7 September 1989 Income Tax Severed Letter AC57776 - Doctrine of Constructive Receipt

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.

5-7776
                                J.D. Brooks
                                (613) 957-2097
19(1)

Dear Sirs:

Re: Paragraphs 12(1)(f) and 13(21)(d) of the Income Tax Act (the "Act")

This is in reply to your letter of March 31, 1989 in which you requested our opinion with respect to a situation you described as follows:

24(1)

It is apparent that the situation you described relates to specific taxpayers. Confirmation of the tax consequences of proposed transactions is only provided in response to a request for an advance income tax ruling, as described in our Information Circular 70-6R dated December 18, 1978. Although we are unable to provide any binding confirmation in response to your request, we have stated below some general comments.

Our Comments

As described in subparagraph 4(e) of our Interpretation Bulletin 128R, the cost to a taxpayer of repairs to a property which are required at the time of acquisition to put the property into a condition suitable for use, would be a capital expenditure and not a current expense. This would be true in the hypothetical situation described above whether or not the corporation were to become entitled to insurance proceeds. If the insurance company would not concur with an assignment of the right to the insurance proceeds, when the amount is determined it would be payable to the individual and not to the corporation. If, at the time the amount became payable, the individual directed the insurance company to pay the insurance proceeds to the corporation, it is apparent that either subsection 56(2) of the Act or the doctrine of constructive receipt would apply with respect to the individual. This would result in proceeds of disposition to the individual pursuant to subparagraph 13(21)(d)(vi) of the Act.

In considering the situation described above, no consideration has been given to other tax consequences that may be relevant to the particular situation. As stated in paragraph 24 of our Information Circular 70-6R, the comments stated herein are opinions only and are not rulings.

Yours sincerely,

for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch