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)
This is in reply to your letter of June 15, 1988 concerning the draft Regulations relating to certified film productions. You have suggested that Revenue Canada, Taxation, has not been interpreting the Regulations providing for the grandfathering of series productions in a manner consistent with the discussions which took place last year between this Department and representatives of the film industry.
In your letter you have suggested that we intended to grandfather episodes produced pursuant to any agreement which would be the equivalent of a right of first refusal on the part of the broadcaster or distributor. As you know, officials of this Department participated in extensive consultations with industry representatives, including yourself, concerning the impact of the capital cost allowance changes on series productions. During these consultations, concerns were expressed that the new rules would have an adverse impact on certain producers of television series who could, under an option agreement with a broadcaster, be required to produce further episodes of a series at a fixed price. The increased transitional relief which was announced in August, 1987 was developed to respond to these concerns and to my knowledge was not contemplated to apply to further episodes which a producer might choose to produce before the end of 1988 at his discretion.
As you can appreciate, the interpretation you gave suggested would allow virtually any agreement to qualify as a production option agreement entitled to the additional transitional relief, which result would be inconsistent with the basis upon which the decision of the Minister of Finance to offer this additional relief was made. In view of the above, I cannot agree with your suggestion that these draft Regulations are being inappropriately administered by Revenue Canada.
I trust this information will assist you in your discussions with Revenue Canada, Taxation.
Yours sincerely,
Len FarberDirectorTax Policy - LegislationDivision
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