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 intangible property that is capital property and is used principally in producing deemed active business income under subparagraph 95(2)(a)(ii) would be excluded property.
Position:
Yes.
Reasons:
Income deemed to be active business income under 95(2)(a)(ii) is active business for purpose of excluded property definition in subsection 95(1).
970977
XXXXXXXXXX J. Stalker
Attention: XXXXXXXXXX
December 22, 1997
Dear Sirs:
We are writing in response to your letter of December 11, 1997 in respect of the definition of “excluded property” in subsection 95(1) of the Income Tax Act (Canada) (the “Act”).
You have presented a hypothetical situation where Company B, a corporation incorporated and resident in a designated treaty country, is a controlled foreign affiliate of a Canadian corporation. Company B owns an intangible property that is used principally in producing deemed active business income under subparagraph 95(2)(a)(ii) of the Act and such income is included in the exempt earnings of Company B as defined in subparagraph 5907(1)(b) of the Regulations. The intangible property is a capital property to Company B.
It is our view that the intangible property would be excluded property as defined in subsection 95(1) of the Act. Provided a gain arising from the disposition of the intangible by Company B is a capital gain, it would be included in exempt earnings as defined in paragraph 5907(1)(b) of the Regulations.
The above comments represent our general view with respect to the subject matter of your letter. These comments do not constitute an advance income tax ruling and therefore, as described in paragraph 22 of Information Circular 70-6R3, are not binding on the Department.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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