15 October 1990 Ministerial Correspondence 901704 F - Cost of Stock Index Futures Contracts

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.

October 15, 1990

Dear Sirs:

Re: Cost of Stock Index Futures Contracts

This is in reply to your letter of July 27, 1990 wherein you requested our comments concerning an opinion given in our letter to you of January 11, 1989.

In our opinion number 3 of that letter we stated:

     "3.  The cost of a stock index futures contract will generally include the brokerage fees and other costs incidental to its acquisition. For the purposes of subsection 204.6(1) of the Act, however, it will be a question of fact whether or not a property's cost is equal to its fair market value at the time of acquisition".

In respect of this issue, you have obtained opinions that a stock index futures contract will have a nil value or no value at the time of its acquisition. In consequence, as we understand it, you are now asking if we concur that a stock index futures contract will always have a fair market value at the time of its acquisition, for purposes of subsection 204.6(1) of the Income Tax Act, equal to nil although it may have a cost which is of greater value.

It is our opinion, as stated previously, that the fair market value of a stock index futures contract is a question of fact to be determined at the time of its acquisition and that this value may or may not be equal to the costs of acquisition of the investment. The Department does not offer opinions on the proper methods for valuating properties.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate