30 August 1994 External T.I. 9420095 - SALES COMMISSION EXPENSES ON MUTUAL FUNDS

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.

XXXXXXXXXX 5-942009

Attention: XXXXXXXXXX

August 30, 1994

Dear Sirs:

Re: Sales Commission Expenses on Mutual Funds

This is in reply to your letter sent by fax on August 4, 1994 wherein you requested confirmation that this Department's policy of allowing limited partnerships to deduct sales commission expenses on a 50%-25%-25% basis over three years has been extented to June 30, 1995. In your letter, you also requested if this Department would apply the same treatment to sales commission expenses funded internally by mutual fund management corporations.

As for your first question, please find enclosed a copy of the first issue, dated July 22, 1994, of a new publication entitled "Income Tax - Technical News" wherein this Department confirms that its administrative policy of accepting an amortization of sales commission expenses incurred by limited partnerships based on a deduction of 50% of the sales commission expenses in the first year, and 25% in the next two years will be extended until June 30, 1995.

With respect to your second question, it is this Department's position that the deduction of sales commission expenses incurred by mutual fund management corporations must be determined on the basis of the specific facts and circumstances. Where it can be demonstrated that such expenses are running expenses of the business as a whole, the expenses will be deductible in the year the expenses are incurred.

Yours truly,

for Director
Manufacturing Industries, Partnerships
and Trusts Division
Rulings Directorate
Policy and Legislation Branch

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