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 December 4, 1980 concerning the application of section 85, subsection 56(2) and paragraph 125(6)(h) of the Income Tax Act in respect of the following hypothetical situation.
(1) Mr. A. Invested in a unit of certified feature film which was a Class 12 asset.
(2) This is the only asset in the Class 12 pool.
(3) The undepreciated capital cost of Class 12 is zero.
(4) The film is capital property to Mr. A.
You have requested our confirmation of your understanding of the following provisions as they apply to the above-noted situation.
1. Mr. A can dispose of his unit in the film to a newly incorporated taxable Canadian corporation pursuant to subsection 85(1) of the Income Tax Act.
2. The corporation will be carrying on a specified investment business as defined in paragraph 125(6)(h) immediately after the transfer.
3. The income earned from the film will be income of the corporation and will not be attributed to Mr. A.
4. Subsection 56(2) does not apply in this transaction.
It is our opinion that generally a unit of certified feature film would be considered to be a property to which subsection 85(1) of the Income Tax Act could apply. However, whether or not the income derived from the unit would be attributed to Mr. A or the corporation or whether or not section 55, subsection 56(2) and paragraph 125(6)(h) would apply would depend on all the facts surrounding the transactions. For further clarification you might wish to discuss the problems with our Toronto District Office at 36 Adelaide Street E., Toronto. If your concerns are in respect of proposed transactions contemplated by specific taxpayer(s) you might wish to apply for an advance income tax ruling by following the procedures outlined in Information Circular No. 70-6R issued by the Department on December 18, 1978.
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© Her Majesty the Queen in Right of Canada, 1980
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© Sa Majesté la Reine du Chef du Canada, 1980
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