30 June 1998 External T.I. 9809095 - ELIGIBLE CAPITAL PROPERTY,S.116, TCP

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 an eligible capital property is a taxable Canadian property.

Position:

No.

Reasons:

Gain from the disposition of eligible capital property by a non-resident will be treated by paragraph 14(1)(b) of the Act as income from a business carried on in Canada.

						                                                          					5-980909
XXXXXXXXXX 					              			                                           	Daniel Wong
(613) 954-4949
Attention: XXXXXXXXXX 

June 30, 1998

Dear Sirs:

Re: Section 116 Compliance Certificate for Eligible Capital Property

This is in reply to your letter of April 6, 1998, wherein you requested our opinion as to whether section 116 of the Income Tax Act (the “Act”) is applicable to a non-resident person who disposes of eligible capital property.

COMMENTS

Section 116 of the Act sets out procedures for collecting tax from non-residents with respect to certain types of taxable Canadian property. Taxable Canadian property is defined in paragraph 115(1)(b) of the Act to mean certain property prescribed therein, the disposition of which will result in a taxable capital gain or an allowable capital loss under paragraph 3(b) of Act. In our view, an eligible capital property is not a taxable Canadian property as the gain from the disposition of eligible capital property will be treated by paragraph 14(1)(b) of the Act as income from a business carried on in Canada. In the case of a non-resident such income will be included in income under paragraph 2(3)(b) and subparagraph 115(1)(a)(ii) of the Act. As a result, the provisions of paragraph 115(1)(b) and section 116 respecting taxable Canadian property are not applicable to eligible capital property that is owned by a non-resident person.

The above comments represent our general views with respect to the subject matter of your letter and are provided in accordance with paragraph 22 of Information Circular 70-6R3.

Yours truly,

for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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