22 June 1990 Income Tax Severed Letter ACC9592 - Acquisition Expenditures in respect of Scientific Research and Experimental Development

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.

24(1) 900554

W.C. Bailey
957-2061

Attention: 19(1)

Dear Sirs:

Re: Subsection 15(2) of the Act

This will reply to your letter of April 24, 1990 concerning the timing of the application of subsection 15(2).

We agree with your interpretation of these provisions that it is the status of the debtor at the time a loan is received that determines whether subsection 15(2) applies and would not be redetermined thereafter with respect to the same loan simply because the debtor has later become a shareholder. Therefore, where a Canadian resident individual employee, who is not a person described in subsection 15(2), receives a loan from an arm's length corporate employer, that employee is not subject to the provisions of subsection 15(2) even though he or she subsequently uses the funds to acquire shares in that corporate employer.

Yours sincerely,

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

QUESTION 18

Paragraph 37(7)(f) of the Income Tax Act provides that expenditures on or in respect of a scientific research and experimental development shall not include "any capital expenditures made in respect of the acquisition of a building...". Would renovation of a capital nature to an existing building be considered as "the acquisition of a building"? Would alterations such as building an extension or addition, to an existing building be considered as "the acquisition of a building" for this purpose?

ANSWER

It is the Department's position that additions and alterations related to an existing building are included under the exclusion for acquisition expenditures in subparagraph 37(7)(f)(i) of the Act. Subparagraph 37(7)(f)(i) of the Act states that expenditures on or in respect of scientific research and experimental development shall not include any capital expenditures made in respect of the acquisition of a building other than a "prescribed special-purpose building". The Department considers the definition of "building" to include any addition or alteration to an existing building.

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