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.
January 12, 1979
Non-Corporate Rulings Division W.P. Guglich
Interaction of ITAR 26(5)(c)(i)(A) and subparagraph 40(1)(a)(iii)
In a memo dated December 20, 1976 to Mr. Albert of the Montreal District Office we took the position that the phrase "a capital gain" as used in ITAR 26(5)(c)(i)(A) refers to amounts reported by the previous owner under paragraph 40(1)(a). Consequently, the subsequent owner could, under the provisions of ITAR 26(5)(c)(i)(A), increase his acb of the property in the amounts of the capital gains reported by the previous owner up to the year that is previous to the year of sale. We also administratively permitted the subsequent owner to increase his acb in the year of sale to the extent of the amount reported by the previous owner in that year.
Upon advice received from R. Norris of Tax Policy we subsequently revised our position and in a memo dated February 1, 1977 we advised the Montreal D.O. that the phrase "a capital gain" as used in ITAR 26(5)(c)(i)(A) refers to the amount determined under subparagraph 40(1)(a)(i) and not paragraph 40(1)(a).
In response to a recent enquiry we have given further consideration to this matter and it is now our view that we should revert back to the position set out in our December 20, 1976 memo. The position set out in our February 1, 1977 memo can lead to tax avoidance and abuse where the previous owner is in a position to defer indefinitely payment for the property.
Current amendments Division are now in agreement with our views expressed in the December 20, 1976 memo. They also inform us that subsequent to our February 1, 1977 memo they received a position paper from the Department of Finance wherein they supported the views expressed in our December 20, 1976 memo.
for Director Non-Corporate Rulings Division
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