25 May 1990 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.

May 25, 1990

APPEALS BRANCH Appeals & Referral Division

Attention: J. E. Nordin

Publications Division R.A. Primeau 957-2060

Meaning of "all or substantially all",

This is in response to your memorandum of May 17, 1990.

The term "all or substantially all" is referred to in the following published Interpretation Bulletins ("S.R." after the number of a bulletin denotes a Special Release to that bulletin). Depending on the particular provision of the Income Tax Act, the term can apply with respect to the amount of income, assets, use, time, etc. In those paragraphs which are not marked with an asterisk (*), no comment is made as to what percentage would be considered "all or substantially all". In those paragraphs which are marked with an asterisk, there is an indication, in one way or another, that the "all or substantially all" requirement cannot be met unless a level of 90% of whatever is being measured is achieved. In some of these paragraphs, this is referred to as the "90% rule".

Bulletin     Issued      Paragraphs
IT-52R4
      Oct. 20/83  14(b)
IT-124R5
     Mar. 7/86.  13(d)
IT-148R2
     June 2/81   4
IT-149R3
     July 22/85  1 & 2
IT-151R3
     June 24/88  5, 10* (see also 14 & 15), 21* (see also

                         22* & 23)
IT-171R
      Feb. 19/88  5* (see also 17, 22, 23 & 25)
IT-188R
      May 22/84   1*
IT-191R2
     May 29/87   7
IT-193
 S.R.  Sept. 30/85 33* (see also 34, 35, 37, 39, 41 & 42)
IT-268R3
     Feb. 13/87  26, 27 & 29*
IT-349R2
     July 17/87  33, 34 & 35*
IT-480
       Oct. 13/81  8(b), 18* & 19(c)
IT-486R
      Dec. 31/87  4, 5*
IT-497R
      Aug. 30/85  4(b)*
IT-507
       May 8/87    8(b)*, 15(b)*, 18(b), 26(b)*, 27(b)* & 34*
IT-513
       Feb. 3/89   6

In the following bulletin, the paragraph marked with an asterisk indicates that while the words "substantially all" cannot be rigidly specified, they will normally be viewed as meaning "in excess of 90%".

Bulletin Issued Paragraphs

IT-483 Apr. 13/82 2, 3* & 40

In a Special Release dated April 17, 1990, paragraph 1 of IT-188R (which is listed above) has been revised to indicate that where a level of 90% is reached, the "all or substantially all" requirement is considered to be met. Similarly, the above-listed IT-497R is now being revised ( IT-497R2 is currently in printing) to indicate that the Department considers the "all or substantially all" test to be met if at least the 90% level is reached. Such revised statements in these two bulletins do not rule out (as their predecessors did) the possibility that in a particular case, depending on the facts and circumstances as established by the taxpayer, a level of something less than 90% could still meet the "all or substantially all" requirement. These bulletin revisions have been made because of the case of Douglas Wood v. M.N.R., 87 DTC 312, in which the Tax Court of Canada found as follows:

The Minister's rule ... is that the Canadian income should be at least 90% of total income - the "90% rule". Obviously that is just a departmental assessing policy, and while arbitrary is undoubtedly a useful and functional mechanism in dealing with a difficult section of the Act, I would think the Minister might be hard-pressed to refuse a claim where the percentage was 89%, may be even 85% or 80% or lower.... Clearly the term "substantially all" does not lend itself to a simple mathematical formula. Further it would seem to me that any particular definition of "substantially" would be only valid with reference to the specific context in which it is found.

In due course, similar revisions will be considered in the other above-listed bulletins which currently indicate that the "all or substantially all". requirement cannot be met unless a level of 90% is achieved.

If you have any questions regarding the above, please do not hesitate to call the writer.

R.C. Shultis Director Publications Division Legislative Affairs Directorate

cc. Bulletin files: 1T-52, IT-124 , IT-148 , IT-149 , IT-151 , IT-171 , IT-191 , IT-193 , IT-268 , IT-349 , IT-480 , IT-483 , IT-486 , IT-507 , IT-513

Research files: 6(2)(d); 13(2)(a); 15.1(2)(d)- 15.1(3)(a) & (b) 15.2(2)(b); 15.2(3)(a); 18(3.3) 20(16.1)(a); 22(1); 37(6.1)(b); 37(7)(c) & (e); 37.i(7)(c); 54.2; 59(3.4)(a); 66(15)(h); 66.6(1) & (2) 66.7(7)(a) & (b); 66.7(8)(a) & (b); 66.7(11)(b) 66.7(12)(13), (14) & (15); 70(9.3)(b); 70(10)(b) & (c); 80.1(1)(a); 83(2.2) & (2.4); 85.1(4); 87(8.1)(a), (b) & (c); 88(1)(e.3); 88(1.1)(e); 88(2); 95(1)(a.1); 104(2)(a); 110.6(1) definitions of "Interest in a family farm corporation", "Qualified small business corporation share" & "Share of the capital stock of a family farm corporation"; 110.6(14)(e) & (f) 111(5)(a) & (b); 115(1)(f); 118.94; 122.3(1)(b); 127(9.1)(d); 127(9.2)(d); 137(6)(b); 137.1(5.1); 138(4.6); 138(11.5)(a)(b) & (c); 138(11.92)(a), (b) & (e); 138(11.94)(a), (b) & (c); 149(1)(n); 149.1(1)(j); 149(6.1) & (6.2); 187.3(2)(c) & (d); 209(1) definition of "carved-out property"; 219(5.1); 219(5.2)(a); 218(1) definitions of "Grandfathered share", "Income bond", Small business corporation" & "Term preferred share"