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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: A corporation, which acts as a buyer for its members, received compensation as a result of court settlement that related to U.S. antitrust legislation. The compensation was received in respect of XXXXXXXXXX purchases (XXXXXXXXXX ) and will be distributed to the members on a pro rata basis. Will the compensation be taxable?
Position: Our general position is that it will be taxable.
Reasons: The position is consistent with comments in paragraph 4 of IT-182.
October 21, 1998
GST Rulings & Interpretations HEADQUARTERS
Don Dawson M. Eisner
10th Floor, Vanier Towers (613) 957-2138
982664
Settlement - Antitrust Litigation
This is in reply to your facsimile of October 10, 1998, in which you included a copy of a letter sent to you by XXXXXXXXXX. As one of the matters set out in the letter relates to income tax you have asked for our comments thereon so that they could be included in the letter that you will send to them.
In the circumstances of the situation that this Department has been asked to consider, a Canadian-controlled private corporation (the “Company”), as defined in subsection 125(7) of the Income Tax Act (the “Act”), acts as a buyer of XXXXXXXXXX supplies for XXXXXXXXXX. The Company was one of the claimants in an antitrust litigation suit in the United States against a number of defendants, who were suppliers of XXXXXXXXXX. As a result of a court settlement, the Company received compensation which will be distributed to the members of the buying group. A member will receive a pro rata share of the settlement on the basis of XXXXXXXXXX purchases.
We have been asked whether the settlement is taxable or non-taxable. We would suggest that you add the following comments in your response to the client:
In order to determine the tax consequences of compensation awarded to a purchasing agent or its members as a result of an antitrust litigation suit, it would be necessary to review all the relevant facts and documentation including the exact nature of the relationship between the purchasing agent and its members. However, we are providing the following general comments.
It is the Department’s general position that where compensation has been received as a result of contract, statute law, etc. and the compensation relates to purchases that have been deducted for income tax purposes, the compensation would be taxable. These comments are consistent with paragraph 4 of Interpretation Bulletin IT-182, which has been enclosed for your convenience.
If you require further technical assistance, we would be pleased to provide our views.
Jim Wilson
Section Chief
Business, Property & Employment Section II
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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