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:
Request to confirm the following interpretation :
Subsection 402(5) of the Regulations excludes interest on bonds, debentures or mortgages and dividends on shares of capital stock from the definition of "gross revenue" for the purposes of subsection 402(3) of the Regulations. The reference in subsection 402(5) of the Regulations to "that is not used in connection with the principal business operations of the corporation" refers only to "rentals or royalties from property" and not to the other items enumerated therein.
Position:
We confirm that this is our interpretation of subsection 402(5) of the Regulations.
Reasons:
This interpretation is based on the clear and unambiguous wording of that subsection and has been a long-standing position.
XXXXXXXXXX 2000-005339
Sylvie Labarre, CA
November 15, 2000
Dear Sir:
Re: Allocation of Taxable Income Between Provinces
We are writing in response to your facsimile of October 27, 2000 in which you requested a confirmation of the interpretation provided in our letter 2000-004868 with respect to subsection 402(5) of the Income Tax Regulations (the "Regulations") and how it applies to an investment holding company.
The interpretation you refer to is the following:
Subsection 402(5) of the Regulations excludes interest on bonds, debentures or mortgages and dividends on shares of capital stock from the definition of "gross revenue" for the purposes of subsection 402(3) of the Regulations. The reference in subsection 402(5) of the Regulations to "that is not used in connection with the principal business operations of the corporation" refers only to "rentals or royalties from property" and not to the other items enumerated therein.
We confirm that this is our interpretation of subsection 402(5) of the Regulations. This interpretation is based on the clear and unambiguous wording of that subsection and has been a long-standing position.
You stated that you had some discussions with representatives of Revenue Québec and that these representatives did not have the same position. You did not mention Alberta's position. We suggest that you obtain a written technical interpretation from these provinces as they administer their own corporate tax law and rule on the obligation of the taxpayers under their law.
We also agree that our comments with respect to the application of subsections 402(5) and 402(6) of the Regulations given in letter 2000-004868 produce an anomalous result, as the allocation of the corporation's income to various provinces may not accurately reflect the factual income earned in each jurisdiction. However, in our view, the particular wording contained in the Regulations does not allow for a different result.
Yours truly,
Marc Vanasse, CA
for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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