29 August 1990 Ruling 901463 F - Deduction of Goodwill Paid

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.

August 29, 1990

Dear Sirs:

Re:  Deduction of Goodwill Paid

This is in reply to your letter dated May 16, 1990 wherein you requested our opinion as to the deductibility of cumulative eligible capital under subsection 24(1) of the Income Tax Act (the "Act").

Our understanding of the facts of the situation as described to us is as  follows:

1.     

2.     24(1)

3.

4.     

5.     24(1)

6.     

Our Comments

Subsection 24(1) of the Act permits a taxpayer to deduct the balance of cumulative eligible capital when the taxpayer had ceased to carry on the business to which the cumulative eligible capital relates.  Whether a taxpayer has "ceased to carry on business" must be determined upon examining the facts of each case.  As stated in Interpretation Bulletin T-313R "Generally, where the normal business activities have ceased and there is little likelihood of the business starting up again in the near future, business is considered to have ceased".  The cessation of a business does not necessarily result from a relocation or change in clientele but rather refers to a cessation of the type of business.

Based on the information you have provided to us.

24(1)

We hope these comments are of assistance.

Yours truly,

for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch