2096 Ruling 9600363 - RELATED BUSINESS

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 registered charity status would be revoked if charity under takes a proposed XXXXXXXXXX program.

Position:

NO.

Reasons:

The XXXXXXXXXX programs would be considered a related business for purposes of subsection 149.1(2) of the Act.

XXXXXXXXXX							960036

XXXXXXXXXX, 1996

Dear XXXXXXXXXX:

Re: XXXXXXXXXX
Advance Income Tax Ruling

This is in reply to your letter of XXXXXXXXXX wherein you requested an advance income tax ruling on behalf of XXXXXXXXXX.

We understand that to the best of your knowledge and that of the taxpayers involved, none of the issues involved in the requested rulings is being considered by a District Taxation Office or a Taxation Centre in connection with a tax return already filed, and none of the issues involved in the requested rulings is the subject of any notice of objection or is under appeal.

Our understanding of the facts, proposed transactions and purpose of the proposed transactions is as follows:

Facts

1.XXXXXXXXXX is a corporation, but since it is a charitable organization it does not have a corporation tax account number. Its charitable registration number is XXXXXXXXXX.

2.The mission of

XXXXXXXXXX

Proposed Transactions

A.XXXXXXXXXX

3. XXXXXXXXXX

4.In the case of materials which it creates,

XXXXXXXXXX

distribute the product.

5.In other cases,

XXXXXXXXXX

and materials created by other parties outside Canada. In those cases,

XXXXXXXXXX

6.In both cases, the products would be designed to be sold in commercial outlets, such as
XXXXXXXXXX

7.XXXXXXXXXX would receive royalties from sales of the products and would also derive revenues through promotional activities, for example, obtaining sponsors for products. XXXXXXXXXX would use these funds to cover expenses associated with product development and marketing, and would distribute the balance to the XXXXXXXXXX which are also registered charities with missions virtually identical to that of the XXXXXXXXXX.

8.Third party commercial interests, for example, XXXXXXXXXX would derive revenues from their activities in connection with the products.

9.These endeavours would be undertaken on a semi-regular basis, but each would have a limited period of effectiveness.

XXXXXXXXXX

10. XXXXXXXXXX

B.XXXXXXXXXX

11. XXXXXXXXXX

12. XXXXXXXXXX

XXXXXXXXXX

13. XXXXXXXXXX

14.Third party commercial interests, such as XXXXXXXXXX would derive revenues from their activities.

15.These endeavours would occur in a regular fashion and would likely have unlimited application. That is, while products would continue to be compared against predetermined criteria, the program would occur on an annual basis for the foreseeable future.

Purpose of Proposed Transactions

16.The purpose of the proposed XXXXXXXXXX activities is to
XXXXXXXXXX

In addition, as mentioned above, the activities would raise funds for the XXXXXXXXXX.

17.The purpose of the proposed
XXXXXXXXXX

In addition, as mentioned above, the program would raise funds which the XXXXXXXXXX would use in its charitable activities.

Rulings

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purpose of the proposed transactions, and provided that the proposed transactions are completed in the manner described herein, we confirm that the proposed transactions, as described above, will not, in and by themselves, cause the Department to recommend to the Minister that the registration of XXXXXXXXXX be revoked pursuant to subsection 149.1(2) of the Act.

The above rulings, which are based on the Act in its present form and do not take into consideration any proposed amendments thereto, are given subject to the general limitations and qualifications set out in Information Circular 70-6R2 dated September 28, 1990 and Special Release thereto dated September 30, 1992 and are binding on Revenue Canada, Taxation provided that the proposed transactions are completed by XXXXXXXXXX.

Yours truly,

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