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:
Shares of a corporation owned by a Status Indian.
Position TAKEN:
Corp. is taxable unless exempt by virtue of 149(1)(l), etc.
Reasons FOR POSITION TAKEN:
ADM'S OFFICE (3) ADM# 950106
RETURN TO RULINGS, 15TH FLOOR, ALBION TOWERS
AUTHOR
SUBJECT OR CORPORATE FILE
February 14, 1995
XXXXXXXXXX
Dear XXXXXXXXXX:
I am replying to your letter of January 10, 1995, concerning the tax status of XXXXXXXXXX which you described as being a company registered in British Columbia that operates as a trust company. More than
XXXXXXXXXX
have invested in voting shares of the capital stock of XXXXXXXXXX in sufficient quantity to collectively control the company. It is your view that the company should not be subject to income tax and you outlined some reasons in support of your view.
Due to the confidentiality provisions of the Income Tax Act, in addressing the specific case of XXXXXXXXXX it would be appropriate for me to correspond directly with representatives of the company. However, I am able to address the issue you raise without referring to any specific corporation.
By virtue of section 87 of the Indian Act, the following property is exempt from taxation, namely:
a) the interest of an Indian or a band in a reserve or surrendered lands; and
b) the personal property of an Indian or band situated on a reserve.
No Indian or band is subject to taxation in respect of ownership, occupation, possession or use of property mentioned in paragraphs a) or b) or is otherwise subject to taxation in respect to any such property. However, since a corporation is not an Indian, it is not entitled to the exemption in section 87 notwithstanding that it is owned or controlled by Indians or a band.
When an Indian owns shares of a corporation, the shares constitute property of the Indian and income from that property may be exempt by virtue of section 87 if the income is connected to a reserve. Whether or not the Indian shareholder is exempt from taxation on dividends received from a corporation, the corporation will be subject to tax unless it is exempted by a specific provision in the Income Tax Act, such as paragraph 149(1)(l), which concerns organizations which are organized and operated for a purpose other than profit.
I trust that these comments will be of assistance.
Yours sincerely,
Denis Lefebvre
Assistant Deputy Minister
Policy and Legislation Branch
J.D. Brooks
957-2103
February 7, 1995
950204
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