Income Tax Severed Letters - 2003-07-11

Miscellaneous

24 June 2003 2003-000552A50 - Debt owed by a testamentary trust

Unedited CRA Tags
108(1) 104(13.1)

Principal Issues: Whether a testamentary trust is tainted under the proposed amended definition in 108 in the December 2002 package where a beneficiary pays taxes owed by a trust on income taxed as a result of a designation under 104(13.1) or (3.2).

Position: Normally, no.

Reasons: We would not expect the trust to become indebted to the beneficiary.

3 June 2003 2002-014675A50 - Computation interest on bonds/estate

Unedited CRA Tags
12(1)(c); 12(4) 12(11); 20(14) 52(1); 53(2)(1)

Principal Issues: (1) How much interest should have been included in the income of an estate with respect to a bond on which a premium was paid. (2) How is the premium factored in the calculation of the capital gain that arose on the sale of the bond? (3) How is the income earned on the stripped bond taxed? (4) Issues related to the final period of the estate.

Position: (1 and 2) All the interest income has to be included in income, but a deduction may be claimed with respect to the accrued interest that was included in income by the transferor (par. 20(14)(b) of the Act). The accrued interest is a right or thing that has to be included in the terminal return. The estate may claim a deduction with respect to that interest (ss. 20(14) of the Act). The premium paid on the purchase of a bond is added to its ACB, and any amount deducted under ss. 20(14) of the Act reduces the ACB. (3) The owner of a strip bond is required to include the interest that accrued at the end of the anniversary day of the contract (ss. 12(4) of the Act) and that amount is included in the ACB of the bond (ss. 52(1) of the Act. (4) An estate may deduct the amounts payable to a beneficiary and the appropriate T3 or NR4 slips have to be issued. (5) Various considerations.

Reasons: Wording of the Act.

26 January 1990 EAC74533 - REGISTERED RETIREMENT SAVINGS PLANS PROCEEDS TO DEATH

Unedited CRA Tags
19(1)

7-4533
19(1) W.C. Harding
613-957-3499
January 26, 1990

Dear Sir:

Re: Registered Retirement Savings Plans (RRSPs)
Proceeds on death

This is in reply to you letter of September 29, 1989 in respect of the above-noted topic which was referred to us for reply by our Assessing and Enquiries Directorate.

26 January 1990 AC745337 - REGISTERED RETIREMENT SAVINGS PLANS PROCEEDS TO DEATH

Unedited CRA Tags
19(1)

7-4533
19(1) W.C. Harding
613-957-3499
January 26, 1990

Dear Sir:

Re: Registered Retirement Savings Plans (RRSPs)
Proceeds on death

This is in reply to you letter of September 29, 1989 in respect of the above-noted topic which was referred to us for reply by our Assessing and Enquiries Directorate.

Ruling

2003 Ruling 2003-00164330 - Reduced Mgmt Fee-add. Class of units of MFT

Unedited CRA Tags
104(7.1)

Principal Issues: This ruling involves the addition of a new class of units to an existing multi-class structure of mutual fund trusts. This ruling expands upon the previous ruling given, 2000-000836, and raises the same issues:
1) Does the creation of a new series of units result in a resettlement of the existing trusts or a disposition of existing units by current unitholders?
2) Does the reclassification of Class B units into Class C units or Class C units into Class A or Class B units result in a disposition to the unitholder?
3) Will 104(7.1) or GAAR apply to the transactions?

Position: No to all three questions.

Reasons: 1) The changes to the trust agreement are not so significant as to cause a resettlement of the existing trusts. 2) The unitholders will not be deemed to have disposed of their units since the reclassification of units will not result in any units being redeemed or cancelled nor will the unitholder be entitled to any proceeds of disposition as a result of the reclassification; the rights, privileges and conditions attached to the reclassified units will be substantially the same as the existing units with the exception of the reduced management fee. 3) The purpose test in 104(7.1) is not met as the main purpose of the proposed transactions is to enable the manager to effectively market the units to differing groups of investors by applying an appropriate level of management fee for each group of investors.

2003 Ruling 2003-01837330 - DISTRESS PREFERRED SHARE

Unedited CRA Tags
248(1) 20(1)(c) 53(1)

Principal Issues: uniquely structured DPS

Position: Favourable ruling on

Reasons: Complies with ITA

2003 Ruling 2003-0016433 - Reduced Mgmt Fee-add. Class of units of MFT

Unedited CRA Tags
104(7.1)

Principal Issues: This ruling involves the addition of a new class of units to an existing multi-class structure of mutual fund trusts. This ruling expands upon the previous ruling given, 2000-000836, and raises the same issues:
1) Does the creation of a new series of units result in a resettlement of the existing trusts or a disposition of existing units by current unitholders?
2) Does the reclassification of Class B units into Class C units or Class C units into Class A or Class B units result in a disposition to the unitholder?
3) Will 104(7.1) or GAAR apply to the transactions?

Position: No to all three questions.

Reasons: 1) The changes to the trust agreement are not so significant as to cause a resettlement of the existing trusts. 2) The unitholders will not be deemed to have disposed of their units since the reclassification of units will not result in any units being redeemed or cancelled nor will the unitholder be entitled to any proceeds of disposition as a result of the reclassification; the rights, privileges and conditions attached to the reclassified units will be substantially the same as the existing units with the exception of the reduced management fee. 3) The purpose test in 104(7.1) is not met as the main purpose of the proposed transactions is to enable the manager to effectively market the units to differing groups of investors by applying an appropriate level of management fee for each group of investors.

2003 Ruling 2003-0183733 - DISTRESS PREFERRED SHARE

Unedited CRA Tags
248(1) 20(1)(c) 53(1)

Principal Issues: uniquely structured DPS

Position: Favourable ruling on

Reasons: Complies with ITA

Technical Interpretation - External

9 July 2003 External T.I. 2003-00160550 - MEDICAL EXPENSES - ELIGIBLE PERIOD

Unedited CRA Tags
118.2(1)

Principal Issues: Medical expenses - availability of 24 month eligible period in the case of death

Position: Available to the deceased under current law. Will be available to spouse, etc. under proposed amendments.

Reasons: Wording of legislation and draft amendments.

9 July 2003 External T.I. 2003-0016055 - MEDICAL EXPENSES - ELIGIBLE PERIOD

Unedited CRA Tags
118.2(1)

Principal Issues: Medical expenses - availability of 24 month eligible period in the case of death

Position: Available to the deceased under current law. Will be available to spouse, etc. under proposed amendments.

Reasons: Wording of legislation and draft amendments.

8 July 2003 External T.I. 2003-0000305 - MUTUAL FUND CORP SWITCH FUNDS

Unedited CRA Tags
51

Principal Issues:
When shares of a class of a mutual fund corporation are exchanged for shares of another class of the same mutual fund corporation, is there a disposition?

Position:
Generally, yes. However, the exchange is deemed not to be a disposition if all the requirements of section 51 are satisfied. In this case, there is insufficient information to make such a determination.

Reasons:
Pursuant to section 51, when a shareholder receives no consideration other than the new shares, the exchange is deemed not to be a disposition. It is a question of fact whether the shareholder receives consideration other than the new shares.

8 July 2003 External T.I. 2003-00160450 - DEFERRED SALARY LEAVE PLAN

Unedited CRA Tags
REG 6801(a)(iii)

Principal Issues:
Can an employee teach a course and be paid for teaching the course from her employer while she is on leave under a DSLP.

Position: No

Reasons: It contravenes the provisions of 6801(a)(iii) of the Regulations

8 July 2003 External T.I. 2003-00003050 - MUTUAL FUND CORP SWITCH FUNDS

Unedited CRA Tags
51

Principal Issues:
When shares of a class of a mutual fund corporation are exchanged for shares of another class of the same mutual fund corporation, is there a disposition?

Position:
Generally, yes. However, the exchange is deemed not to be a disposition if all the requirements of section 51 are satisfied. In this case, there is insufficient information to make such a determination.

Reasons:
Pursuant to section 51, when a shareholder receives no consideration other than the new shares, the exchange is deemed not to be a disposition. It is a question of fact whether the shareholder receives consideration other than the new shares.

8 July 2003 External T.I. 2003-0016045 - DEFERRED SALARY LEAVE PLAN

Unedited CRA Tags
REG 6801(a)(iii)

Principal Issues:
Can an employee teach a course and be paid for teaching the course from her employer while she is on leave under a DSLP.

Position: No

Reasons: It contravenes the provisions of 6801(a)(iii) of the Regulations

30 June 2003 External T.I. 2003-01828750 F - TRANSFERT DE POLICE D'ASSURANCE

Unedited CRA Tags
148(7) 15(1) 148(1)

Position Adoptée:
Oui pour un montant égal à la JVM de la police.

RAISON POUR POSITION ADOPTÉE:
Le transfert est sujet au paragraphe 15(1) de la Loi.

30 June 2003 External T.I. 2003-0182875 F - TRANSFERT DE POLICE D'ASSURANCE

Unedited CRA Tags
148(7) 15(1) 148(1)

Position Adoptée:
Oui pour un montant égal à la JVM de la police.

RAISON POUR POSITION ADOPTÉE:
Le transfert est sujet au paragraphe 15(1) de la Loi.

27 June 2003 External T.I. 2003-0017015 - LEVERAGED BUYOUT

Unedited CRA Tags
20(1)(c)

Principal Issues: Whether interest is deductible in leveraged buyout scenario

27 June 2003 External T.I. 2003-01819750 - CHARITABLE DONATION TAX CREDIT

Unedited CRA Tags
118.1(3)

Principal Issues:
We are asked to comment on a specific completed transaction. Property was transferred to a qualified donee for consideration in year 1. Pursuant to a written agreement, the donee was to receive cash consideration for the transfer and a donation receipt. No receipt was issued due to consideration given. In year 11, a valuation was obtained suggesting property gifted could have been divided into sets with one set having a fair market value equal to the cash consideration for the transfer. We are asked whether the written agreement could be amended, on a retroactive basis, to reflect gift of one set, sale of other, then a donation receipt issued in year 12, and a tax credit claimed by the donor.

Position:
General comments given as to when a gift is completed, and the time limits for claiming a donation tax credit.

Reasons:
Question of fact to be determined by Audit having regard to all documentation.

27 June 2003 External T.I. 2003-0019095 F - RACHAT DE SERVICES PASSES

Unedited CRA Tags
147.2(4)

Position Adoptée:
Application du paragraphe 147.2(4)

27 June 2003 External T.I. 2003-00170150 - LEVERAGED BUYOUT

Unedited CRA Tags
20(1)(c)

Principal Issues: Whether interest is deductible in leveraged buyout scenario

27 June 2003 External T.I. 2003-0181975 - CHARITABLE DONATION TAX CREDIT

Unedited CRA Tags
118.1(3)

Principal Issues:
We are asked to comment on a specific completed transaction. Property was transferred to a qualified donee for consideration in year 1. Pursuant to a written agreement, the donee was to receive cash consideration for the transfer and a donation receipt. No receipt was issued due to consideration given. In year 11, a valuation was obtained suggesting property gifted could have been divided into sets with one set having a fair market value equal to the cash consideration for the transfer. We are asked whether the written agreement could be amended, on a retroactive basis, to reflect gift of one set, sale of other, then a donation receipt issued in year 12, and a tax credit claimed by the donor.

Position:
General comments given as to when a gift is completed, and the time limits for claiming a donation tax credit.

Reasons:
Question of fact to be determined by Audit having regard to all documentation.

27 June 2003 External T.I. 2003-00190950 F - RACHAT DE SERVICES PASSES

Unedited CRA Tags
147.2(4)

Position Adoptée:
Application du paragraphe 147.2(4)

25 June 2003 External T.I. 2003-00244650 F - PARTIE XI.1 BIENS NON-ADMISSIBLES

Unedited CRA Tags
207.1

Position Adoptée:
Commentaires généraux sur l'application de la Loi.

25 June 2003 External T.I. 2003-0024465 F - PARTIE XI.1 BIENS NON-ADMISSIBLES

Unedited CRA Tags
207.1

Position Adoptée:
Commentaires généraux sur l'application de la Loi.

24 June 2003 External T.I. 2003-0000695 - Capital distribution to n/r beneficiary

Unedited CRA Tags
107(2.11) 107(5)
distribution of capital property with accrued gain entails distribution of that gain
Pt XIII tax exigible, in absence of election, on distribution to NR of appreciated capital property

Principal Issues: Is the accrued gain realized by a trust on the distribution of property to a n/r beneficiary considered payable to that beneficiary in the absence of an election under 107(2.11)?

Position: Yes

Reasons: In the absence of any evidence of an intention to the contrary, it is reasonable to conclude that the distribution of property with an accrued gain includes the capital gain that has accrued on such property and to the extent that the capital gain is included in the trust's income for tax purposes, it is payable to the beneficiary. Where the trustees do not intend to distribute the gain to the beneficiary, an election can be made under 107(2.11).

24 June 2003 External T.I. 2003-000552A - Debt owed by a testamentary trust

Unedited CRA Tags
108(1) 104(13.1)

Principal Issues: Whether a testamentary trust is tainted under the proposed amended definition in 108 in the December 2002 package where a beneficiary pays taxes owed by a trust on income taxed as a result of a designation under 104(13.1) or (3.2).

Position: Normally, no.

Reasons: We would not expect the trust to become indebted to the beneficiary.

24 June 2003 External T.I. 2003-00006950 - Capital distribution to n/r beneficiary

Unedited CRA Tags
107(2.11) 107(5)

Principal Issues: Is the accrued gain realized by a trust on the distribution of property to a n/r beneficiary considered payable to that beneficiary in the absence of an election under 107(2.11)?

Position: Yes

Reasons: In the absence of any evidence of an intention to the contrary, it is reasonable to conclude that the distribution of property with an accrued gain includes the capital gain that has accrued on such property and to the extent that the capital gain is included in the trust's income for tax purposes, it is payable to the beneficiary. Where the trustees do not intend to distribute the gain to the beneficiary, an election can be made under 107(2.11).

13 June 2003 External T.I. 2002-01564350 F - ASSURANCE DE MALADIES REDOUTEES

Unedited CRA Tags
148(1) 6(1)A)

Principales Questions:
Situation où une garantie de maladies redoutées est incluse dans un contrat d'assurance collective d'un employeur.

13 June 2003 External T.I. 2002-0156435 F - ASSURANCE DE MALADIES REDOUTEES

Unedited CRA Tags
148(1) 6(1)A)

Principales Questions:
Situation où une garantie de maladies redoutées est incluse dans un contrat d'assurance collective d'un employeur.

9 June 2003 External T.I. 2003-0004285 - FMV TRANSFER OF INSURANCE POLICY

Unedited CRA Tags
148(7)

Principal Issues: Whether subsection 148(7) of the Act would apply to a situation where a corporation transfers a life insurance policy, on the life of an arm's length shareholder or arm's length employee to the life insured, for proceeds equal to the fair market value of the life insurance policy at the time of transfer.

Position: No

Reasons: Subsection 148(7) applies to non-arm's length transfers of life insurance policies and also to arm's length transfers made by way of gift, by operation of law only or by distribution from a corporation. Where the shareholder or employee, as the case may be, and the corporation are dealing at arm's length and the shareholder or employee pays FMV consideration to the corporation to acquire the policy, it is our view that such a transfer would not be considered to have been made by way of gift, by operation of law only or by distribution from the corporation.

9 June 2003 External T.I. 2003-00042850 - FMV TRANSFER OF INSURANCE POLICY

Unedited CRA Tags
148(7)

Principal Issues: Whether subsection 148(7) of the Act would apply to a situation where a corporation transfers a life insurance policy, on the life of an arm's length shareholder or arm's length employee to the life insured, for proceeds equal to the fair market value of the life insurance policy at the time of transfer.

Position: No

Reasons: Subsection 148(7) applies to non-arm's length transfers of life insurance policies and also to arm's length transfers made by way of gift, by operation of law only or by distribution from a corporation. Where the shareholder or employee, as the case may be, and the corporation are dealing at arm's length and the shareholder or employee pays FMV consideration to the corporation to acquire the policy, it is our view that such a transfer would not be considered to have been made by way of gift, by operation of law only or by distribution from the corporation.

3 June 2003 External T.I. 2003-0018835 - Retroactive salary - estate

Unedited CRA Tags
5(1)

Principal Issues:What are the tax consequences of the estate of a deceased employee becoming entitled to receive retroactive salary by virtue of a collective agreement being signed after the employee's date of death?

Position: Not subject to tax, CPP or EI; although payment of interest would be taxable.

Reasons: Similar to pay equity positions stated on our internet site.

