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.
REVENUE CANADA FORESTRY TAX CONFERENCE
PRESENTATION BY RULINGS
"FINISHED GOODS" FOR ITC AND M&P PURPOSES
After a detailed study conducted during 1991, supported by a written opinion from the Department of Justice ("Justice"), Rulings adopted the view that the products of the extractive industries, such as the logs (the felled trees) from logging, would not constitute "finished goods" referred to in subparagraph 127(11)(b)(i) of the Income Tax Act and paragraph (d) of the definition of "qualified activities" in section 5202 of the Income Tax Regulations for purposes of determining a taxpayer's investment tax credits ("ITC") and manufacturing and processing ("M&P") profits.
In correspondence dated 1990, the Department of Finance ("Finance") stated that after logs have been delivered to a storage facility, the limitations in respect of finished goods in subparagraph 127(11)(b)(i) should apply and any property used to place the logs into or out of storage should not be eligible for ITC. We did not share this view and we informed Finance accordingly during 1991.
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In correspondence dated February, 1992, Finance agreed with Rulings that arbitrary rules cannot be used to determine whether particular items are finished goods and that the proper determination of that issue should be based on the facts of a given situation, the nature of the industry and the activities of the particular taxpayer. Finance also stated that the determination of whether any item, including logs, is a finished good should consider the policy underlying any related tax measures that may apply thereto. We do not have any quarrel with Finance's latest comments.
Finance's views were forwarded to Justice with our request for confirmation that it is still Justice's view that logs from logging would not constitute finished goods. Justice so confirmed in correspondence dated July, 1992.
We therefore reiterate our view which continues to be that the products of the extractive industries, such as logs from logging, do not constitute finished goods for purposes of the aforementioned provisions of the Act and Regulations pertaining to ITC and M&P.
Prepared by:John Chan
Date: September 1, 1992
File #: 7-922559
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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