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.
DM's Office (2) Y.S. # 92-1503D
ADM's Office (3)
Return to Rulings, Room 303, Met. Bldg.
Author
Subject or Corporate Case File
September 29, 1992
19(1)
Dear 19(1) I am responding to your letter of August 12, 1992, in which you raised concerns pertaining to my letter of July 27 addressed to 19(1) regarding the mutual fund industry and limited partnerships.
You state that recent case law does not require the use of the matching principle in the circumstances that were reviewed with industry representatives and that a pronouncement by the Canadian Institute of Chartered Accountants ("CICA") did not clarify that the matching principle is required for income tax purposes. In addition, you expressed disappointment that the arrangement reached with the industry extends only to the end of 1993.
I have been advised that arguments to support your view concerning recent case law were presented by industry representatives and carefully reviewed by Departmental officials. However, the Department remains of the view that case law supports the matching principle. Although I agree that the pronouncement by the CICA is for accounting purposes, in the absence of specific statutory provisions to the contrary, it is accepted that general accounting principles be followed in determining the income of a business for tax purposes.
Document Disclosed Pursuant to The Access To Information Act Document Divulgué en vertu de la loi sur l'accès à l'information
While the CICA pronouncement did not specify the period of time over which the selling commissions should be amortized, it is our understanding that the practice for accounting purposes is to amortize this type of expense over periods ranging from three to seven years. Therefore, the three year amortization period accepted for income tax purposes in respect of expenses incurred in 1992 and 1993 is as generous as possible. This period was agreed to as a transitional measure in order to provide time for the mutual fund industry to consider making adjustments to its business practice.
I thank you for bringing this matter to my attention and I trust that this information explains the Department's position on this issue.
Yours sincerely,
Pierre Gravelle, Q.C.
C.R. Bowen
957-2131
September 18, 1992
922470
Document Disclosed Pursuant to The Access To Information Act Document Divulgué en vertu de la loi sur l'accès à l'information
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© Sa Majesté la Reine du Chef du Canada, 1992
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