5 March 1992 External T.I. 920268A F - "NISA" Program

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.

DM'S OFFICE  (2)                        Y.S. 92-0528T

ADM'S OFFICE (3)

RETURN TO RULINGS, ROOM 303, MET. BLDG

AUTHOR

SECTION CHIEF

RESEARCH FILE

SUBJECT FILE

24(1)  

Dear  19(1)

The Honourable Otto Jelinek, Minister of National Revenue, has asked me to reply to your letter of December 16, 1991, regarding the Department's response to your letter concerning the net income stabilization ("NISA") program.

It is unfortunate that draft legislation had not been released by the Minister of Finance and that other firm information was not available at the time of your original letter.  However, I would like to thank you for your sugesstion and I can assure you that in future we will  hold enquiries such as yours until a reply until a reply can be provided.

With regard to the questions raised in your letter, the draft legislation on the NISA program was issued by the Minister of Finance on December 21, 1991.  It proposes a new subsection 110.6(1.1) of the Income Tax Act, which provides that the fair market value of a

producer's NISA account is considered to be nil for purposes of determining whether a share satisfies the definitions "qualified small business corporation share" or "share of the capital stock of a family farm corporation".  In effect, the value of a NISA held by a corporation will not influence the determination of whether a particular share meets the criteria set out in those definitions.

Subsection 8(2) of the Farm Income Protection Act provides for the division of each participating producer's NISA account into:

(a)     Fund No. 1, to which shall be credited all amounts paid by      the      producer in respect of the program; and

(b)     Fund No. 2, to which shall be credited all other amounts paid      in respect of that producer as or on account of contributions,      interest and bonuses.

Proposed subsection 12(10.2) of the Income Tax Act requires all amounts received out of the taxpayers NISA  Fund No. 2 to be included in computing income for the year.  The draft legislation also proposes to amend paragraph 125(7)(c) of the Income Tax Act to provide that all amounts in respect of a NISA account which are included in computing the income of a corporation for the year will be considered income from an active business.  As a result, payments out of Fund No. 2 representing the interest in respect of the corporation's participant non-matchable deposit and any return on investment in respect of a corporation's participant matchable deposit would be considered "income of the corporation from an active business" for purposes of section 125 of the Income Tax Act.

I would like to note that these comments are based on draft legislation which may be subject to modification before being enacted into law.

The Department of Finance distributes draft legislation and explanatory notes to interested parties to assist them in tracking law changes.  If you wish, you may have your firm placed on the mailing list by writing to the Department of Finance, Distribution Centre, Floor 1P West, 300 Laurier Avenue, Ottawa, Ontario, K1A 0G5.

I wish to thank you for bringing your concerns to my attention.

Yours sincerely,

Pierre Gravelle, Q.C.

B.GUGLICH

920268

FEBRUARY 5, 1992

957-2131