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.
Principal Issues: Whether an information return is required to be filed for certain transactions.
Position: Yes, if they fall within the requirements of subsections 230 (2) & (3) of the Regulations and are not one of the exceptions listed in subsection 230(7) of the Regulations.
Reasons: Reporting requirements in Regulation 230 and as explained in RC 4268, Handbook on Securities Transactions.
XXXXXXXXXX
2010-036678
V. Srikanth
August 27, 2010
Dear XXXXXXXXXX :
Re: Return of Securities Transactions
This is in response to your letter dated May 3, 2010, wherein you requested our views regarding the filing requirements of certain information returns. Specifically, you wanted us to comment on whether a T5008 information return is required to be filed with respect to certain transactions. Further, you also wanted us to comment on whether those transactions constitute capital or income transactions.
Our Comments
Written confirmation of the tax implications inherent in actual proposed transactions is given by this Directorate only where the transactions are the subject of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, entitled Advance Income Tax Rulings. This Information Circular and other Canada Revenue Agency ("CRA") publications, including that referred to herein, can be accessed on our website at http://www.cra-arc.gc.ca. If, however, the particular transactions are completed or partially completed, the enquiry should be addressed to the relevant Tax Services Office. As stated in paragraph 22 of IC 70-6R5, we do provide written opinions on general enquiries which are not advance income tax rulings and we are prepared to provide you with the following comments.
Subsection 230(2) of the Income Tax Regulations (the "Regulations") states that:
"Every trader or dealer in securities who, in a calendar year, purchases a security as principal or sells a security as agent for any vendor shall make an information return for the year in prescribed form in respect of the purchase or sale."
Subsection 230(6) of the Regulations requires nominees and agents to report on behalf of their principals if the transaction is carried out in the name of the agent or nominee. And, according to subsection 230(3) of the Regulations, issuers of securities and their agents must report redemptions, acquisitions, and cancellations of securities in a prescribed form. The prescribed form for these transactions is a T5008 information return.
Further, as per subsections 201(6) and (7) of the Regulations, a T5008 information return is to be filed to report dispositions, or redemptions of debt obligations in bearer form by individuals (including trusts) resident in Canada.
However, subsection 230(7) of the Regulations exempts from the security reporting requirements, generally and inter alia, the following transactions:
(i) a purchase of a security by one trader or dealer in securities from another, other than a non-resident trader or dealer in securities;
(ii) a sale of securities by a trader or dealer in securities on behalf of a person who is exempt from tax under Part I of the Act; or
(iii) a redemption by the issuer or an agent of the issuer of a debt obligation where
- the debt obligation was issued for its principal amount;
- the redemption satisfies all of the issuer's obligations;
- each person with an interest in the debt obligation is entitled to an equal proportion of principal and interest payments (that is, the debt obligation is not a strip bond); and
- another information return is also required as a result of the redemption, (for example, a T5 slip for the redemption of an investment contract or a T600 slip for accrued interest on redemption of a bond, debenture, or similar security).
Further, as explained in RC4268, entitled Handbook on Securities Transactions, units in a trust that trade at a constant fixed price, such as money market funds, are excluded from the T5008 filing requirement. The income earned from money market funds should be reported on T3 or T5 slips as appropriate.
Whether a transaction is income or capital in nature is a question of fact and we do not have enough information to make that determination with respect to the transactions listed in your submission. Further, Regulation 230 is intended to provide CRA with information concerning security transactions which are required to be reported on income tax returns filed under Part I of the Act and this does not depend on whether the transactions are income or capital in nature.
We trust our comments will be of assistance to you.
Yours truly,
R.A. Albert, CA
For Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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