15 February 1990 Ruling 74493 F - Sale of Television Station

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.

Subject: Sale of Television Station

This is in reply to your memorandum of November 3, 1989 requesting our opinion. 24(1)

The first case cited is that of Francis Enderes and IEM Management Limited ("Enderes") v. MNR, 80 DTC 1523 which is a Tax Review Board case that was not appealed by the Department  because the reassessment resulted in no change in the taxpayer's tax position.  In this case the chairman of the Board clearly stated (in connection with goodwill or a Government right): "Within that context, it is my opinion that it was nt disposed of by the appellants since it clearly could not be sold or transferred.  To succeed therefore, the appellants must place themselves within the parameters of the term 'for allowing the expiry of', even presuming the property as a 'government right'."  He goes on to say, "As I see it, they have done so since the agreements in question contemplate and are conditional upon the issue of new licences to the purchasers."

In the Enderes case it is reasonably clear that the sums received by the taxpayers were received in return for them allowing the (Government) licences to expire.  The Department in fact allocated $15,000 of the amount received as consideration in respect of a government right. The taxpayers contended that the amounts in question were received entirely for allowing the expiry of a Government right and the documents supporting the sale and offer-to-purchase appear to bear this out.  The issue in the case was essentially that of valuation.

24(1)

The second case cited, Michajio Bishyk ("Bishyk") v. MNR 83 DTC 596, also a Tax Court of Canada case, is more on point as the documents are silent as to receiving an amount for allowing the licence to expire.  Irrespective of evidence to the contrary the chairman of the Board stated, "The appellant's basic proposition that he sold the government permit... is not tenable, but hi is nevertheless entitled to reply on the other provision concerning the fact that he allowed the government right to expire."  The Department has cross-appealed this case, however, as of this instant the appeal has not been heard.

As the Bishyk case is under appeal the taxpayer's representatives are unable to use it as a precedent at this time.

21(1)(b)

24(1)

Your file is returned herewith.

We trust our comments will be of assistance in this matter.

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch

c.c.     Mr. Roy  Assistant Deputy Minister