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 our administration position related to subsection 40(3.3) described in document 2001-0088155 can be extended to cover paragraph 40(3.4)(b).
Position: No.
XXXXXXXXXX
2011-039961
Katie Campbell
(613) 957-2126
October 6, 2011
Dear XXXXXXXXXX ,
This confirms our telephone conversation relating to your letter of March 11, 2011 wherein you requested our views regarding the application of our administrative position as described in document 2001-0088155 in the circumstances described below.
Subsection 40(3.3) of the Act (footnote 1) outlines the circumstances under which subsection 40(3.4) applies to deny a capital loss. Document 2001-0088155 contains an algebraic formula, based on the provisions of subsection 40(3.3), to determine the amount of a capital loss to be suspended under subsection 40(3.4). Essentially, this algebraic formula will allow, in certain circumstances, a portion of a capital loss where that capital loss would otherwise be fully denied by subsection 40(3.4).
Paragraph 40(3.4)(b) outlines the circumstances under which a capital loss that was previously denied, can be claimed by the transferor. Under subparagraph 40(3.4)(b)(i), neither the transferor nor the affiliated party can own any substituted property, as defined in paragraph 40(3.3)(b), at the end of the relevant period described in subparagraph 40(3.4)(b)(i) in order to be able to claim a capital loss that was previously denied by virtue of paragraph 40(3.4)(a). You have asked whether the administrative position described in document 2001-0088155 can be applied to allow a portion of a previously denied capital loss to be claimed where only a portion of the substituted property remains at the end of the relevant period described in subparagraph 40(3.4)(b)(i).
Your request appears to relate to a proposed transaction or a completed transaction. Confirmation of the income tax consequences of proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. To make such a request the advance income tax ruling must be submitted in accordance with the guidelines set out in Information Circular 70-6R5 ("IC-70-6R5") dated May 17, 2002. However, if the situation relates to a completed transaction a request for the Canada Revenue Agency's ("CRA's") views must be made to your local Tax Services Office. We can, however, provide the following general comments.
In our view, for the reasons we have discussed, the administrative position outlined in document 2001-0088155 cannot be extended to allow a portion of a capital loss denied under paragraph 40(3.4)(a), in respect of a previous disposition of property, to be claimed when the transferor or an affiliated party subsequently disposes of a portion of the substituted property.
Our comments are provided in accordance with the practice outlined in paragraph 22 of Information Circular IC 70-6R5, dated May 17, 2002.
Yours truly,
David Palamar
Manager
Corporate Reorganizations Section II
Reorganizations and Resources Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
FOOTNOTES
Note to reader: Because of our system requirements, the footnotes contained
in the original document are shown below instead:
1 The Act means the Income Tax Act R.S.C. 1985 (5th Supp.) c.1 as amended from time to time and consolidated to the date of this letter and, unless otherwise expressly stated, every statutory reference herein is a reference to the relevant provision of the Act.
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2011
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2011
Email this Content