4 April 1997 External T.I. 9706555 - SEPARATION OF COMMUNAL ORGANIZATION - NISA

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:

The tax implications where a communal organization (to which section 143 applies) separates into two colonies. This is a follow-up to our letter in file 5-951741.

Position TAKEN:

Advise taxpayer of an administrative position adopted by Audit Directorate and refer the taxpayer to Audit for more information.

Reasons FOR POSITION TAKEN:

Although our previous reply was technically correct, we have been advised that Audit Directorate has an administrative position which, provided that certain conditions are met, would allow property of an existing communal organization to be transferred to a new communal organization on a tax deferred basis. Audit has requested that we forward such files to their attention for reply (see file 960657).

Darell Pack
Director, Planning and Public Affairs
NISA Administration
Agriculture Canada
P.O. Box 6100
Winnipeg, Manitoba		                          7-970655
R3C 3A4		                                     M. Azzi

April 4, 1997

Dear Sir:

Re: Transfer of NISA Fund No. 2 - Communal Organizations

This is further to our letter of November 1, 1995 (our file 5-951741, copy enclosed) which, inter alia, dealt with the tax implications of the transfer of a portion of a NISA Fund No. 2, in a situation where members of an existing communal organization are separating to establish a new communal organization (i.e, "situation 2" of our previous letter).

In our previous letter, we indicated that such a transfer may result in an income inclusion to the existing organization. However, it has recently come to our attention that the Department has an administrative position which, provided that certain conditions are met, would nonetheless allow property of an existing communal organization to be transferred to a new communal organization on a tax deferred basis. For more information on this administrative position and how it would apply to your situation, you may contact Mr. E.H. Gauthier, Director General, Audit Directorate, Revenue Canada, 875 Heron Road, Ottawa, Ontario, K1A 0L5.

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

c.c. Mr. E.H. Gauthier

Director General
Audit Directorate