25 March 1991 Internal T.I. 9022887 F - Timing of Deduction for Reforestation Cost

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.

24(1)

Subject: Timing of Deduction for Reforestation Cost

This is in reply to your memorandum of August 24, 1990 in which you requested our comments on the above-captioned and related issues.

The facts are:

24(1)

24(1)

Our views on the main issues are:

A.  Deductibility by 24(1)

In our view 24(1) The decision in The Queen v. Nomad Sand and Gravel Ltd. 90 DTC 2160 seems to us quite on point.  In both Nomad and the matter at hand the payments are not irrevocably made.  In neither case has the taxpayer done more than put funds on deposit.

B.  Whether the "Trust" may be disregarded for tax purposes - whose interest is it?

23

There are two court cases which particularly support this conclusion - Pan-American Trust Co. v. M.N.R. 49-50 DTC 672, and Brookview Investments Limited et al. v. M.N.R. 63 DTC 1205. In the former, the Court stated that:

     It also seems to me that the term "income received or accruing from a Canadian estate or trust" must mean something other than the income from property which a settlor has transferred to a trustee for himself and of which he has never ceased to be the beneficial owner.",

which seems quite on point.

In Brookview, the appellants, a group which included Brookview, acquired an interest in some land through a nominee corporation.  At issue was whether a subsequent loss on abandonment of the profit-making scheme was that of the nominee corporation, or of the group members.  The Court found that the loss was that of the group members, the nominee, which the Court found held the property as "bare trustee for the group and subject to the obligation to convey it at the direction of the group", having no rights with respect to the property.

In our view,

24(1) 21(1)(b)

C.  The deductibility of irrevocable payments by third parties

24(1) 21(1)(b)

DirectorBilingual Services Resource Industries DivisionResource Industries SectionRulings Directorate