3 June 2003 External T.I. 2002-014675A - Computation interest on bonds/estate

Unedited CRA Tags
12(1)(c); 12(4) 12(11); 20(14) 52(1); 53(2)(1)

Principal Issues: (1) How much interest should have been included in the income of an estate with respect to a bond on which a premium was paid. (2) How is the premium factored in the calculation of the capital gain that arose on the sale of the bond? (3) How is the income earned on the stripped bond taxed? (4) Issues related to the final period of the estate.

Position: (1 and 2) All the interest income has to be included in income, but a deduction may be claimed with respect to the accrued interest that was included in income by the transferor (par. 20(14)(b) of the Act). The accrued interest is a right or thing that has to be included in the terminal return. The estate may claim a deduction with respect to that interest (ss. 20(14) of the Act). The premium paid on the purchase of a bond is added to its ACB, and any amount deducted under ss. 20(14) of the Act reduces the ACB. (3) The owner of a strip bond is required to include the interest that accrued at the end of the anniversary day of the contract (ss. 12(4) of the Act) and that amount is included in the ACB of the bond (ss. 52(1) of the Act. (4) An estate may deduct the amounts payable to a beneficiary and the appropriate T3 or NR4 slips have to be issued. (5) Various considerations.

Reasons: Wording of the Act.

3 June 2003 External T.I. 2003-00188350 - Retroactive salary - estate

Unedited CRA Tags
5(1)

Principal Issues:What are the tax consequences of the estate of a deceased employee becoming entitled to receive retroactive salary by virtue of a collective agreement being signed after the employee's date of death?

Position: Not subject to tax, CPP or EI; although payment of interest would be taxable.

Reasons: Similar to pay equity positions stated on our internet site.

2 June 2003 External T.I. 2003-00145150 - Spouse's discretion to accumulate inc intrust

Unedited CRA Tags
70(6)(a)(i)

Principal Issues: Does a trust that retains income at the discretion of the spousal beneficiary lose its status as a spousal trust?

Position: No

Reasons: As stated in previous positions, the spousal beneficiary must have a legal right to enforce payment of all the income of the trust while the spouse is alive; thus a trust which gives the trustee the discretion to accumulate income is not a spousal trust but if the spouse has the discretion to direct the trustees to accumulate, it will not taint the trust.

2 June 2003 External T.I. 2003-0014515 - Spouse's discretion to accumulate inc intrust

Unedited CRA Tags
70(6)(a)(i)

Principal Issues: Does a trust that retains income at the discretion of the spousal beneficiary lose its status as a spousal trust?

Position: No

Reasons: As stated in previous positions, the spousal beneficiary must have a legal right to enforce payment of all the income of the trust while the spouse is alive; thus a trust which gives the trustee the discretion to accumulate income is not a spousal trust but if the spouse has the discretion to direct the trustees to accumulate, it will not taint the trust.

30 May 2003 External T.I. 2002-01724750 - Administration of Estates

Unedited CRA Tags
108(1)

Principal Issues: Whether the wording of typical last wills is sufficient to enable executors to extend the time of realization of estates to many years.

Position: No

Reasons: There is not a certainty of intention on the part of the deceased person to create a trust.

30 May 2003 External T.I. 2002-0172475 - Administration of Estates

Unedited CRA Tags
108(1)

Principal Issues: Whether the wording of typical last wills is sufficient to enable executors to extend the time of realization of estates to many years.

Position: No

Reasons: There is not a certainty of intention on the part of the deceased person to create a trust.

29 May 2003 External T.I. 2002-0180235 - Residence of a Trust for Treaty purposes

Unedited CRA Tags
250(5)

Principal Issues: 1. Is a trust that is subject to 94(3) and which is liable for tax in the US as a resident of the US considered to be resident in the US for the purposes of the Canada-US Treaty?
2. If the trust is resident in the US for the purpose of the Canada-US Treaty, will 250(5) apply to eliminate any Part I tax payable in Canada?

Position: 1. Where a trust is resident in both countries by reason of the laws of each country, the residency for the purpose of the treaty is determined by the Competent Authorities.
2. Where the Competent Authorities have determined that a particular trust is resident in the US for the purpose of the Canada-US Treaty, 250(5) will apply to deem the trust to be non-resident of the purposes of the Act.

Reasons: see above

29 May 2003 External T.I. 2002-01802350 - Residence of a Trust for Treaty purposes

Unedited CRA Tags
250(5)

Principal Issues: 1. Is a trust that is subject to 94(3) and which is liable for tax in the US as a resident of the US considered to be resident in the US for the purposes of the Canada-US Treaty?
2. If the trust is resident in the US for the purpose of the Canada-US Treaty, will 250(5) apply to eliminate any Part I tax payable in Canada?

