Income Tax Severed Letters - 2002-05-24


4 June 2002 Ruling 2002-0132703 F - POMPIERS VOLONTAIRES

Unedited CRA Tags

Principales Questions:
Est-ce que les "pompiers volontaires" peuvent profiter de l'exemption prévue au paragraphe 81(4) de la Loi?

Position Adoptée: Commentaires généraux sur ce qu'est un volontaire.

2002 Ruling 2001-0114583 - unwinding 243

Unedited CRA Tags
134, 133 134.1

Principal Issues: Will certain transactions undertaken to unwind two NROs permit debts owed to the NRO's to be transferred to a limited partnership and interest on those debts to continue to be deductible by Canco?

Position: Yes. The transactions have the effect of winding up the NRO into the limited partnership and the interest on the debts involved will continue to be deductible to Canco.

Reasons: See Issue Sheet.

2002 Ruling 2002-0124853 F - Butterfly Transaction - Papillon

Unedited CRA Tags
55(3)(b) 55(3.1) 55(2)

Principal Issues: Split-up butterfly transaction.

Position: Favourable rulings provided.

Reasons: Meets the requirements of the law.

2002 Ruling 2002-0126653 - GOODWILL CEASING TO BE EXEMPT

Unedited CRA Tags
149(10)(b) 14(5)

Principal Issues:
1) Whether goodwill is property for the purposes of 149(10)(b) even if it has not been previously recognized;
2) Whether the amount in respect of goodwill which is disposed of and reacquired by virtue of 149(10)(b) is an eligible capital expenditure within the meaning of 14(5).

1) Yes
2) Yes


2002 Ruling 2002-0134013 - PARTNERSHIP RESERVE AVOIDANCE

Unedited CRA Tags
34.2(4)(c) 34.2(6)(c)

Principal Issues: 1. whether Principal will be entitled to 34.2(4) reserve after most of his interest in the partnership is transferred to a corporation that he controls
2. whether income in 34.2(4)(c) is limited to income earned as a partner

Position:1 only in the year when the Principal transfers 90%of his interest in the Partnership to his corporation. In subsequent years the Principal cannot claim a reserve
2. no - income will include income earned by the taxpayer through the corporation: see ITA (also see Dec 1995 technical notes "income ...(from all sources)"

Reasons: 1. in the year when the Principal transfers 90%of his interest in the Partnership to his corporation the criteria in 34.2(6)(c)(i) would be satisfied at the beginning of the year and the anti-avoidance rule would not apply at that time. However, in subsequent years the anti-avoidance rule in (7) would prevent the Principal from claiming a reserve

2002 Ruling 2002-0139053 - LOSS CONSOLIDATION

Unedited CRA Tags

Principal Issues:
Loss consolidation. Taxpayer seeking certainty on deductibility of interest on funds borrowed as part of a loss consolidation scheme within a related group.

Position: Favourable rulings given.

Reasons: We have previously provided rulings in similar situations.

Technical Interpretation - External

19 June 2002 External T.I. 2002-0135445 - FOREIGN PROPERTY GRANDFATHERING

Unedited CRA Tags

Principal Issues:
Where shares held in an RRSP trust are not foreign property because of the 24-month grandfathering provision in subparagraph 206(2)(a)(iii), will the grandfathering continue where the annuitant transfers his or her holdings in the RRSP trust to another RRSP trust during that 24-month period?

Position: No.

In order to qualify for the grandfathering, the shares must become foreign property after their acquisition by the RRSP trust. This would not be the case where grandfathered shares are transferred to another RRSP.

18 June 2002 External T.I. 2002-0144935 - SPECIFIED INVEST. BUSINESS

Unedited CRA Tags

Principal Issues: Interpretation of paragraph (a) of the definition of "specified investment business" in subsection 125(7) of the Income Tax Act .

Position: The exclusion in paragraph (a) does not require a corporation to employ more than 5 full time employees from the beginning of the year to the end, but rather requires the corporation to employ more than 5 full time employees throughout the period in which there is a business.

Reasons: Wording of the Act permits such an interpretation.

18 June 2002 External T.I. 2002-0141405 - PENSION INCOME RECEIVED BY STATUS INDIANS

Unedited CRA Tags
81(1)(a) 56(1)(a)(i)

Principal Issues: Taxation of pension income received by status Indians

Position: General Comments provided.

Reasons: General comments provided.

18 June 2002 External T.I. 2002-0126945 - qualified farm property

Unedited CRA Tags

Principal Issues: Whether land owned by the taxpayer constitutes "qualified farm property"?

Position: Perhaps

Reasons: We have not been provided with enough detail to make such a determination. Only general comments have been provided.

17 June 2002 External T.I. 2002-0118485 - MUNICIPAL CORPORATION

Unedited CRA Tags

Principal Issues:
Whether a municipal corporation would qualify for the tax exemption under paragraph 149(1)(d.5).

Position: Factual determination.

Reasons: Legislation

15 June 2002 External T.I. 2000-0047365 - Barbados Treaty 5907(11.2)(c) Regulations

Unedited CRA Tags

Principal Issues:
Where a foreign affiliate, that is incorporated in Barbados and is an international business company under the Barbados International Business Companies Act ("IBCA"), is liable to tax in Barbados on its worldwide income under the Barbados Income Tax Act and IBCA, whether the foreign affiliate would satisfy the conditions in paragraph 5907(11.2)(c) of the Income Tax Regulations ("Regulations")?


The foreign affiliate would be a resident of Barbados for the purposes of the Barbados Treaty but for paragraph 3 of Article XXX of the Barbados Treaty (which provides that the Barbados Treaty does not apply to the foreign affiliate).

14 June 2002 External T.I. 2002-0143555 - Deemed Residency

Unedited CRA Tags

Principal Issues: Would the contractual or statutory framework that governs the relationship between the employer and employee be used to determine the meaning of "immediately prior to appointment or employment" found in 250(1)(c)?

Position: Our position has been that the phrase "appointment or employment" refers to the hiring rather than actual commencement of employment. As it is a determination of fact when an employee is actually hired or considered employed, we could look to the relevant legislation or contract law; however, it would depend on the circumstances whether the use of that approach produces the intended results of paragraph 250(1)(c) being the taxation of persons who are employed by Canada or a province in a foreign country.

Reasons: previous position taken in files 9507485, 2000-001328 and 2002-011819

14 June 2002 External T.I. 2002-0127955 - RRIF TRANSFER TO DEPENDANT CHILD

Unedited CRA Tags
146.3(6) 60(l)

Principal Issues: Can amount be transferred out of a RRIF on a tax-deferred basis to an infirm adult child of the annuitant of the RRIF on the death of the annuitant?

Position: The amount may be transferred on a tax-deferred basis to an RRSP, a RRIF or an annuity under which the child is the annuitant, if the amount is a "designated benefit" as that term is defined in the Act.

Reasons: The Act provides for tax-deferred transfers of amounts between registered plans for the benefit of dependent children in certain circumstances. An infirm adult child must be financially dependent on the annuitant at the time of death to qualify for the tax-deferred transfer.

13 June 2002 External T.I. 2001-0098305 - Flow-Through Shares

Unedited CRA Tags

Principal Issues:
1) Whether an election pursuant to subsection 39(4), is available for flow through shares;
2) The point at which a newly created corporation achieves a "principle business corporation status" to the extent that it may not have engaged in any of the activities enumerated in the definition of "principle business corporation status".

1) Election pursuant to subsection 39(4), is not available for a flow-through share.
2) Depends on the facts of the situation.

1) Election pursuant to subsection 39(4), is not available for a flow-through share because it is a prescribed security that is excluded from the definition of a Canadian security.
2) Generally speaking a new corporations activities in preparing its offering memorandum, it's business plan and developing it's organizational structure could be indications that it has commenced business thereby achieving the principal business corporation status.

12 June 2002 External T.I. 2002-0140545 - RCA MUTUAL FUNDS

Unedited CRA Tags

Position: Referred to Finance.


12 June 2002 External T.I. 2002-0141115 - MGM FEES & BONUSES

Unedited CRA Tags

Principal Issues: Whether section 67 of the Act will apply when a management fee or bonus is paid to a family trust.

Position: Question of fact.

Reasons: The situation is not covered by the CCRA policy outlined in Income Tax Technical News Issue No. 22, dated January 11, 2002.

12 June 2002 External T.I. 2002-0124925 - EXEMPTIONS-GENERAL MENTAL INJURY

Unedited CRA Tags

Principal Issues: Whether the income on amounts paid under a settlement reached on behalf of children under 21 years in respect of loss of consortium, society and companionship arising from the death of a parent are payments for a "mental injury" within the meaning of paragraph 81(1)(g.1)?

Position: No.

Reasons: While the relevant statute that provides for recovery for "the reasonable value of the services, consortium, companionship, comfort, instruction, guidance, counsel, training, and support", it precludes recovery for "damages for grief and bereavement by reason of the death".

12 June 2002 External T.I. 2002-0138625 - REGISTERED INVESTMENTS FUTURES CONTRACTS

Unedited CRA Tags
204.4(1) 204.4(2) REG 4901(1)

Principal Issues:
Are currency and interest rate futures contracts prescribed investments for a registered investment?

Position: Question of Fact.

In order to be a prescribed investment for a registered investment, property must be a qualified investment for an RRSP, a RRIF or a DPSP in respect of which the corporation or trust is seeking registration as a registered investment.

12 June 2002 External T.I. 2002-0135135 - OPEN CUSTODY HOMES

Unedited CRA Tags

Principal Issues:
Tax treatment of amounts received to operators of open custody homes.

Position TAKEN:
General information provided.

Question of fact.

12 June 2002 External T.I. 2002-0143325 F - REGIME DE CONGE A TRAITEMENT DIFFERE

Unedited CRA Tags
REG 6801(a)

Position Adoptée:
Oui, dans la mesure où les montants différés durant la période d'échelonnement commune en vertu des deux régimes ne dépassent pas 33 1/3 % du salaire que l'employé aurait reçu au cours de l'année et que le sous-alinéa 6801a)(vi) du Règlement soit respecté pour chaque régime individuellement.
Analyse législative.

XXXXXXXXXX 2002-014332
L. J. Roy, CGA
Le 12 juin 2002

11 June 2002 External T.I. 2002-0140225 - HOME BUYER'S PLAN DIVORCE

Unedited CRA Tags

No unless the jointly owned home was sold before January 1, 1998.
Application of the Act.

XXXXXXXXXX 2002-014022
L. J. Roy, CGA
June 11, 2002

11 June 2002 External T.I. 2002-0131445 - MEDICAL EXPENSES

Unedited CRA Tags
118.2(2)(a) 118.2(2)(f) 118.2(2)(g) 118.2(2)(i)

Principal Issues: The t/p suffered a heart attack while vacationing in XXXXXXXXXX . Do various unreimbursed expenses incurred qualify as medical expenses?

Position: yes to ambulance costs and amounts paid to doctor and hospital for medical services; probably no to travel/transportation exp.; rental of medical equipment may qualify (details not provided); no to telephone exp.

Reasons: travel/transportation exp. probably denied because it is likely that comparable medical services were available closer to the locality at which the t/p was dwelling

10 June 2002 External T.I. 2001-0102915 - LIMITED PARTNERS

Unedited CRA Tags
4900(1)(J) 4900(4)

Principal Issues: In circumstances where a limited partnership takes out a mortgage on its real property, would a limited partner who is the annuitant of the RRSP be considered to be the mortgagor for purposes of paragraph 4900(1)(j) of the Regulations

Position: The determination of the issue is a factual one and can only be determined in the context of an advance income tax ruling.

Reasons: In an ordinary partnership the partner would be considered the mortgagor for purposes of paragraph 4900(1)(j) and the taxpayer would have to demonstrate to us that the limited partner should be treated differently.

10 June 2002 External T.I. 2002-0138885 F - Redemption of Preferred Shares

Unedited CRA Tags
55(2) 55(3)(a)

Principal Issues: Whether subsection 55(2) would apply with respect to the deemed dividend on the redemption of the preferred shares in the 2 scenarios described in the letter?

Position: No

Reasons: No transaction as described in 55(3)(a).

6 June 2002 External T.I. 2002-0133895 F - entreprise de placement determinee

Unedited CRA Tags

Principales Questions:
Est-ce que, dans la situation donnée, la récupération d'amortissement réalisée par Immeubleco est un revenu d'entreprise exploitée activement ?

Position Adoptée:

5 June 2002 External T.I. 2002-0143625 - Date of becoming a non resident

Unedited CRA Tags
2 250(5)

Principal Issues: What is the date that the individual becomes a non-resident?

Position: When all significant ties to Canada are severed or possibly sooner depending on application of 250(5) as Canada has a tax treaty with the Netherlands. It is a question of fact.

Reasons: See paragraph 15 of IT-221R3.

5 June 2002 External T.I. 2002-0122665 - Shareholder rights plans & Section 86.186.1

Principal Issues: Can a distribution of common shares with rights attached to them come within the meaning of a distribution that consists solely of common shares for purposes of section 86.1 of the Act?

Position: No. We are willing to look into this issue in more depth if we receive a live file to review, however.

Reasons: We generally take the position that a share right is a property distinct from the share. So if the share right is created before the distribution such that the right is distributed along with the share, we do not see how it can be said that the distribution consists "solely" of common shares. The situation may be slightly different for rollover provisions other than s. 86.1; the wording of such provisions may allow us more flexibility with respect to share rights as non-share consideration. Again, we need to see a "live" file before we change our basic position.

4 June 2002 External T.I. 2002-0141435 F - Disposition of Shares

Unedited CRA Tags
85(1) 248(1) "Disposition"

Principal Issues: Whether, in a given fact situation, the "exchange" of voting common shares of the capital stock of a corporation for voting preferred shares and non-voting common shares of the same corporation would constitute a disposition for the purposes of subsection 85(1) of the Act. The voting common shares would be cancelled in the process.

Position: Yes.

Reasons: Wording of the Act and current positions.

4 June 2002 External T.I. 2001-0114255 - Taxation year of a foreign affiliate

Unedited CRA Tags
95(1) "Taxation year" Reg. 5907(1) "exempt surplus"

Principal Issues: Where U.S. Treasury Regulation §1.1502-76(b)(1)(ii) applies, for purposes of computing the exempt surplus of a foreign affiliate, does the "taxation year of the subject affiliate in which it last became a foreign affiliate" mean the year ending on the day of the acquisition, or the year commencing on the day subsequent to the acquisition?

Position: The year commencing on the day subsequent to the acquisition, plus any transactions from the previous day after the acquisition

Reasons: Only the earnings and loss of the foreign affiliate subsequent to the acquisition is considered in the computation of exempt surplus.

4 June 2002 External T.I. 2002-0117915 - gifts in kind to charity

Unedited CRA Tags

Principal Issues:
Can a tax receipt be issued for gifts of baked goods (cakes, pies etc.), or baking supplies? What is the appropriate amount to receipt? Is there any distinction between a "gift" and a "donation"?

Baked good and baking supplies are property that may be gifted as gifts in kind. The amount to be receipted is the fair market value of the property gifted at the time of the gift. There is no distinction, for tax purposes, between a gift and a donation.

A gift is a voluntary transfer of property for which the donor receives no benefit in return. Gifts, pies, baking supplies etc. are property and therefore may be gifted. Section 3501 of the Income Tax Regulations requires that gifts in kind be receipted at fair market value.

3 June 2002 External T.I. 2002-0138595 - LIFE INSURANCE POLICIES T5

Unedited CRA Tags
56(1)(j) 148(1) REG 217(2)

Principal Issues:
A taxpayer disposes of his/her interest in a life insurance policy in a non-arm's length private sale in 1999 without advising the insurer. The insurer is advised only in 2002. Should the insurer report the income on the T5 pursuant to subsection 217(2) of the Regulations for the 1999 or 2002 taxation year?

Position: For the 1999 taxation year

Subsection 217(2) of the Regulations deals with an amount that is required to be included in computing the income of a taxpayer pursuant to paragraph 56(1)(j) which applies with respect to the taxation year in which the disposition occurred. The relevant time for determining the adjusted cost basis and value of the policy is the date of the disposition.

30 May 2002 External T.I. 2002-0134345 - DECEASED'S INTEREST IN JOINT TENANCY

Unedited CRA Tags
70(6) 40(4)

Principal Issues: Whether subsections 70(6) and 40(4) of the Act would apply when the taxpayer becomes the sole owner of the property at the time the spouse dies?

Position: Yes, unless an election under subsection 70(6.2) of the Act to not have this provision apply is made.

Reasons: Previous interpretations.

30 May 2002 External T.I. 2002-0134505 - PRESCRIBED PRIZE

Unedited CRA Tags

Principal Issues: Whether the XXXXXXXXXX qualifies as a "prescribed prize" pursuant to section 7700 of the Income Tax Regulations

Position: Question of fact, but likely not.

Reasons: Cannot be described as a prize that is recognized by the general public and that is awarded for meritorious achievement in the arts, the sciences or service to the public.

27 May 2002 External T.I. 2002-0135605 F - DIVISION 6208(1)a)(iii)(A) du Règlement

Unedited CRA Tags
REG 6801(1)(a)(ii)(A) 212(1)b)(vii)

Principales Questions:
L'expression " ou tout autre bien " mentionné à la division 6208(1)a)(iii)(A) du Règlement inclut-elle le titre de créance lui-même ou a-t-elle une portée plus limitée.

