15 February 1996 External T.I. 9529295 - TIME LIMIT FOR ISSUING CERTIFICATE.

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:

1. Time limit for issuing class 34 certificate?

2. Whether requirements of subparagraph 8(j)(i) or (ii) of Class 34 of Draft Regulations are met in scenario described?

Position:

1. For property acquired after 1993, the certificate must be issued no later then 2 years after acquisition. For property acquired before 1994, the certificate must be issued before the end of 1995.

2. Question of fact.

Reasons:

1. Paragraph 8(k) of Class 34 of Draft Regulations.

2. Determination as to whether requirements of subparagraph 8(j)(i) or (ii) of Class 34 of Draft Regulations are met in scenario described would necessitate interpretation of the terms of numerous contractual arrangements entered into by taxpayers.

		952929
XXXXXXXXXX	Wm. P. Guglich

Attention: XXXXXXXXXX

February 15, 1996

Dear Sirs:

Re: Class 34 Certification

This is in reply to your letter of November 7, 1995 concerning the timing necessary to obtain a Class 34 certificate as provided in the draft legislation released by the Department of Finance on September 27, 1994 (the "Draft Regulations").

You described the following schedule of key contracts/agreements entered into by a partnership in relation to an Energy Center:

1.For purposes of the application of Class 34, the taxpayer is a partnership which was organized on November 12, 1993.

2.One of the partners entered into a Power Purchase Agreement with a public power utility on June 30, 1992. That contract was assigned to the partnership on March 11, 1994.

3.One of the partners entered into a Construction Agreement with a third party on April 22, 1993. That construction contract was assigned to the partnership on February 17, 1994.

4.Construction of the Energy Centre commenced in August 1994. You estimate that construction and testing will be completed in the first quarter of 1996.

It is your view that:

5.To qualify for inclusion in Class 34 it is necessary to satisfy the requirements described in both paragraph (j) and (k) of the Draft Regulations.

6.In the scenario you described, the provisions of both clause 8(j)(i)(A) and 8(j)(ii)(B) of Class 34 of the Draft Regulations would be met.

7.Paragraph (k) of Class 34 of the Draft Regulations provides that the certificate may be issued after 1995 but must be issued no later then two years after the property is acquired.

It appears that the interpretation you seek relates to a proposed transaction to be undertaken by a specific taxpayer and, therefore, we bring to your attention Information Circular 70-6R2 dated September 28, 1990 issued by Revenue Canada, Taxation. Confirmation with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling for a particular taxpayer with respect to specific transactions which are contemplated, a written request for an advance income tax ruling can be submitted in accordance with the Information Circular. Nevertheless, we can offer the following general comments.

OUR VIEWS

A.We agree that the requirements of both paragraphs (j) and (k) of the Draft Regulation must be met in order for property to qualify for inclusion in Class 34.

B.We agree that paragraph (k) of Class 34 of the Draft Regulations requires that for property acquired after 1993, the certificate must be issued no later then two years after the property is acquired. For example if the property is acquired on February 1, 1996, the certificate would be required to be issued before February 1, 1998. If the property is acquired before 1994, the certificate would be required to be issued before the end of 1995.

C.To qualify under paragraph (j) of Class 34 of the Draft Regulations the requirements of either subparagraph (j)(i) or (j)(ii) must be met. Subparagraphs 8(j)(i) and 8(j)(ii) are disjunctive. To qualify under subparagraph 8(j)(ii) the property must be acquired before 1996. There is no time limit on an acquisition of property that qualifies under subparagraph 8(j)(i).

D.Whether a particular property acquisition will meet the requirements of either subparagraphs 8(j)(i) or 8(j)(ii) of Class 34 of the Draft Regulations is a question of fact.

We trust our comments will be of assistance to you.

Yours truly,

R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch