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.
Q7. Deductibility of Expenses Incurred by a Receiver
Control of a corporation was in the hands of a receiver for a number of years during which time the receiver liquidated the corporation's assets and incurred significant expenditures, including receiver's fees, legal fees, storage fees and building costs. The receiver did not carry on the business of the corporation at any time. Control of the corporation was eventually returned to its shareholders and the business was restarted. In computing the income of the corporation from the business for the years when it was controlled by the receiver would the expenditures incurred by the receiver during that period be deductible?
Department's Position
With respect to the deductibility of business expenses, subsection 18(1)(a) of the Act prohibits the deduction of certain outlays or expenses in computing a taxpayer's income from a business except to the extent that they are incurred for the purpose of gaining or producing income from the business. In the situation described, we would consider the purpose test as not having been met since the business of the corporation was discontinued during the relevant period. Accordingly, such expenditures incurred by the receiver are not deductible in computing the income of the corporation from a business. It is a question of fact whether a receiver continues to carry on a corporation's business in the course of liquidating its assets, or whether certain expenditures are incurred for the purpose of gaining or producing income from a business.
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1992
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1992
Email this Content