Principal Issues: 1) Where an EPSP member forfeits a previously allocated capital gain, will the CRA administratively allow an adjustment to account for the amount taxed which will never actually be received?
2) If the EPSP re-allocates the forfeited capital gain, is the amount taxable to the member(s) to whom the amount is allocated?
Position: 1) No.
Reasons: 1) The formula in subsection 144(9) of the Act clearly excludes a deduction for a previously allocated capital gain.
2) Upon re-allocation, the forfeited capital gain is taxable under subsection 144(4) of the Act.
XXXXXXXXXX Renée Shields
June 12, 2006