17 August 1993 External T.I. 9314945 F - Similar Properties

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.

XXXXXXXXXX 

Attention:  XXXXXXXXXX

Dear Sirs:

RE:  Subparagraph 111(5)(a)(ii) of the Income Tax Act (the "Act")

This is in reply to your letter of May 17, 1993 wherein you requested a technical interpretation concerning the words:

from any other business substantially all the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services found in the above subparagraph of the Act.

It is your understanding that Revenue Canada - Customs, Excise and Taxation has taken the position that metallurgical coal is a "similar property" to other minerals (such as base or precious metals) for these purposes. You have asked whether this remains our position and whether this would be our position with respect to thermal coal.

Our Comments:

Whether or not the requirements embodied in the above quoted words are satisfied in a particular situation is a question of fact which can only be resolved after consideration of all of the relevant facts of that situation. However, we will attempt to provide our general views with regard to the queries raised in your letter.

In our view, the word "similar" in the context of subsection 111(5) of the Act has a narrower meaning than "having characteristics in common" and should be interpreted to mean "of the same general nature or character".

The Department has previously opined to the effect that, where a corporation carries on the business of mining and sale of metallurgical coal as well as the business of mining and sale of other "minerals" (within the meaning given that term in subsection 248(1) of the Act), income therefrom will be considered to be derived by those businesses from the "sale, leasing, rental or development...of similar properties" for the purposes of subparagraph 111(5)(a)(ii) of the Act. It would remain a question of fact as to whether the "substantially all" test with regard to the income of the relevant business from the sale, etc. of "similar properties" (as well as the other requirements of paragraph 111(5)(a) of the Act) would be satisfied. That opinion continues to reflect our general view in such a fact situation which would also encompass the business of mining and sale of thermal coal.

The foregoing comments represent our general views with respect to the issues raised in your letter. The facts of a particular situation may lead to a different conclusion. In accordance with paragraph 21 of Information Circular 70-6R2, the comments expressed herein do not constitute an advance income tax ruling and consequently are not binding on Revenue Canada - Customs, Excise and Taxation.

Yours truly,

for Director Manufacturing Industries, Partnerships and Trusts DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch