18 March 1996 External T.I. 9526495 - tax shelter

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.

									952649
XXXXXXXXXX							Cal Brown
(613) 957-8980

Attention: XXXXXXXXXX

March 18, 1996

Dear Sir/Madam:

This is in reply to your letter to the Department of Finance dated October 3, 1995, concerning the "tax shelter" rules. A copy of this letter was sent to us. We apologize for the delay in reply to your request.

Your specific concern relates to the situation where there is a "revenue guarantee" with respect to an operating lease of fast write-off assets. You believe that since these arrangements including such features as a parent corporation guaranteeing leasing revenue and residual buy-out arrangements for its subsidiary are typical commercial practice, there is a need for special rules to deal with such lease arrangements.

We agree that such arrangements may be interpreted as a "revenue guarantee" and therefore the leased asset could be a "tax shelter". As you can appreciate, there are many situations including leasing transactions, that could fall within the definition of a tax shelter. Revenue Canada is currently consulting with the Department of Finance on this matter.

With respect to your comments on whether normal accounting advice can be said to be "...statements or representations made..." for the purpose of the tax shelter rules, this would have to be ascertained after reviewing the facts of a particular situation.

We regret that our reply cannot be more definitive.

Yours truly,

for Director
Manufacturing Industries, Partnerships
and Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch