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: Whether amount A of the formula in subsection 127(10.2) of the Income Tax Act must include the taxable incomes of all associated corporations if an election under subsection 256(2) of the Act has been filed by one of the corporations.
Position: Yes.
Reasons: The wording in subsection 256(2) provides that an election applies only for purposes of section 125 of the Act
XXXXXXXXXX 2002-014546
J. Gibbons, CGA
August 29, 2002
Dear XXXXXXXXXX:
We are replying to your letter dated June 5, 2002, in which you requested our comments concerning subsection 127(10.2) of the Income Tax Act (the "Act"). In particular, you wish to have our views whether amount A of the formula in the provision must include the taxable incomes of all associated corporations if an election under subsection 256(2) of the Act has been filed. For example:
? Corporations A, B and C are Canadian-controlled private corporations carrying on business in Canada.
? Corporations A and C are each associated with Corporation B within the meaning of subsection 256(1) of the Act but are not associated with each other.
? Corporation B elects in prescribed form not be associated with either A or C pursuant to subsection 256(2) of the Act.
? Corporation C claims an amount under subsection 127(10.1) of the Act.
Our comments are of a general nature only since we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular IC 70-6R5.
Under subsection 256(2) of the Act, Corporations A and C are deemed to be associated with each other unless an election is filed by Corporation B. However, it is our view that the wording in subsection 256(2) provides that an election applies only for purposes of section 125 of the Act. Accordingly, even if an election is filed by Corporation B, Corporations A, B and C will continue to be associated with each other for all other purposes of the Act, including subsection 127(10.2).
We trust that these comments will be of assistance.
Yours truly,
Bruce Dodd
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
??
- 2 -
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2002
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2002
Email this Content