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) |
5-9710 |
| |
W.C. Bailey |
| |
957-2061 |
July 5, 1990
Dear Sirs:
Re: Paragraph 12(1)(a)
This will reply to your letter of March 5, 1990. We apologize for the delay in our response.
You are concerned as to the interpretation to be given to the m words "amount received", as used in paragraph 12(1)(a) of the Income Tax Act, in the context of the acceptance of conditional promissory notes where they represent payment for services to be provided in a subsequent taxation year and which have the following terms:
(1) a non-interest bearing note due on demand,
(2) an interest bearing note due on demand,
(3) a non-interest bearing note due one year after demand is made,
(4) an interest bearing note due one year after a demand is made.
As you have stated, "amount" is defined in subsection 248(1) as "money, rights or things expressed in terms of the amount of money or the value in terms of money of the right or thing". In the context of paragraph 12(1)(a) "amount received" means that the above "amount" must have been received. This means that the original debt for the services to be rendered must have been extinguished by payment in money or in kind in order for the amount to have been received.
Where a promissory note has been accepted as absolute payment of the debt, the acceptance of the note will be considered as an "amount received" under paragraph 12(1)(a). Where the promissory note has been accepted as conditional payment of the debt, the acceptance of the note will be considered as an "amount received" for purposes of paragraph 12(1)(a). Paragraph 12(1)(a) will then apply only when actual payments are made on the note, assuming the relative services have not yet been performed at that time. The terms "absolute payment" and "conditional payment", as used above, have the meaning as set out in paragraph 2 of IT-436R (copy attached).
The varying terms of the promissory note, as set out in (1) to (4) above, are not pertinent to a decision in this matter.
Yours sincerely,
For DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch
Encl.
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© Sa Majesté la Reine du Chef du Canada, 1990
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