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:
Whether or not a particular oil and gas lease payment is earned income for purposes of 146(1)(c)
Position TAKEN:
Question of fact, however income from royalties usually taxed pursuant to 12(1)(g) and therefore not earned income.
Reasons FOR POSITION TAKEN:
Interpretation of ITA
XXXXXXXXXX 5-942517
Attention: XXXXXXXXXX
October 27, 1994
Dear Sirs:
Re: Earned Income for deduction of RRSP contributions
This is in reply to your letter of September 12, 1994 wherein you request a technical interpretation on whether or not a particular lease payment is earned income for the purposes of calculating a taxpayer's RRSP deduction limit. The situation described in your letter is an actual fact situation and as noted in Information Circular 70-6R2, we do not express opinions on specific proposed transactions other than as a reply to an advance income tax ruling request. Where a completed transaction is involved, the enquiry should be addressed to the relevant District Taxation Office. However, we offer the following general comments which may or may not apply to your particular fact situation.
Income from royalties is normally taxed pursuant to paragraph 12(1)(g) of the Income Tax Act (the "Act"). As a general rule, it is our position that income taxed pursuant to paragraph 12(1)(g) of the Act is not rental income from the rental of real property and thus is not "earned income" for the purpose of computing deductible RRSP contributions. However, it is possible, depending on the terms of the contractual arrangement, that payments under a particular contract are rentals rather than royalties; e.g., surface rentals of the type discussed in IT-200. As such, the determination of the type of payment and income can only be made on a case-by-case basis after reviewing all terms of the contract.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch
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