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.
24(1)
902341
(613) 957-8963
19(1)
October 25, 1990
Dear Sirs:
This is in reply to your letter dated August 27, 1990 concerning the views expressed by the Department in a letter to another taxpayer dated April 24, 1986. The letter to which you referred represented the intent by the Department to provide some general comments on the topic of reciprocal exchanges. These comments did not relate to a specific situation and they were and are not binding upon the Department in respect of any particular situation.
In that the tax implications that flow from a reciprocal arrangement cannot be determined independent of the actual documentation including agreements between the members, we would recommend that, should you be contemplating a specific arrangement, consideration be given to obtaining an advance income tax ruling.
The deductibility of premiums, the timing of any such deduction and the treatment of investment income are all issues that need to be considered in circumstances where members of the exchange are other than tax-exempt entities. For example if the reciprocal exchange does not constitute a person for purposes of the Income Tax Act there is some question as to at what point the members' premiums constitute a deductible expense.
In response to your question the comments expressed in the April 24, 1986 should not be relied upon in respect of a particular situation.
We hope our comments are of some assistance.
Yours truly,
Chief Financial Institutions Section Financial Industries Division Rulings Directorate
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