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.
August 5, 1993
| SCARBOROUGH DISTRICT OFFICE |
HEAD OFFICE |
| D.A. Graham |
T. Murphy (613) 957-3496 |
| Director |
Financial Industries Division |
Attention: R.L. Coker
Large File Case Manager
XXXXXXXXXX and Part I.3 of the Income Tax Act (the "Act")
This is in reply to your memorandum of March 18, 1993 concerning the above noted subject. Your specific queries are:
1. Is XXXXXXXXXX a financial institution as defined in subsection 181(1) of the Act?
2. Are finance and lease receivables tangible property as referred to in paragraph 181.3(1)(a) of the Act?
As discussed with you in our telephone conversation of August 4, 1993, it is our view that XXXXXXXXXX would qualify as a financial institution.
Tangible property is defined in Black's Law Dictionary as "all property which is touchable and has real existence (physical) whether it is real or personal." An intangible is defined as "property that is a 'right' rather than a physical object. Examples would be patents, stocks, bonds, goodwill, trademarks, franchises and copyrights."
It is clear from the above description that a receivable, whether a finance receivable or a lease receivable, is intangible as opposed to tangible property.
There is no tangible property owned by XXXXXXXXXX with respect to a finance receivable. With respect to a lease receivable, provided the lease is truly a lease and not a conditional sale, the tangible property owned by XXXXXXXXXX would be the property that is the subject of the lease agreement.
Paragraph 181.3(1)(a) of the Act specifically refers to the "carrying value ...of an asset of the financial institution" and that "carrying value" is determined pursuant to subsection 181(3) of the Act which specifically refers to the amount as determined by generally accepted accounting principles. Accordingly it may be possible to argue that the amount reflected on the balance sheet as a lease receivable is the carrying value of the leased asset.
We hope our comments are of assistance to you. Should you have any questions concerning this memorandum please contact T. Murphy or F. Lee Workman.
Section Chief Financial Institutions Financial Industries DivisionRulings Directorate
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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