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.
TO - TORONTO DISTRICT OFFICE
ATTENTION I.H. Thompson Basic Files Selection 142.5.1
DATE June 16, 1986
FROM - Head Office David R. Senecal Resource Industries Section (613) 995-1178
Re: XXXX
XXXX
The above position is not in conflict with the position taken by us in our memorandum to your office of August 24, 1983. That memorandum dealt with the situation where XXXX were accruing the XXXX for financial statement purposes while adding back the compensation for tax purposes in order to increase the amount of the 3% inventory allowance available pursuant to paragraph 20(1)(gg) of the Income Tax Act. XXXX on the other hand, has adopted the new method for both financial statement and income tax purposes.
In the above-mentioned memorandum, our main argument was that, by accruing the compensation in respect of the XXXX and recognizing the amount receivable, the taxpayers have clearly stated in their financial statements that there is no contingency regarding their receipt. However, the memorandum also went on to state that where the compensation is considered to be contingent for financial statement purposes, it would be difficult to argue that the compensation is not also contingent for tax purposes. These latter comments, in our view, apply to XXXX and we should not disallow the additional inventory allowance available to the corporation as a result of the change.
Section Chief Resource Industries Section Bilingual Services and Resource Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1986
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© Sa Majesté la Reine du Chef du Canada, 1986
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