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:
Re: Request for Technical Interpretation
Subsection 85(1.1) of theIncome Tax Act(the “Act”)
We are responding to your letter, dated October 26, 1990, in which you requested our opinion on whether “eligible property”, as defined in subsection 85(1.1) of the Act, includes shares in a company holding land inventory.
In our view, unless such shares constitute either capital property or inventory to the holder, they will not be considered to be “eligible property” within the meaning of subsection 85(1.1) of the Act.
In your view, based on the decision in Ronald K. Fraser (No. 2) v. Minister of National Revenue, [[1963] C.T.C. 130] 64 DTC 5224, any gain on the sale of such shares would be categorized as an income gain.
Whether the gain on the sale of the shares would constitute an income gain or a capital gain cannot be determined without a review of all of the relevant facts. As the circumstances of sale are usually considered relevant in determining whether the property was held on income account, as an adventure in the nature of trade or on account of capital, it might not be possible to determine, prior to the ultimate sale to a third party, whether any gain realized on the ultimate sale would be considered to be an income gain. Further, even if a gain on the sale of the shares were to constitute an income gain, because the shares were held and sold as an adventure in the nature of trade, it is not clear that the shares would therefore constitute inventory to the holder.
The issues of whether property can be determined to be held as an adventure in the nature of trade prior to the ultimate sale thereof and whether property held as an adventure in the nature of trade constitutes inventory are currently before the courts in several cases, including Donald R. Bailey v. Minister of National Revenue, [[1990] 1 C.T.C. 2450] 90 DTC 1321, which is currently under appeal.
The foregoing comments are given in accordance with the practice referred to in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990.
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1991
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1991
Email this Content