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 ISSUE:
Whether subsection 130.1(8) of the Income Tax Act (the "Act") applies to the first taxation year in which the corporation starts to carry on business or to the first taxation year in which the corporation carried on business throughout the taxation year.
Position TAKEN:
The first taxation year in which the corporation carried on business.
Reasons FOR POSITION TAKEN:
Interpretation of the Act.
5-942427
XXXXXXXXXX L. Roy
Attention: XXXXXXXXXX
November 16, 1994
Dear Sir\Madam:
Re: Subsection 130.1(8) of the Income Tax Act
This is in reply to your letter of September 12, 1994 in which you requested our opinion on whether subsection 130.1(8) of the Income Tax Act (the "Act") applies to the first taxation year in which the corporation starts to carry on business or to the first taxation year in which the corporation carried on business throughout the taxation year.
The definition of mortgage investment corporation in paragraph 130.1(6)(d) of the Act requires that the number of shareholders of the corporation be not less than twenty and that no one shareholder hold more than 25% of the issued of the capital stock of the corporation throughout the taxation year. However, subsection 130.1(8) of the Act provides an exception which deems the corporation to have complied with paragraph 130.1(6)(d) of the Act throughout the first taxation year in which it carries on business if the test in paragraph 130.1(6)(d) of the Act is met on the last day of its first taxation year.
It is our view that subsection 130.1(8) of the Act applies to a corporation first taxation year whether or not the corporation carried on business throughout the first taxation.
We trust the above comments will be of assistance to you. If you have any questions do not hesitate to contact us.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
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