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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Are Wholesale Receivables sold to investors in undivided Certificates and payable on a floating interest basis subject to reg 7000 ?
Position TAKEN:
No
Reasons FOR POSITION TAKEN:
Most (if not all) of the accrued amount is paid during the year and it cannot be determined what the maximum specified rate can be (floating rate).
941626
XXXXXXXXXX C. Tremblay
Attention: XXXXXXXXXX
September 28, 1994
Dear Sirs:
This is in reply to your letter of June 22, 1994, and further to a facsimile of September 2, 1994, requesting an advance income tax ruling on behalf of XXXXXXXXXX.
In your letter you have outlined what appears to be a proposed transaction that is the same in character as a completed transaction entered into by the taxpayer in a prior taxation year. The review of such transactions falls within the responsibility of District Taxation Offices. However, we can provide you with the following general comments which we hope will be of assistance to you.
In our view, the accrual rules for prescribed debt obligations as described in subsection 7000(1) of the Income Tax Regulations would generally not apply to a debt obligation that pays a floating rate of interest to an investor on a monthly basis.
Generally, interest should be brought into income on a rational basis throughout the term of the obligation. Accordingly, the provisions of subsection 12(3) would apply to corporate and partnership investors while individual investors will be subject to the provisions of paragraph 12(1)(c) of the Act.
The above comments are only expressions of opinion on the application of the Income Tax Act, generally, and as such should not be construed as advance income tax rulings, nor are they binding on the Department.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
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