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: How does section 34.2 of the Act apply when a professional moves his or her practice from Hull, Quebec to Ottawa, Ontario.
Position: The taxpayer is required to include in income the reserve taken in the previous year and may claim a reserve to the extent permitted in subsection 34.2(4) of the Act.
Reasons: The two tax systems (Federal and Quebec) seem compatible in respect to the reserve when there is a move between Quebec and another province.
XXXXXXXXXX 2001-006968
J. E. Grisé
March 8, 2001
Dear XXXXXXXXXX:
Re: Reserve for December 31, 1995 Income
This is in reply to your letter of January 10, 2001, requesting our interpretation on the application of section 34.2 of the Income Tax Act (the Act) when an unincorporated professional operating in Hull, Quebec moves his or her practice to Ottawa, Ontario.
As indicated in a telephone conversation (XXXXXXXXXX/ Grisé), we are not in a position to offer an opinion concerning the Quebec income tax legislation. Enquiries with respect to such legislation should be directed to officials of the ministère du revenue du Québec.
With respect to the Federal income tax implications, subsection 34.2(5) of the Act requires the taxpayer to include in income the amount of the reserve deducted in computing the taxpayer's income for the preceding taxation year. The taxpayer would then be entitled to a reserve pursuant to subsection 34.2(4) of the Act to the extent permitted by that subsection. The Ontario income tax is computed on the taxpayer's taxable income for Federal income tax purposes, which takes into consideration the subsection 34.2(5) income inclusion and any subsection 34.2(4) deduction.
We hope our comments are helpful.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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