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.
ADM'S OFFICE (3)
RETURN TO RULINGS, ROOM 303, MET. BLDG.
AUTHOR
SUBJECT OR CORPORATE CASE FILE
July 19, 1994
MEMORANDUM FOR MR. PIERRE GRAVELLE
SUBJECT: Sales Commissions incurred by Mutual Fund Management Corporations
XXXXXXXXXX
XXXXXXXXXX we have concluded that the Department could distinguish these corporations from limited partnerships and, as such, could accept that these corporations be allowed to deduct the sales commission expenses in the year they are incurred. This position would enable these corporations to be on a level playing field with substantially similar businesses such as banks, trust and insurance companies.
The relevant distinguishing factors are that limited partnerships are financing vehicles which only have one expense and one revenue stream. They have no infrastructure (i.e, no employees, no premises, no client relationship) and they simply provide a distribution function for mutual fund units or shares for a period of 4 to 12 months.
Conversely, the mutual fund management corporations are fully integrated services corporations which provide investment management services in a wide variety of financial products and services. Unlike the limited partnerships, these corporations derive their income from the management of the mutual fund assets and by providing administrative and customer services. These corporations do not earn their income by simply arranging for the issuance of mutual fund units or shares but rather they earn their income by providing the necessary investment, administrative and customer services.
As a result, the sales commission expenses incurred by the mutual fund management corporations do not produce, or cannot be related to, their key revenues since revenues are earned based on management services. Simply put, if these management services are not rendered by the corporations, they would not be entitled to their revenue stream.
XXXXXXXXXX
Denis Lefebvre
Assistant Deputy Minister
Legislative and Intergovernmental
Affairs Branch
Attachment
Marc Vanasse
4-941785
July 15, 1994
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