16 August 1989 External T.I. 58310 F - Taxation of Investment Income of Indians

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.

August 16, 1989

Dear Sirs:

This is in reply to your letter of June 7, 1989 concerning the taxation of investment income of Indians.

You described a situation involving payments to an Indian Band by the federal, provincial and municipal governments and private corporations under an agreement in respect of the regulation, use and maintenance of reserve land by the Indian band.  The amounts are to be deposited directly into a financial institution in trust for the Band and invested for the financial benefit of the Band.

The situation described in your letter apparently concerns a proposed transaction and, accordingly would most appropriately be considered through the mechanism of an advance income tax ruling as is discussed in Information Circular IC 70-6R and the Special Release thereto.  However we will provide some general comments:

-        Paragraph 81(1)(a) of the Income Tax Act and Section 87 of the Indian Act exempt from taxation income earned from reserve lands by an Indian Band.  The location of the financial institution where the payment is deposited is not relevant in this regard.

-        The location of the financial institution where the payment is deposited is relevant in determining the tax treatment of any interest earned.  The Department's position respecting the tax treatment of interest earned is set out in paragraph 6(g) and subparagraph 6(h)(iv) of IT-62.

We trust our comments will be of assistance to you.

Yours truly,

for Director Small Business and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch

c.c.      P. McNallyDirectorEnquiries and TaxpayerAssistance