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.
XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sirs:
RE: Reserves - Insurance Agents and Brokers
We are writing in response to your correspondence of May 21, 1993 wherein you had requested clarification with respect to certain aspects of the reserve available to insurance brokers and agents pursuant to section 32 of the Income Tax Act (the "Act").
As we understand it, your specific concern is with respect to subsection 32(3) of the Act which provides, to the extent that the taxpayer satisfies the conditions incorporated therein, an additional reserve in respect of unearned commissions from the taxpayer's business as an insurance agent or broker. More specifically, your query relates to the application of that provision in circumstances in which a corporate taxpayer which otherwise qualifies for the reserve has an abbreviated taxation year due to the application of subsection 249(4) of the Act.
In such circumstances, we would advise that, to the extent that the corporate taxpayer carries on business as an insurance agent or broker throughout that abbreviated taxation year, the reserve, as calculated pursuant to paragraphs 32(3)(k) and (l) would be available to that taxpayer and the calendar year in which the abbreviated taxation year ends will determine, pursuant to whichever of paragraphs 32(3)(a) to (j) as would be applicable in the circumstances, the percentage of that reserve which may be claimed for purposes of Part I of the Act.
While we trust that our comments are of assistance to you, we would advise that they do not constitute an advance income tax ruling and are, accordingly, not binding upon the Department with respect to any particular transaction.
Yours truly,
for DirectorFinancial Industries DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© His Majesty the King in Right of Canada, 1993
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© Sa Majesté le Roi du Chef du Canada, 1993
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