Position: 1. Where a trust is resident in both countries by reason of the laws of each country, the residency for the purpose of the treaty is determined by the Competent Authorities.
2. Where the Competent Authorities have determined that a particular trust is resident in the US for the purpose of the Canada-US Treaty, 250(5) will apply to deem the trust to be non-resident of the purposes of the Act.

Reasons: see above

Technical Interpretation - Internal

2 July 2003 Internal T.I. 2003-00079670 - Proprietorship; treaty-protected business

Unedited CRA Tags
81(1)(a) 111(9)

Principal Issues: 1. If USco carries on business in Canada without a PE and there are losses attributable to that business and then USco carries on business in Canada through a PE, can USco use the losses from the non-PE years to offset the profits in the PE years?
2. If the US business is run through a proprietorship instead of a corporation, such that paragraph 81(1)(a) doesn't apply, does the "treaty-protected business" amendment to subsection 111(9) prevent the proprietorship from using the non-PE year losses in the year in which it has a PE?

Position: 1. No.
2. Yes.

Reasons: 1. See doc. # E 2002-0165077.
2. This follows from the definition of "treaty-protected business", together with paragraph 110(1)(f) and the clear policy set out by Finance when the "treaty-protected business" rules were introduced.

2 July 2003 Internal T.I. 2003-0007967 - Proprietorship; treaty-protected business

Unedited CRA Tags
81(1)(a) 111(9)

Principal Issues: 1. If USco carries on business in Canada without a PE and there are losses attributable to that business and then USco carries on business in Canada through a PE, can USco use the losses from the non-PE years to offset the profits in the PE years?
2. If the US business is run through a proprietorship instead of a corporation, such that paragraph 81(1)(a) doesn't apply, does the "treaty-protected business" amendment to subsection 111(9) prevent the proprietorship from using the non-PE year losses in the year in which it has a PE?

Position: 1. No.
2. Yes.

Reasons: 1. See doc. # E 2002-0165077.
2. This follows from the definition of "treaty-protected business", together with paragraph 110(1)(f) and the clear policy set out by Finance when the "treaty-protected business" rules were introduced.

27 June 2003 Internal T.I. 2003-00001870 - FRATERNAL BENEFIT SOCIETY

Unedited CRA Tags
149(1)(K)

Principal Issues: Is the trust exempt from tax pursuant to paragraph 149(1)(k) of the Act as a "benevolent or fraternal benefit society or order"?

Position: No.

Reasons: The trust will likely be taxed as a retirement compensation arrangement.

27 June 2003 Internal T.I. 2003-00196670 - Conversion rate for US dollar receivable

Unedited CRA Tags
9

Principal Issues: Would foreign exchange gains or losses arising as a result of the translation of foreign currency denominated accounts receivable at the year end exchange rate be offset by the foreign exchange gains or losses on the forward currency contracts which are entered into to hedge the projected cash flows from the accounts receivable?

Position: Yes if the forward contracts are not for speculation purposes in that they never exceed the projected foreign currency denominated cash flows from the accounts receivable.

Reasons: This is in accordance with GAAP and it gives a "truer picture".

June 27, 2003

27 June 2003 Internal T.I. 2003-0000187 - FRATERNAL BENEFIT SOCIETY

Unedited CRA Tags
149(1)(K)

Principal Issues: Is the trust exempt from tax pursuant to paragraph 149(1)(k) of the Act as a "benevolent or fraternal benefit society or order"?

Position: No.

Reasons: The trust will likely be taxed as a retirement compensation arrangement.

27 June 2003 Internal T.I. 2003-0019667 - Conversion rate for US dollar receivable

Unedited CRA Tags
9

Principal Issues: Would foreign exchange gains or losses arising as a result of the translation of foreign currency denominated accounts receivable at the year end exchange rate be offset by the foreign exchange gains or losses on the forward currency contracts which are entered into to hedge the projected cash flows from the accounts receivable?

Position: Yes if the forward contracts are not for speculation purposes in that they never exceed the projected foreign currency denominated cash flows from the accounts receivable.

Reasons: This is in accordance with GAAP and it gives a "truer picture".

June 27, 2003