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.
19(1) |
5-8905 |
|
R.B. Day |
|
(613) 957-2136 |
December 1, 1989 |
19(1) |
We are writing in reply to your letter of October 11, 1989, wherein you requested our views regarding the income tax aspects of costs incurred by a partnership in the following scenario.
24(1)
Our Comments
24(1)
Paragraph 1 of IT-364 "Commencement of Business Operations" (copy attached) states, in part, that
"For an amount to be deductible on the grounds that it was an expense incurred for the purpose of gaining or producing income from a business, that taxpayer must have been carrying on business in the fiscal period in which the expense was incurred."
Paragraph 6 of IT-364 states, in part, that
"Expenses in respect of a proposed business that are incurred prior to the commencement of the business do not constitute a business loss or a non-capital loss and thus cannot be applied against income in the year the expenses were incurred, and cannot be carried back to be applied against income of the preceding year or forward to be applied against income of any subsequent year."
In addition to the above paragraph 6 of IT-417R "Prepaid Expenses or Deferred Charges" (copy attached) states that
"Pre-production or start-up costs of a new business, to the extent they are not capital outlays, must be claimed in the year they are incurred."
In view of the foregoing, it is our opinion that paragraphs 18(1)(a) and (b) of the Income Tax Act would deny the deduction of the costs incurred by the partnership, prior to the commencement of its business operations, on either a current or subsequent basis.
We hope these comments are of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch
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