Section 181.2

Subsection 181.2(3) - Capital

Cases

Autobus Thomas Inc. v. The Queen, 2000 DTC 6299 (FCA), briefly aff'd 2001 DTC 5665, 2001 SCC 64

The taxpayer partly financed the acquisition of buses by means of its bank purchasing conditional sales contracts from a manufacturer. Marceau...

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Words and Phrases
loan

Oerlikon Aérospatiale Inc. v. Canada, 99 DTC 5318, [1999] 4 CTC 358 (FCA)

The taxpayer financed its work on the manufacture of defence products under two contracts by receiving advances from the prime contractor or an...

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Words and Phrases
advance

See Also

Canadian Forest Products Ltd. v. The Queen, 2004 DTC 2869, 2004 TCC 405

The amount of outstanding cheques of the taxpayer that it had issued to suppliers but which had not yet cleared were not includable in its...

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Upper Lake Shipping Ltd. v. Minister of Finance, 98 DTC 6264, [1998] 3 CTC 281 (Ont CA)

Given that generally accepted accounting principles require that a government grant relating to a capital asset be included in retained earnings...

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Administrative Policy

12 February 2004 Internal T.I. 2003-0027201I7 - Swaps and Part I.3 Tax

Where the principal amount under interest rate or currency swap contracts was only notionally exchanged, there was no amount that would constitute...

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31 December 2002 External T.I. 2002-0163545 - construction deferred revenue

In light of the decision in PCL Construction Management Inc. v. The Queen, 2002 DTC 2624 (TCC), deferred revenue of a contractor with respect to...

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29 November 2001 Internal T.I. 2001-0106227 - PREPAID LEASE OBLIGATIONS

The taxpayer transfers a portfolio of office equipment and related leases to a special purpose vehicle ("SPV"), the SPV uses borrowed money to pay...

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3 July 2001 Internal T.I. 2001-0078917 - PARTNERSHIPS AND OVERDRAFTS PART 1.3

"A corporate partner's share of earnings from a partnership's fiscal period ended in the corporate partner's taxation year would have to be...

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IT-532 "Income Tax Act, Part I.3 - Tax on Large Corporations"

1 June 2000 Internal T.I. 2000-0006167 - LARGE CORPORATION TAX GOLD CONSIGNMENTS

A consignment agreement between a bullion bank and a jeweller was characterized as a loan or advance for LCT purposes.

5 April 2000 Internal T.I. 1999-0015087 - CONSTRUCTION CONTRACTORS

"Amounts billed by a subcontractor that are subject to a holdback requirement constitute a contingent liability of the contractor, and generally...

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10 February 1997 Internal T.I. 9701277 - PURCHASE AND SALE AGREEMENT - PART I.3

The obligation of the taxpayer under a purchase and sale agreement where a condition precedent had not yet been fulfilled did not represent either...

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7 November 1996 External T.I. 9636805 - CICA 3860 AND LARGE CORPORATIONS TAX

A deficit shown as such on a balance sheet and created by the application of section 3860 of the CICA Handbook to redeemable and retractable...

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9 September 1996 External T.I. 9621855 - LARGE CORPORATIONS TAX AND AUTOMOBILE DEALERSHIPS

It appeared that where an automobile dealership acquired vehicles from the manufacturer by way of a wholesale conditional sales contract, the...

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8 July 1996 Internal T.I. 9617717 - LEVERAGED LEASES AND PREPAID PENSION - PART I.3

A prepaid pension asset reflecting pension funding amounts which have been deducted for income tax purposes but not for accounting purposes is not...

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22 February 1996 Internal T.I. 9604507 - PART I.3 - CAPITAL LEASES & CONDITIONAL SALES AGREEMENTS

The obligation of a purchaser under a conditional sales agreement generally will be included in its capital only where such obligation has been...

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1996 Tax Executive Institute Round Table, Q. 16 (No. 9638910)

Where, in accordance with CICA Handbook Section 3860, a U.S. $100 million debt is hedged through entering into a currency swap, an increase in the...

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1996 Tax Executive Institute Round Table, Q. 8 (No. 9638920)

As the Tax Court did not consider the legal basis for RC's position on the capital tax treatment of outstanding cheques, the adverse decision in...

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20 July 1995 Internal T.I. 9517946 - DEFERRED REVENUE AND LARGE CORPORATIONS TAX

Detailed discussion of the circumstances in which deferred revenue amounts will be included in capital.

9 June 1995 Internal T.I. 9515177 - LARGE CORPORATIONS TAX HEALTH WELFARE PLAN DEFERRED

Where the corporate taxpayer (which was not a financial institution) had an actuarial determination done of the amount that would be necessary to...

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May 1995 Tax Executive Institute Round Table, Q. 22 (C.T.O. "Part I.3, Advances")

An advance billing, that remains unpaid at a year end, made with respect to services to be rendered in a subsequent year, would not be considered...

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7 May 1995 Internal T.I. 9510220 - PART I.3, O/S CHEQUES & OVERDRAFTS

Bank overdrafts are considered to have arisen to the extent that they have been utilized or drawn upon. For these purposes, RC, in common law...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Payment & Receipt conditional payment principle accepted 77

13 October 1994 External T.I. 9413095 - CORP.PARTNERSHIPS & PART I.3

Discussion of the application of Part I.3 to loans to and from corporate partnerships, loans between partnerships and the impact of equity-based...

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Revenue Canada Round Table, 1994 Alberta Conference, Q. 10 (C.T.O. "Large Corporation Tax - Foreign Exchange Gains/Losses")

There is no adjustment to capital in respect of the amount of deferred foreign exchange losses reported on the balance sheet. Deferred unrealized...

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Revenue Canada Round Table TEI, 16 May 1994, Q. 6 (C.T.O. "Part I.3 Tax - Deferrred Revenue")

Deferred revenue must be included in the computation of capital irrespective whether or not a tax deductible reserve is available.

Revenue Canada Round Table TEI, 16 May 1994, Q. 6

A bank overdraft is excluded from a corporation's capital to the extent it is made up of outstanding cheques assuming that the giving of the...

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13 May 1994 Internal T.I. 9333017 - LARGE CORPORATION TAX AND INVESTMENT TAX CREDITS

Unclaimed or unexpired investment tax credits are not deferred tax debits and therefore do not reduce capital pursuant to s. 181.2(3)(h).

7 December 1993 Income Tax Severed Letter 9332865 - Large Corporation Tax

Where a corporation that issues bankers' acceptances and deposits the proceeds with the bank in order for the bank to provide operating loans to...

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December 1992 B.C. Tax Executives Institute Round Table, Q. 7 (October 1993 Access Letter, p. 479)

Deferred revenue constitutes a "loan or advance" to the corporation. A deferred charge is a "reserve", and therefore must be included in capital...

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10 September 1992 Memorandum (Tax Window, No. 24, p. 18 ¶2194)

Contributions received by a regulated utility from its customers to compensate it for the insufficiency of revenue it will receive from special...

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92 CPTJ - Q.9

Because the term "advance" often means simply "pay" or "pay money before it is due", a take- or-pay amount is an advance for purposes of s....

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5 August 1992 T.I. 921651 (May 1993 Access Letter, p. 207, ¶C180-138; Tax Window, No. 23, p. 16, ¶2132)

Where a property development company has debited "land under development" and credited "provision for cost to complete" for an estimate of costs...

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16 March 1992 T.I. (Tax Window, No. 18, p. 14, ¶1808)

The factoring by a foreign parent of accounts receivable owing to it by its Canadian subsidiary will not, by itself, convert that indebtedness of...

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10 March 1992 T.I. (Tax Window, No. 17, p. 22, ¶1794)

Both security deposits and deferred revenue of a corporation are considered to be advances to the corporation that must be included in capital.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 181 - Subsection 181(3) 26

91 C.R. - Q.37

A corporate member of a joint venture will have its share of the indebtedness of the joint venture included in its capital.

91 C.R. - Q.36

Where there has been a write-down in accordance with GAAP to reflect other than a temporary decline in the value of a capital asset, the...

