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 certain statements contained in paragraphs 1 and 15 of IT-236R4 Reserves Disposition of Capital Property still represent the CRA's views?
Position: Yes.
Reasons: Wording of the Act.
XXXXXXXXXX
2013-049272
Charles Rafuse
613-247-9237
July 9, 2013
Dear XXXXXXXXXX:
Re: Interpretation bulletin IT-236R4 Reserves Disposition of Capital Property
This is in response to your email of June 13, 2013 and our telephone conversation (XXXXXXXXXX/Rafuse), concerning whether the following statements contained in paragraphs 1 and 15 of cancelled IT-236R4, "Reserves Disposition of Capital Property" ("IT-236R4") still represent the Canada Revenue Agency's (CRA) position:
1) "A reserve claimed in one year becomes the capital gain on the particular disposition for the next year under subparagraph 40(1)(a)(ii)
".
2) "A reserve that is included in determining an individual's capital gain for the year (
) qualifies for the capital gains deduction under section 110.6
".
Our Comments
As you are aware, while IT-236R4 was cancelled in 1999, it provided useful comments on the computation and deduction by a taxpayer of a capital gains reserve where all or some of the proceeds of disposition are payable after the end of the particular year. However, the current version of Guide T4037 "Capital Gains" at Chapter 1, under the heading "What happens if you have a capital gain?" provides similar information and, in particular, states:
"A capital gain from a reserve brought into income qualifies for the capital gains deduction only if the original capital gain was from a property eligible for the deduction."
We trust that these comments will be of assistance.
Yours truly
Michael Cooke, C.P.A., C.A.
Manager
Business and Capital Transactions Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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