23 January 1997 Internal T.I. 9700557 - ACTIVE BUSINESS INCOME

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: payments from associated corp

Position:payor must be associated- no indirect payments

Reasons:law

			January 23, 1997

H. S. Lee	Financial Industries
	Interim Director	  Division
	Edmonton Tax Services	S.J. Tevlin
(613) 957-2746
	Attention: Barrie J. Wickware
	           Business Enquiries 471-4-3
			970055

Subsection 129(6)

We are writing in response to your memorandum dated December 13, 1996 wherein you asked for our opinion regarding the application of subsection 129(6) to a situation described in a letter to you from XXXXXXXXXX.

As XXXXXXXXXX letter appears to relate to a fact situation and proposed transactions it should therefore be in the form of a request for an advance income tax ruling in accordance with the procedures set forth in paragraph 22 of Information Circular 70-6R3 dated December 30, 1997.

However, we are prepared to provide the following general comments.

Subsection 129(6) in part states, "where any particular amount paid or payable to a corporation.... by another corporation .... with which the recipient corporation was associated....". This would suggest to us that in order for that subsection to apply, the amount paid or payable to the recipient must be received directly from an associated corporation. Therefore, where the recipient corporation receives an amount from an associated corporation indirectly through a third party which is not associated with the recipient corporation, subsection 129(6) would not apply.

We trust our comments will assist you in your response to XXXXXXXXXX request.

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch