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 balance sheet amounts on transactions between related parties, as sanctioned by section 3840 of the CICA Handbook, are used for LCT purposes.
Position:
Generally Yes. However, we seem to be missing some facts or an indication of what the taxpayer's specific concerns are, if any. Therefore we have provided very general comments only.
Reasons:
Section 181(3) and see above.
952588
XXXXXXXXXX Michael Cooke
Attention: XXXXXXXXXX
November 14, 1995
Dear Sirs:
Re: Large Corporation Tax
This is in reply to your letter dated September 25, 1995, wherein you requested our views on the application of large corporations tax to the proposed transactions set out in your letter.
Subsection 181(3) of the Income Tax Act (Act) requires that amounts reflected in a corporation's balance sheet, prepared in accordance with generally accepted accounting principles (GAAP), be used to determine the values or amounts of the various components for purposes of Part I.3, unless otherwise required under that Part. The CICA Handbook, which generally represents the accepted authority for the application of GAAP in Canada, in section 3840 discusses the conditions under which related party transactions are recorded.
It would be inappropriate and perhaps misleading for us to comment on the situation you have described in your letter without having all of the relevant facts. You apparently have some concerns that certain amounts reflected in the balance sheet in accordance with section 3840 of the CICA Handbook may not be recognized for purposes of the calculations of capital and investment allowance pursuant to subsections 181.2(3) and (4) of Act respectively. Should you wish to advise us of your specific concerns we will give them consideration and provide you with our comments.
Yours truly,
F. Lee Workman
Section Chief
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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