29 August 1991 Administrative Letter 912036 F - Request for Advance Income Tax Ruling

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.

Dear Sir:

Re:             24(1)

This is in reply to your letter dated June 17, 1991 wherein you requested an advance income tax ruling on behalf of the above-referenced taxpayer. We also acknowledge the information provided during our various telephone conversations    19(1)  Sarazin.

It would appear, based upon the limited set of facts presented in your letter and the additional information provided over the telephone, that your submission is incomplete. We refer you to Information Circular 706R2 dated September 28, 1990 wherein the Department has set out guidelines under which advance income tax rulings are issued. We regret that without a new submission in writing detailing a complete and accurate disclosure of all of the relevant facts, a description of the proposed transactions and the purpose of the proposed transactions, the Department is unable to further review your request for an advance income tax ruling.  We would also like to draw to your attention to subparagraph 14(c) of Information Circular 70-6R2, wherein the Department has stated that it will refuse to provide rulings in respect of transactions which are to be completed at some indefinite future time, since it cannot be said that the transactions are seriously contemplated by the  taxpayers.

In order to assist you should you wish to submit a new application for an advance ruling at a later time, you may wish to review the following information, which was presented in your current submission.

I.                    24(1)

II.               24(1)

III.               24(1)

During our telephone conversation, you requested that we provide you with our comments regarding the past transactions detailed in your letter. We regret that we are unable to comment thereon.  The appropriate District Taxation Office will consider requests for written opinions on completed transactions. We will, however, provide you with the following general comments relating to the determination of a corporation's capital dividend account, within the meaning of paragraph 89(1)(b) of the Act.

In the determination of a corporation's capital dividend account, the provisions of paragraph 89(1)(b) of the Act require that the corporation deduct all capital dividends that became payable by the particular corporation.  As stated in paragraph 2 of Interpretation Bulletin IT66R6, a dividend becomes payable on the day stipulated by the resolution of the directors declaring the dividend. Also, paragraph 6 of IT-66R6 explains that a capital dividend account is reduced by the aggregate of all capital dividends that became payable by the corporation in the relevant period.  Thus, where a corporation has declared a dividend for the full amount of the balance in its capital dividend account, then immediately following the date the dividend has become payable, the corporation would have a capital dividend account balance of nil.  We also note that, at the present time, there are no provisions in the Act which would allow a taxpayer to amend a subsection 83(2) election which has been filed.

Your deposit of $400 will be returned to you under separate cover. If, after considering our above comments, you wish to submit a new application for an advance ruling, another deposit will be required.

Yours truly,

for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch