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.
1991 CPTS Roundtable
Question
14. For purposes of the Large Corporations Tax in Part I.3 of the Income Tax Act, does Revenue Canada consider amounts received by a vendor corporation under a take-or-pay gas purchase contract for which the purchaser has not taken delivery of the contracted volume of gas to be
(a) included in the definition of "capital" as defined in subsection 181.2(3)
or -
(b) a reserve as defined in subsection 181(1)?
Answer
14. In a decision handed down on January 23, 1990, the Supreme Court of Ontario held in favour of TransCanada Pipelines against the Minister of Revenue of Ontario that the corporation's excess payments under it's take-or-pay arrangements with suppliers were "advances to other corporations".
We agree with the Ontario Supreme Court's decision. It is therefore our view that the vendor corporation's excess receipts under take-or-pay gas purchase contracts are "advances to the corporation" which would be included in the vendor corporation's "capital" under paragraph 181.2(3)(c) and the purchaser corporation's "investment allowance" under paragraph 181.2(4)(b).
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