24 June 1982 Income Tax Severed Letter RCT-0483A

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.

Dear Sirs:

This is in reply to your letter of May 3, 1982 wherein you requested our opinion as to the Canadian tax consequences in respect of the following hypothetical fact situation:

• 1. P Co is a body corporate incorporated under the laws of a foreign jurisdiction;
• 2. P Co's jurisdiction of incorporation has not concluded a double tax treaty with Canada;
• 3. P Co is not a resident of Canada for Canadian tax purposes;
• 4. On January 1, 1982, P Co acquired real property in Canada in respect of which it derives rental income. P Co's rental operation is not a business or part of a business and P Co is not otherwise carrying on business in Canada;
• 5. P Co has elected under subsection 216(1) of the Income Tax Act, Canada ("Act") to be taxed in respect of its Canadian source rental income on a "net " basis for its 1982 taxation year ended December 31, 1982;
• 6. P Co has undertaken to file a return of income under Part I of the Act for its 1982 taxation year;
• 7. This Canadian-source rental income will be P Co's only Canadian-source income for its 1982 taxation year;
• 8. P Co derives income from business operations in non-Canadian jurisdictions.

It is your opinion that in respect of its 1982 taxation year P Co will be subject to tax under Part I of the Act on its Canadian source net rental income. It is also your opinion that P Co will not be subject to tax under Part XIV of the Act in respect of its 1982 taxation year.

Provided P Co is in fact not carrying on business in Canada, as indicated in Fact 4 above, we concur with your opinion as to the Canadian tax consequences to P Co in respect of its 1982 taxation year.

We do, however, emphasize that it is a question of fact dependent on the circumstances of each particular case as to whether or not a corporation is carrying on business in Canada. In this regard we refer you to our comments in Interpretation Bulletin IT-420R, dated November 23, 1981.