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.
C. Robb (613)957-2744
Attention: XXXX
January 5, 1990
Dear: XXXX
Re: Paragraph 1100(16)(a) of the Income Tax Regulations (the "Regulations")
We are writing in response to your letter of September 18, 1989 in which you have requested our views concerning the application of subsection 1100(16) of the Regulations and the treatment of interest income earned under a conditional sale contract ("CSC") in the calculation of gross revenue for purposes of that provision.
Our comments in the same sequence as your requests are as follows:
(a) Subparagraph 1100(16)(a)(ii) of the Regulations does not place a limit on the proportion of the total principal business activity which must be devoted to renting or leasing of property.
(b) It is not necessary for the corporation to provide "service" for the property that is rented, leased or sold in order for the revenue therefrom to be included in the gross revenue of the principal business.
(c) The inclusion of interest and other financing charges in the "gross revenue" from a principal business is discussed in paragraph 10 of IT-443 . In our view, such gross revenue generally includes interest and finance charges earned where CSC's are entered into in the course of selling property. This would not be our view in situations in which such income is earned where CSC's are entered into in the course of carrying on a money lending business.
(d) We are of the view that the fact that a corporation offers to either lease or sell under a CSC property of the same general type does not, in and of itself, mean that the corporation is engaged in the money lending business. The determination of whether a money-lending business is being carried on is a question of fact which requires a full knowledge of the relevant circumstances of the particular case under consideration.
In accordance with paragraph 24 of Information Circular 70-6R the opinions expressed herein do not constitute an advance income tax ruling and consequently are not binding on Revenue Canada, Taxation.
Yours truly,
for Director
Financial Industries Division Rulings Directorate
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