15 August 1990 External T.I. 74770 F - Merali v. The Queen (88 DTC 6173)

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:  Merali v. The Queen (88 DTC 6173)

This is in reply to your Memorandum that was received by us on February 28, 1990.

Effective in respect of losses incurred in 1983 and subsequent taxation years the decision of the Federal Court of Appeal in the above noted case was in effect overruled by the amendments made to paragraph 111(8)(c) of the Act by the Statutes of Canada 1984, c.1. By virtue of such amendments to the Act, only losses from businesses carried on in Canada are included in determining the non-capital loss of a taxpayer for a taxation year during which he was not resident in Canada.  Accordingly, to the extent the losses in question of the 1983 and subsequent taxation years were losses from property, and not losses from business, they are not included in determining the non-resident's non-capital loss and thus no deduction is available in respect thereof.  This is confirmed by paragraph 6 of IT-262R.

The decision of the Federal Court of Appeal is considered effective and binding in respect of losses incurred in taxation years preceding 1983 and thus any assessment in respect of losses incurred prior to the taxpayer's 1983 taxation year in a case with the same facts as were considered by the Court in Merali should be made following the decision of the Court in that case.  In this regard, we enclose for your reference a copy of the Appeals Branch Decision not to appeal the decision of the Federal Court of Appeal.

Accordingly, if the facts concerning 19(1) are the same as in Merali.  19(1) should be allowed to 24(1)  However, by virtue of the above-noted amendments to paragraph 111(8)(c).  24(1)

Yours truly,

for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch