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:
1. Does our administrative position regarding the interpretation of subparagraph 85(1)(e)(i) extend to subparagraph 85(1)(d)(i)?
2. Does this administrative position apply to transactions carried out pursuant to paragraphs 55(3)(a) and 55(3)(b)?
Position:
1. Yes
2. Yes
Reasons:
Position taken in previous rulings.
2001-007399
XXXXXXXXXX Karen Power, C.A.
(613) 957-8953
May 9, 2001
Dear XXXXXXXXXX:
Re: Application of paragraphs 85(1)(e) and 85(1)(d)
We are writing in reply to your letter of March 5, 2001 wherein you requested our comments concerning an administrative position dealing with the application of paragraph 85(1)(e) of the Income Tax Act (the “Act”).
You have noted a number of Rulings and Technical Interpretations which contain the following administrative concession:
“For the purposes of the joint election described herein, the reference to "the undepreciated capital cost to the taxpayer of all property of that class immediately before the disposition" found in subparagraph 85(1)(e)(i) shall be interpreted to mean that proportion of the undepreciated capital cost to the taxpayer of all of the property of that class that the fair market value of the asset immediately before the disposition is of the fair market value of all property of that class immediately before the disposition.”
You have specifically requested our views on whether this administrative practice is acceptable in all paragraph 55(3)(a) and 55(3)(b) situations and whether the position extends to subparagraph 85(1)(d)(i) of the Act.
The administrative position described above is generally acceptable in most divisive reorganizations governed by paragraphs 55(3)(a) and 55(3)(b) of the Act. In addition, the administrative concession has been granted in situations where the pro ration has been based on the proportion that the capital cost of the particular property is of the capital cost of all property of the class. Finally, the position has in certain circumstances been extended to transfers of eligible capital property under subparagraph 85(1)(d)(i) of the Act.
This administrative concession has not been restricted to situations where an advance income tax ruling has been issued to the particular taxpayer. However, given that it is an administrative concession, confirmation that this administrative position will apply to particular proposed transactions is often the subject matter of an advance tax ruling request.
We trust our comments will be of assistance to you. These comments are provided in accordance with the practice outlined in paragraph 22 of Information Circular 70-6R4.
Yours truly,
for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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