28 November 1989 Income Tax Severed Letter 58321A F - Compensation Capital Gain or Business Income

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.

November 28, 1989

19(1)

Re:  24(1)

This is in reply to your letter of June 28, 1989 and further to our telephone conversation of August 29, 1989 in which you requested our views respect to 24(1)

Our understanding of the facts relating to this matter as described in your letter and from our conversation are as follows:

1.     

2.     24(1)

Based on the above information you have asked if the compensation received would be classified as a capital gain or ordinary business income for income tax purposes.

Our Comments

Business Income vs. Capital Receipt

From the information contained 24(1)

Capital Receipt

Under subsection 39(1) of the Income Tax Act a capital gain is the gain from the disposition of any property of the taxpayer, other than certain specified properties.  Thus a capital gain could result from the disposition of depreciable properties and any other property in respect of which a gain or loss on disposition would be a capital gain or loss.  For further information on this point please refer to the enclosed capital gains guide.  Therefore, in determining if a payment would result in a capital gain the nature of the property given up or disposed of in return for the payment must be considered.  

24(1)

As the calculation to determine which portion of the proceeds of disposition relate to the various capital and other assets and the determination of the resulting capital gains and recapture is a question of fact, we suggest you discuss this aspect with your tax advisor or officers of our Regina District Office.

The foregoing comments represent an expression of opinion only and as such are not binding upon the Department.

We regret the delay in replying to your letter, but hope that the foregoing comments will be of assistance.

Yours truly,

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch