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:
Transaction fee charged deductible under 20(1)(bb)
Position TAKEN:
Question of fact whether this is in accordance with par 4 of IT 238R2
Reasons FOR POSITION TAKEN:
Not enough facts as to exact nature.
951746
XXXXXXXXXX C. Tremblay
Attention: XXXXXXXXXX
July 11, 1995
Dear Sirs:
Re: Fees paid to Investment Counsel
This is in reply to your letter of June 26, 1995, requesting our views on whether or not a transaction fee charged for each security trade after a certain maximum number of trades have been processed would be deductible under paragraph 20(1)(bb) of the Income Tax Act (the "Act").
The situation that is described appears to involve a series of actual completed and proposed transactions. It is not our practice to give written opinions concerning proposed transactions, as indicated in Information Circular 70-6R2, other than by way of an Advance Ruling request. If, however, your request describes completed transactions involving a specific taxpayer, your questions should be directed to your District Services Taxation Office which has the responsibility of determining the tax consequences of completed transactions and their implications to the specific taxpayers. Although we are unable to provide any opinion in respect of the specific transactions described in your letter, we have set out some general comments which may be of some assistance.
Whether or not certain fees paid are in respect of the management and the administration of shares or securities is a question of fact. The preamble of paragraph 20(1)(bb) of the Act specifically excludes amounts paid as commissions. Accordingly, in our opinion, a transaction fee related to a specific number of trades and not expressly for services in respect of the administration or management of shares or securities of the taxpayer would not be deductible under paragraph 20(1)(bb) of the Act. However, further to paragraph 4 of IT-238R2, custody of securities, maintenance of accounting records and collections and remittance of income would normally qualify for the deduction.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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