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 the deduction under ss 34.1(3) is to be taken into account in determining amount A in the formula for determining the additional business income under ss 34.1(1).
Position: No.
Reasons: SS 34.1(3) refers to a deduction from income for the taxation year while 34.1(1) refers to income from the business for the fiscal periods. Obviously, a distinction was intended so that the deduction under 34.1(3) would not be taken into account in 34.1(1). This makes sense considering that the alternative would allow a deferral of income.
XXXXXXXXXX 5-982039
Attention: XXXXXXXXXX
September 2, 1998
Dear XXXXXXXXXX:
This is in response to your fax of August 7, 1998, concerning the interaction of subsections 34.1(1) and (3) of the Income Tax Act.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. The following comments are, therefore, of a general nature only.
You have asked whether or not the deduction in subsection 34.1(3) of the Act (because of an income inclusion under subsection 34.1(2) in the prior year), should be taken into account in determining amount “A” in subsection 34.1(1). In our view, it should not. The deduction under 34.1(3) of the Act is described as a deduction in computing an individual’s income for a taxation year, whereas amount “A” in subsection 34.1(1) of the Act is defined as “the total of the individual’s income from business for the fiscal periods of the business that end in the year.” Thus, if an amount has, for example, been included in income under subsection 34.1(2) in 1997, that amount is deducted in computing income for tax purposes in 1998, and not from fiscal period income described in the formula in subsection 34.1(1) of the Act.
We trust that these comments will be of assistance.
Yours truly,
J.F. Oulton, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
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