29 March 1990 Internal T.I. 59429 F - Tax Shelter Reporting

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.

March 29, 1990

19(1)

Re: Section 237.1 Tax Shelter Reporting

We are writing in reply to your letter of November 10, 1989 in which you have requested a technical interpretation of the provisions of section 237.1 of the Income Tax Act (the "Act") with respect to the requirements to obtain a tax shelter identification number.

You have described the following hypothetical situation:

1.     Mr. X purchased units of a limited partnership in 1988 prior to the effective date of section 237.1.

2.     In 1990, Mr. X would like to sell his limited partnership units to Mr. Y.

Based on this situation, you have requested our interpretation as to whether Mr. X must obtain a tax shelter identification number before he disposes of his units to Mr. Y.

Our Comments

While we are unable to confirm the income tax consequences of a hypothetical situation, we can provide the following general comments.

Subsection 237.1(2) of the Act provides that a tax shelter promoter shall apply in prescribed form for an identification number for a tax shelter.  As described in paragraph 3 of Information Circular IC 89-4, paragraph 237.1(1)(b) of the Act defines a tax shelter as any property of which it is expected, based on statements or representations made or proposed to be make in connection with the property, that the aggregate of losses or other amounts, calculated in any of the relevant years, which a purchaser will be entitled to deduct in taxation years ending within four years of the date of acquisition of the property will exceed the cost of the interest in the property (less prescribed benefits) to the purchaser.  As described in paragraph 2 of Information Circular IC 89-4, paragraph 237.1(1)(a) of the Act defines a tax shelter promoter as any person who in the course of a business sells, issues or promotes the sale, issuance or acquisition of an interest in a tax shelter or who acts as an agent or advisor in respect of such activities. In our opinion, an investor who maintains an investment in property for the earning of income from that property and who disposes of such an investment would not be considered to be disposing of the investment in the course of a business as business is defined in section 248 of the Act.

These comments represent our opinion of the law as it applies generally.  As indicated in paragraph 24 of Information Circular 70-6R dated December 18, 1978, this opinion is not a ruing and accordingly, it is not binding on Revenue Canada, Taxation.

We trust these comments will be of assistance.

Yours truly,

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch