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.
PRINCIPAL ISSUES:
Is a pool of unclaimed R&D expenses considered eligible property for purposes of 85(1.1)?
POSITION TAKEN:
No. It is not eligible property.
REASONS FOR POSITION TAKEN:
Other than capital property, it is not property described in the provision. It results from a provision of the Act which permits a deduction.
XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sirs:
Re: Transfer of Property
We are writing in response to your letter dated August 12, 1992 wherein you requested our opinion as to whether a research and development tax pool (the "R&D Pool") would be eligible to be transferred pursuant to the provisions of subsection 85(1) of the Income Tax Act 1 in exchange for share consideration.
The R&D Pool refers to the accumulation of expenditures which are deductible but not yet deducted by a taxpayer pursuant to the provisions of section 37. These expenditures were incurred in respect of the taxpayer's business.
Comments
It is our view that the R&D Pool would not constitute eligible property, within the meaning assigned by subsection 85(1.1), since it is not a property described therein. The R&D Pool is merely a result of a provision of the Act that permits a taxpayer to deduct certain expenditures.
Any capital property, within the meaning of section 54, the cost of which is included in the R&D Pool would be an eligible property which may be transferred pursuant to the provisions of subsection 85(1).
The foregoing comments are given in accordance with the practice referred to in paragraph 21 of IC 70-6R2 dated September 28, 1990 and are not binding on Revenue Canada.
Yours truly
for DirectorReorganizations and Foreign DivisionIncome Tax Rulings and Interpretations DirectoratePolicy and Legislation Branch
ENDNOTES
1 All statutory references in this letter are to the Income Tax Act (Canada), R.S.C. 1985 (5th Supp.) c. 1, as amended (the "Act").
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