paragraph 69(1)(b) of the Act could apply to A Co.
We would also note that we were not provided with sufficient information in order to establish whether any benefit provisions of the Act could apply in the above-situation, such as subsection 15(1), 56(2), 56(4) or 246(1) of the Act.
We trust that these comments will be of assistance.
Yours truly,
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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