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.
Dear Sirs:
This is in reply to your letter of June 7, 1989, concerning the treatment of gains or losses from the disposition of Stock Index Futures ("SIF") by a unit trust that is not a mutual fund trust (as defined in subsection 132(6) of the Act).
It is our view that the comments in Interpretation Bulletin, IT-479R with respect to the option available to certain taxpayers to report gains or losses on capital account in specific circumstances are not applicable to unit trusts that deal in SIFs on a speculative basis.
Furthermore, whether or not a unit trust is carrying on a business or investing its funds so that all its profits, gains and losses from its investments and from dispositions of investments will be income and losses from a business and not capital gains or capital losses for purposes of the Income Tax Act will be a question of fact which can only be decided after a review of the actual course of conduct followed by the trust. The Department's view with respect to some of the factors to be considered in this regard can be found in Interpretation Bulletin IT-479R, entitled "Transactions in Securities" and Interpretation Bulletin IT-114, entitled "Discounts, Premiums and Bonuses on Debt Obligations".
Where the whole course of a taxpayer's conduct indicates that
- a) in security transactions the taxpayer is disposing of securities in a way capable of producting gains and with that object in view, and
- b) the transactions are of the same kind and carried on in the same way as those of a trader or dealer in securities,
the proceeds of sale will normally be considered to be income from a business and, therefore, on income account,
We trust the foregoing is of assistance.
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© Her Majesty the Queen in Right of Canada, 1989
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© Sa Majesté la Reine du Chef du Canada, 1989
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