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.
962449
XXXXXXXXXX B. Kerr
Attention: XXXXXXXXXX
August 9, 1996
Dear Sir/Madam:
Re: Charitable Organization Investment in a Business Corporation
This is in response to your letter of July 11, 1996, wherein you requested our views on whether a charitable organization can invest in the shares of a business corporation that will operate a bingo hall.
The situation described in your letter involves actual proposed transactions with identifiable taxpayers. Assurance as to the tax consequences of actual proposed transactions will only be given in the context of an advance income tax ruling. The procedures for requesting an advance income tax ruling are outlined in Information Circular 70-6R2 dated September 28, 1990, and the Special Release thereto dated September 30, 1992, issued by Revenue Canada, Taxation. However, we can offer the following general comments.
In order to qualify as a "charitable organization" as defined in subsection 149.1(1) of the Income Tax Act, inter alia, an organization must devote all of its resources to charitable activities carried on by the organization itself and it is a question of fact whether this requirement has been met. However, as stated in paragraph 15 of Information Circular 87-1, the word "resources" is considered to refer to all the financial and physical assets of the charity as well as the services provided by its human resources. Accordingly, the investment in the shares of a business corporation may not qualify.
In any event, issues regarding charitable activities are normally handled by the Charities Division and should you wish to pursue this issue further you should contact them directly by writing to:
Mr. Ron Davis, Director
Charities Division
Room 5004B
400 Cumberland Street
Ottawa, Ontario
K1V 0L8
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
cc. Ron Davis
Charities Division
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