26 April 1991 External T.I. 9104525 F - Large Corporations Tax

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.

5-910452

Dear Sirs:

Re:  Part I.3 of the Income Tax Act (the "Act")

This is in response to your letter of February 8, 1991 in which you requested a technical interpretation of the application of section 181.6 of the Act.

The circumstance in respect of which you wish our comments is illustrated by the following hypothetical facts:

1.        Aco and Bco are related companies.

2.        Aco has taxable capital of $9,000,000.  Bco has taxable capital of $3,000.000.

3.        In filing form T2150, $3,000,000 of the capital deduction would be allocated to Bco pursuant to subsection 181.5(2) of the Act.

Section 181.6 of the Act requires that a Part I.3 return be filed by every corporation that is liable to pay Part I.3 tax for a taxation year.  Provided that an agreement is filed in accordance with the provisions of section 181.5 of the Act, pursuant to which Bco is allocated a capital deduction equal to its taxable capital employed in Canada, Bco would not be liable to pay Part I.3 tax and therefore Bco would not be required to file a Part I.3 return for that taxation year.

The calculations provided for in Part I.3 are nevertheless subject to scrutiny by the Department

While we trust the forgoing comments are of assistance, they do not constitute an advanced income tax ruling and, therefore,are not binding on Revenue Canada, Taxation in respect of a specific situation.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate