25 August 1989 Administrative Letter 58486 F - Regulations to the Income Tax Act

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 25, 1989

19(1)

Re:  Subparagraph 1100(21)(a)(ii) of the Regulations to the Income Tax Act (Canada)

This is in reply to your letter (the "Request Letter") dated August 7, 1989, in which you asked for confirmation of an opinion expressed by an officer of this Department during a telephone conversation on August 6, 1989.  Your questions related to a technical interpretation provided to you in a letter dated October 27, 1988 (the "1988 Letter").

Your Request Letter states that the officer with whom you spoke "confirmed" certain matters.  As we indicated to you in a telephone conversation on August 8, 1989, the officer in question confirmed only that the position set out in the 1988 Letter had not changed.  He did not confirm the proper interpretation of the phrase "services rendered or goods delivered" used in the second category of included production costs as set out in the 1988 Letter.  In fact, the officer had specifically indicated that the Department's files did not contain further elaboration on this point.

You wish to know whether costs have been "incurred" for the purposes of subparagraph 1100(21)(a)(ii) of the Regulations to the Act if the costs are ascertained and unconditional liabilities of the taxpayer at the end of a year but are in respect of services to be rendered or goods to be delivered within 60 days after of the year.

Your request seems to deal with a specific proposed transaction.  Accordingly, your query should take form of a request for an advance income tax ruling.  The procedures for making such a request are set out in Information Circular 70-6R.

You might wish to refer to paragraph 12(e) of Interpretation Bulletin IT-109R and paragraph 9 of IT-215R for the Department's views on when an unpaid expense constitutes a genuine liability of a taxpayer.  By way of general comment, we are unsure how an ascertained and unconditional liability to pay an amount can exist prior to the performance of the services to be rendered or the delivery of the goods to be delivered.

Yours truly,

for Director Financial Industries DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch