15 May 2002 Internal T.I. 2002-0137767 - MEANING OF SUBSTANTIALLY ALL

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

1. What is the meaning of "substantially all" in subsections 149.1(6.1) and (6.2)?

2. Whether the meaning of "substantially all" may vary from one provision to the next.

Position:

While the words "substantially all" cannot be rigidly interpreted as referring to a specific percentage in all cases, we continue maintain the position that for the purposes of the ITA the phrase "substantially all" generally means more that 90%.

Reasons: Jurisprudence

									May 15, 2002

Charities Directorate						Income Tax Rulings
Carl Juneau							  Directorate
Director							K. Cooper, LL.B.
									957-8984

2002-013776

Subsections 149.1(6.1) and (6.2)

This is in response to your e-mail of January 11, 2002 requesting our comments with respect to the meaning of "substantially all" in subsections 149.1(6.1) and (6.2).

The case law considering the meaning of "substantially all" in the Income Tax Act suggests that the interpretation of the phrase will depend upon the provision of the Act at issue and the particular facts before the Court. In Wood v. M.N.R.,¹ the Court stated that "the term "substantially all" does not lend itself to a simple mathematical formula. Further it would seem to me that any particular definition of "substantially" would be only valid with reference to the specific context in which it is found." The Court acknowledged that the Minister might be hard-pressed to refuse a claim where the percentage was 89%, maybe even 85% or 80%, but that the assessing policy of 90% "is undoubtedly a useful and functional mechanism in dealing with a difficult section of the Act."² More recently, in MacDonald v. H.M.Q.,³ the Court considered the phrase "substantially all" in the context of the application of subsection 6(2) to the taxpayer's use of a car and stated:

These dictionary definitions confirm that the word "substantially", as Bowman, J.T.C.C. remarked in Ruhl v. Canada, is elastic and an unsatisfactory medium for conveying the concept of an ascertainable proportion of the whole. The words "substantially all" in the context of paragraph 6(2)(d) need not be interpreted as 90% or more but may be a lesser proportion of the whole depending on the facts.⁴

While the words "substantially all" cannot be rigidly interpreted as referring to a specific percentage in all cases, we continue maintain the position that for the purposes of the Income Tax Act the phrase "substantially all" generally means more that 90%. Further, there is a presumption when interpreting statutes that a word has the same meaning whenever it is used in the Act. For example, in H.M.Q. v. Taylor, it was stated that "(p)rima facie the same words in different parts of the same statute should be given the same meaning unless there is a clear reason for not doing so."⁵ As an assessing policy applicable to most cases, the Agency will consider that the test is met if at least the 90% level is reached. However, this position does not rule out the possibility that in a particular case, depending on the facts and circumstances, a level of something less than 90% could still meet the "substantially all" requirement.

We trust that these comments are helpful. If you have any questions, or wish to discuss these issues in further detail, please do not hesitate to contact Karen Cooper or myself directly.

F. Lee Workman
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch

ENDNOTES

¹ 87 D.T.C. 312 (T.C.C.) at 313. The Court determined that 70% of the taxpayer's income which was earned in Canada was not "substantially all" of his income for the purpose of 115(1)(f).

² Ibid.

³ 98 D.T.C. 2151 (T.C.C.) (Informal Procedure).

⁴ Ibid.at 2154-55. In that case, 85% of the distance traveled was considered to be "substantially all".

⁵ 84 D.T.C. 6234 (F.C.A.).