24 June 1985 Income Tax Severed Letter

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.

REVENUE CANADA TAXATION MEMORANDUM REVENU CANADA IMPOT

DATE June 24 1985

TO-A VANCOUVER DISTRICT OFFICE     FROM-DE HEAD OFFICE
                                           Corporate Ruling Division
                                           P.B. Fontaine
                                           995-1787

ATTENTION: E.V. Westerland
           Section 142-52

                     XXXX

This is in reply to your nemorandur dated May 22, 1985 concerning the above captioned subject.

Our understanding of the situation is as follows:

4. The company cites paragraph 12(1)(b) of the Income Tax Act (the "Act") as amended in respect of taxation years ending after 1982 in support of its position. Accordingly, it has requested an adjustment for the 1983 taxation year and contemplates filing its return for 1984 on this basis.

Our comments are as follows:

(a) Generally-accepted accounting principles ("GAAP") will normally apply in a situation unless the Act specifically provides otherwise.

(b) Paragraph 12(1)(b) effectively brines an amount into income in a taxation year when the services are billed. XXXX argument is that paragraph 12(l)(b) would not apply to the amount of the unbilled toll revenues at December 31 since no account would be rendered in respect thereof at that date and there was no undue' delay in rendering its accounts.

(c) Subsection 12(2) of the Act clarifies the inter-relationship between paragraphs 12(l)(a) and (b) and other provisions of the Act, such that where an amount is of a nature that the rules in paragraphs 12(1)(a) and (b) do not apply to include it in income in the year, such amount may still be required to be included in income for that year under other provisions of the Act dealing with the determination of income.

(d) Subsection 9(1) of the Act provides that a taxpayer's income for a taxation year from a business in his profit therefrom for the year. In computing XXXXXXXX profit for a taxation year for purposes of subsection 9(1) of the Act the unbilled amounts described above would be included in accordance with GAAP. Also for such purposes it is our view that generally these amounts would be considered to be earned at the time the services were rendered.

(e) XXXX appears to recognize that under G.AAP the unbilled amounts are to be included in income in that such amounts have been included in its income for financial statement purposes.

We hope this will be helpful.

Chief Services, Public Utilities & Exempt Corporations Section Corporate Rulings Division Legislation Branch