7 June 1990 Administrative Letter 59396 F - Taxable Capital Employed in Canada of Financial Institution

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)

June 7, 1990

Dear Sir:

We are writing in response to your correspondence of January 11, 1990 requesting our interpretation of the phrase "an asset of the financial institution that is tangible property used in Canada" as that term is utilized in draft paragraph 181.3(1)(a) of the Income Tax Act dealing with the proposed Tax on Large Corporations. Your concern is with the treatment of assets acquired by a credit union by reason of mortgage foreclosure or debt default where those assets are being held for resale and, more particularly, whether these assets are to be included in the calculation of the "taxable capital employed in Canada of a financial institution".

It is our opinion that the particular assets described by you are to be included in the calculation where those assets have been acquired by the financial institution through foreclosure or default and are held for sale in the ordinary course of business of the particular institution.  This is so notwithstanding that the original loan upon which the asset had been pledged as security may not have been included in the determination of the taxable capital employed in Canada of a financial institution.

We would also consider that an inventory of supplies on hand constitutes tangible property used in Canada for the purposes of the aforementioned calculation.

We would further note that, with respect to both of the above referenced types of assets, property which is acquired and held in the ordinary course of a particular business is considered to be "used in Canada" for purposes of the calculation.

We would also advise that the opinions expressed above are based upon the amendments to the Income Tax Act proposed in Bill C-28 as passed by the House of Commons on December 20, 1989.  Further, while we trust that our comments are of assistance to you, they do not constitute an advance income tax ruling and are, therefore, not binding upon the Department in respect of a particular situation.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate