23 April 1990 Ruling 74681 F - IT-92R2

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: 24(1)

We are writing in reply to your memorandum of January 18, 1990 concerning paragraphs 12 to 16 of IT-92R2 as they relate to the reporting of income for tax purposes by 24(1). Your memorandum was forwarded to us for reply from Audit Applications Division, Head Office.

24(1)

DO's Position

You state that it would appear that the intent on paragraph 12 was to make this provision applicable to small contractors who did not operate a sophisticated accounting system 24(1) it would appear that the comments in IT-92R are applicable, however in your opinion the amount of  24(1) You not that under subsection 9(1) of the Income Tax Act and affirmed by paragraphs 3-5 inclusive of IT-92R2, the contractor is required to include in income any amounts received by him for work covered by a progress billing which has been approved for payment. In addition, any amount receivable under the provisions of paragraph 12(1)(b) and subsection 12(2) on services rendered, but not yet billed are also to be included in the taxpayer's taxable income.

Our Comments

Pursuant to paragraph 12 of IT-92R2 the "completion method" is an acceptable method for reporting contract revenues for contracts that are "Fixed-Total-Price Contracts" and which "may reasonably be expected to be completed within two years from the date of their commencement". It is our understanding that the completion method of reporting incomes was accepted as a matter of convenience for both the Department and contractors. It is our opinion that any contractor, 24(1) included, which satisfies the requirements for using the "completion method for income tax reporting should be entitled to use it, regardless of the dollar amounts involved or the sophistication of the contractor's accounting system. For contracts that are expected to exceed two years, the progress method should be used.

21(1)(b)

for Director Business and General Division Specialty Rulings DirectorateLegislative and Intergovernmental  Affairs Branch