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:
What measuring basis does the Agency use to apply the criteria "all or substantially all" in subsection 8604(a) of the Regulation?
Position:
Generally, the cost of the assets as presented in the financial statements is an appropriate measurement basis. However, this is subject to what is reasonable in the particular circumstances depending on the facts of the particular situation.
Reasons:
8604(a) does not specify a measuring basis. This is consistent with the Agency's position which has been to use the cost of the assets or liabilities for accounting purposes (see E9309871).
XXXXXXXXXX 2002-015032
A. St-Amour, CA
August 16, 2002
Dear XXXXXXXXXX:
Re: Large Corporation Tax
This is in reply to your letter of July 5, 2002, requesting a clarification of the test "all or substantially all" to be used for the purposes of subsection 8604(a) of the Income Tax Regulations (the "Regulations"). More precisely, you would like to know the appropriate measurement basis that should be used in interpreting the expression "all or substantially all", i.e. the accounting cost of the assets, their fair market value, their tax cost or other measurement.
The term "financial institution" is defined in subsection 181(1) of the Income Tax Act (the "Act"). Paragraph (g) of that definition refers to a prescribed corporation which is a corporation listed in section 8604 of the Regulations. Paragraph 8604(a) includes a corporation of which all or substantially all of the assets are shares or indebtedness of financial institutions (as defined in subsection 181(1)) to which the corporation is related.
Whether "all or substantially all" of the assets of a corporation are shares of financial institutions to which it is related is a question of fact to be determined on a case by case basis. We are of the view that the cost of the assets as reflected in the balance sheet would normally be the appropriate measure. However, this will be subject to what is reasonable in a particular situation and other measuring basis may be used depending on the circumstances.
As indicated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, the above comments do not constitute an advance income tax ruling and are not binding on the Agency. We trust the above comments will be of assistance to you. If you have any other questions, do not hesitate to contact us.
Yours truly,
Manager
Section du financement et des régimes
Financial Industries Division
Income Tax Rulings Directorate
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