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.
Principal Issues: Whether there are tax consequences resulting from the transfer of silver bullion into another format.
Position: Probably a disposition but definitive answer would depend on the facts and commercial law.
Reasons: Not possible to provide a definitive answer given limited information provided.
XXXXXXXXXX 2006-019664
S. Chua
March 30, 2007
Dear XXXXXXXXXX:
Re: Transfer of silver bullion into another format
This is in response to your letters dated May 25 and August 2, 2006, concerning the transfer of silver bullion into another format.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advanced income tax ruling request. For more information concerning advance income rulings, please refer to Information Circular 70-6R5 dated May 17, 2002. Copies of information circulars are available at your local Tax Services Office or on the Internet at http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office with all the particular facts. However, we are prepared to provide the following general comments.
As you may be aware, paragraph 4 of our Interpretation Bulletin IT-387R2 ("IT-387R2") describes the Canada Revenue Agency's view where gold bullion and gold certificates are considered to be identical properties and a particular certificate and the bullion to which it relates are the same property, with the result that an exchange of a certificate for a bullion or bullion for a certificate will not be considered a disposition within the meaning of subsection 248(1) of the Income Tax Act (the "Act").
You had described the transfer or exchange, in your situation, as a transfer of silver bullion into electronic format. However, based on the information you provided, it does not appear that your situation is a transfer into electronic format nor is it the same as that contemplated in paragraph 4 of IT-387R2. As we understand it, the silver bullion in the situation you described would be exchanged for units of a U.S. trust known as the "XXXXXXXXXX" which is a U.S. XXXXXXXXXX trust designed to reflect the price of silver owned by the trust. Accordingly, we would consider a disposition to have occurred on the transfer of the silver bullion in exchange for units of the U.S. trust.
We are unable to comment more specifically as all the relevant facts and documents must be examined to determine the tax consequences that may arise. Accordingly, we would be prepared to deal with your request in the context of an advance income tax ruling request.
We trust our comments have been of assistance.
Yours truly,
Roberta Albert, CA
For Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
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