Position Adoptée: Question de fait

21 May 2002 External T.I. 2002-0126445 - Deemed disposition as subsequent

Unedited CRA Tags
220(4.5) 128.1(6) 128.1(1)(b)

Principal Issues: Has property subject to a deemed disposition under paragraph 128.1(1)(b) of the Income Tax Act been "subsequently disposed of" for purposes of subsection 220(4.5)?

Position: Yes

Reasons: No basis in subsection 220(4.5) for excluding deemed dispositions

16 May 2002 External T.I. 2002-0135765 - E-Commerce & Computer Software

Unedited CRA Tags

Principal Issues: request for IFA conference to provide status of e commerce papers (Position Paper Internet Commerce and Characterization Issues Arising From Electronic Commerce) and announcements regarding related issues

Position: e commerce paper at Department of Finance for their consultation and CCRA no longer views payment for computer software as payment for secret formula

Reasons: Department of Finance removed Canada's observation in OECD Model Convention that Canada viewed a payment for "computer software" as a payment for a "secret formula"

15 May 2002 External T.I. 2002-0105485 - HEALTH & WELFARE TRUST

Unedited CRA Tags

Principal Issues: 1. whether rules in IT-85R2 will apply where no actuarial info, but the only money that will be transferred to the trust is money that will be payable in the trust in the same year to employees
2. whether H&W trust rules apply where 2-tiered trust

Position: 1.yes
2. issue withdrawn

Reasons: 1. pay-as-you go plans acceptable
2. no clear business necessity for an additional trust

15 May 2002 External T.I. 2002-0139005 - Provincial residence while abroad

Unedited CRA Tags
250(3) Reg. 2600

Principal Issues: What impact does location of storage of personal belongings have on residence determination?

Position: This is a minor tie, and unlikely to "make or break" any residence determination, whether for national or provincial residence purposes.

Reasons: This kind of tie is only significant when taken together with other residential ties. Generally, we'd look at where the most significant residential ties were to determine provincial residence. Usually, a person leaving Canada on a work assignment will be resident for provincial tax purposes in the province that they left from.


Unedited CRA Tags
149(1)(l) 149(5)

Principal Issues: Whether main purpose of a non-profit society is to provide sporting facilities for its members for the purposes of subsection 149(5).

Position: Question of fact

Reasons: Would need to examine by-laws and review activities to make this determination.

13 May 2002 External T.I. 2002-0136855 - Tower Struture

Unedited CRA Tags
20(12) 126

Principal Issues: Whether foreign income taxes are deductible under subsection 20(12) or creditable under section 126 of the Income Tax Act in a tower structure situation?

Position: No.

Reasons: Because these taxes can reasonably be regarded as having been paid by the Canadian parent company in respect of income from a share of the capital stock of a foreign affiliate of the parent company.

Technical Interpretation - Internal

14 June 2002 Internal T.I. 2001-0096897 - SUPPLEMENTARY EMPLOYEE RETIREMENT PLAN

Unedited CRA Tags

Principal Issues:
Is a supplemental pension plan which uses notional accounts to record member allocations an RCA?

Question of fact. Depends on whether it is actually funded.

The definition of an RCA in subsection 248(1) requires that a contribution be made.

12 June 2002 Internal T.I. 2002-0128177 - RCA MUTUAL FUNDS

Unedited CRA Tags

Position: No
REASON: Legislative analysis and previous position.

11 June 2002 Internal T.I. 2002-0126037 - conjugal relationship

Unedited CRA Tags
252(4) 118(1)

Principal Issues: 1. whether there has been a breakdown in conjugal relationship so as to not entitle the taxpayer to a credit for support of non-resident "common-law spouse"

Position: 1. question of fact however likely not entitled to the credit.

Reasons: 1. as per T1 guide and IT-513R- proof of support is required & also taxpayer never resumed cohabitation or cannot provide proof of cohabitation versus visitation. In addition, the taxpayer originally claimed to be divorced for the years at issue.

5 June 2002 Internal T.I. 2002-0142167 - EXEMPT INCOME - MEDICAL EXPENSE

Unedited CRA Tags
81(1)(a) 122.51

Principal Issues: Can a status Indian with no income other than exempt income claim the refundable medical expense supplement?

Position: No.

Reasons: If the amount is exempt under section 81, it cannot be income as income for the purposes of determining whether an individual qualifies for the refundable medical expense supplement under subsection 122.51(1) of the Act.

4 June 2002 Internal T.I. 2002-0142187 - PRESCRIBED PRIZE; CARNEGIE

Unedited CRA Tags
Reg. 7700 56(1)(n)(i)

Principal Issues: whether Carnegie Hero Fund Prize is a prescribed prize

Position: yes

Reasons: fits criteria in Reg 7700,
June 4, 2002

4 June 2002 Internal T.I. 2002-0131077 - Statute-Barred Refund

Unedited CRA Tags
221.2 164(1)

Principal Issues:
Where an overpayment of tax of a corporate taxpayer for a particular taxation year is statute-barred under subsection 164(1) because the corporate taxpayer's tax return for the particular taxation year was late-filed beyond the three-year period from the end of the particular taxation year as described in subsection 164(1), whether such statue-barred tax refund can be transferred to a different taxation year or to a different tax account under section 221.2 of the Act?

Position: No.

Reasons: To transfer the statute-barred tax refund of the corporate taxpayer to another tax account or to a different taxation year would constitute another form of refunding, which refunding is prohibited under subsection 164(1).

24 May 2002 Internal T.I. 2002-0130667 F - REGIME PRESTATION EMPLOYES

Unedited CRA Tags

Principales Questions:
Est-ce que la décision anticipée émise précédemment est toujours valide et en vigueur?

Position Adoptée:
Nous ne sommes pas en mesure de répondre. La lettre du contribuable sera acheminée au BSF.

20 March 2002 Internal T.I. 2002-0126537 - Article XV(2); Employee Stock Options

Unedited CRA Tags
Article XV S. 7(3)

Principal Issues: 1. Is a stock option benefit to be included in income in the year the stock option was granted for purposes of determining the application of subparagraph 2(a) of Article XV of the U.S. Tax Convention?
2. Where the individual has regular employment income in the year that the stock option benefit was granted, and this income is borne by a Canadian employer (or a PE), is this sufficient to make the whole of the remuneration for the year, including the stock option benefit, taxable in Canada, notwithstanding that the stock option benefit is not borne by a Canadian employer (or a PE) and would ordinarily be exempt under subparagraph 2(b) of the U.S. Tax Convention (where the individual is not in Canada for more than 183 days)?

Position: 1. Yes. 2. No.

Reasons: 1. We have consistently taken the position that a stock option benefit is to be included in "remuneration" for purposes of subparagraph 2(a) of Article XV in the year that the stock option was granted. Thus, even if regular employment income is less than $10,000, a stock option benefit that is attributable to the same year may bring the employee's total remuneration for year above $10,000 such that the exemption in subparagraph 2(a) of Article XV does not apply.
2. Although we could try to read "remuneration" as a collective whole for purposes of subparagraph 2(b), as we do for subparagraph 2(a), the emphasis on the amount being "borne by" the Canadian employer (or PE) strongly suggests that the intention was that any income not borne by a Canadian employer (or PE) should not be taxable in Canada where the employee was not in Canada for more than 183 days.

18 July 2001 Internal T.I. 2001-0086027 - FISCAL PERIOD AUTHORIZED FOREIGN BANKS

Unedited CRA Tags
249.1(1) 181.1(2)

Principal Issues: At what point in time does an authorized foreign bank commence its first fiscal period in Canada? Foreign banks wish to take advantage, for their first taxation year in Canada, of the reduced capital tax liability imposed during short taxation years under subsections 181.1(2) and 190.1(2) of the Income Tax Act by commencing their first fiscal period at the time they actually begin to carry on banking activities in Canada e.g. write loans etc.

Position: The first fiscal period of an authorized foreign bank commences no later than the date the Superintendent of Financial Institutions issues a section 534 order authorizing it to commence and carry on business in Canada. The bank may choose to commence its first fiscal period prior to that time, provided it was in existence at the time it elects to commence that first fiscal period

Reasons: Generally, a non-resident corporation is not obligated to adopt, for Canadian tax purposes, either the same fiscal period that it uses to report income in its home jurisdiction or a fiscal period that commences concurrent to the anniversary of its date of incorporation. Instead, it may commence its fiscal period no later than the day it commences business activities in Canada, or at any earlier time that the corporation was in existence. An authorized foreign bank may not commence to carry on business in Canada until it is authorized to do so by an order made under subsection 534(1) of the Bank Act. Once a section 534 order has been issued, an authorized foreign bank is present in Canada and has taken all prerequisite steps to commence its Canadian business.