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.
921871
M.P. Sarazin
24(1) (613) 957-2118
Attention: 19(1)
July 30, 1992
Dear Sirs:
Re: Subsection 80(2) of the
Income Tax Act (Canada) (the"Act")
This is in reply to your letted dated June 15, 1992 wherein you requested that we reconsider our position regarding the determination of cost amount for purposes of subsection 80(2) of the Act as expressed in our letter of June 3, 1992. The position expressed in our letter was based upon the fact that accounts receivable would usually be considered to be capital property, as defined in paragraph 54(b) of the Act, except in the situation where the corporation is a trader in accounts receivable and, as such, the cost amount would be determined in accordance with paragraph (b) of the definition "cost amount" in section 248 of the Act. However, you are of the view that paragraphs 7 and 8 of Interpretation Bulletin IT-188R imply that accounts receivable would not be considered capital property unless they are sold in the course of the sale of the entire business.
Document Disclosed Pursuant to The Access To Information Act Document Divulgué en vertu de la loi sur l'accès à l'information
It is the Department's general position that accounts receivable will represent capital property to a taxpayer unless the taxpayer's business includes trading in accounts receivable. The position described in paragraph 8 of Interpretation Bulletin IT-188R is not inconsistent with this position as the situation described therein involves a taxpayer who discounts receivables in the ordinary course of carrying on business.
In the situation where it is determined that the accounts receivable do not constitute capital property held by the corporation then the cost amount would be determined in accordance with paragraph (f) of the definition "cost amount" in section 248(1) of the Act. In any case, the application of subsections 80(2) and 80(1) of the Act would be as expressed in our letter of June 3, 1992. We hope that the above comments will be of help to you.
Yours truly,
for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
Document Disclosed Pursuant to The Access To Information Act Document Divulgué en vertu de la loi sur l'accès à l'information
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© His Majesty the King in Right of Canada, 1992
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© Sa Majesté le Roi du Chef du Canada, 1992
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