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91 CPTJ - Q.13

Amounts received by a vendor under a take-or-pay gas purchase contract are "advances to the corporation".

November 1991 Memorandum and 14 November 1991 T.I. (Tax Window No. 13, p. 15, ¶1582)

If a corporation that is a member of a joint venture is solely liable for any indebtedness related to the joint venture, the full amount of such...

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25 October 1991 T.I. (Tax Window, No. 12, p. 14, ¶1553)

A policy loan to a corporation against the cash render value of a life insurance policy is an advance within the meaning of s. 181.2(3)(c),...

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18 September 1991 T.I. and 27 September 1991 T.I. (Tax Window, No. 9, p. 14, ¶1454)

Where a corporation issues a bond to a partnershp of which it has a 1/3 interest, it is required to include the bond in computing its capital but...

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8 July 1991 T.I. (Tax Window, No. 5, p. 6, ¶1329)

Discussion of various issues.

10 June 1991 T.I. (Tax Window, No. 4, p. 26, ¶1294)

Amounts in respect of the write-down of amortizable capital assets which are included in accumulated depreciation pursuant to paragraph 3060.58 of...

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5 June 1991 T.I. (Tax Window, No. 4, p. 25, ¶1281)

The undistributed earnings of a partnership are not included in the capital of a corporate partner.

Articles

Anthony Schiefer, "Buyer Beware - Structuring to Minimize to Minimize Capital Tax Consequences of a Share Purchase", Corporate Structures in Groups, Vol. IV. No. 1, p. 300

Discussion of techniques to use interest expense of purchaser to shelter taxable income of target.

Harris, "Developments in Asset-backed Financing: Tax Considerations", Business Vehicles, Vol. III, No. 3, 1997, p. 136

It is suggested that a rent prepayment under a lease is not an "advance".

Paragraph 181.2(3)(a)

Administrative Policy

2 May 2017 External T.I. 2016-0663781E5 F - Meaning of retained earnings/calculation of capital

On the initial application to it of accounting standards for private enterprises ("ASPEs") on January 1, 2011, a corporation revalued its assets...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 181 - Subsection 181(3) - Paragraph 181(3)(b) - Subparagraph 181(3)(b)(i) GAAP meant ASPE if ASPE followed by the corporation 162

Paragraph 181.2(3)(b)

Administrative Policy

19 January 2005 External T.I. 2004-0081001E5 F - Réserve de valorisation d'une coopérative

S. 149.1 of the Quebec Cooperatives Act provided that certain cooperatives could set up an “enhancement reserve” to value the use of the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 135 - Subsection 135(4) - Allocation in Proportion to Patronage question of fact whether distributions of enhancement reserves are allocations in accordance with patronage 140

Paragraph 181.2(3)(c)

Cases

ADP Canada Co.(Canadian Automatic Data Processing Services Ltd.) v. Canada, 2009 DTC 5091, 2009 FCA 117

The taxpayer, which provided payroll services for a fee, received funds from its clients in advance of the required remittance of such funds by it...

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Words and Phrases
appropriate advance

Administrative Policy

21 September 2007 External T.I. 2007-0229191E5 F - Agent de voyages & impôt de la partie I.3

Quebec and Ontario travel agents were required by provincial legislation to hold funds collected from clients for services to be rendered to them...

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Words and Phrases
advance
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 181 - Subsection 181(3) - Paragraph 181(3)(b) - Subparagraph 181(3)(b)(i) customer advances received by travel agents and reported as deferred revenue in their balance sheets were required to be included in taxable capital even though amounts held in trust 109

Paragraph 181.2(3)(f)

Administrative Policy

11 May 2005 Roundtable, 2005-0118731C6 F - Contrat avec une société d'affacturage

A factoring company advances sums to Corporation A at a discount to the face value of the discounted receivables, and then applies the amounts...

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Words and Phrases
loan advance indebtedness

Paragraph 181.2(3)(g)

Administrative Policy

14 April 2010 Internal T.I. 2009-0347511I7 F - Partie I.3 - Société de personnes

A Quebec crown agent was a member of a limited partnership (the “LP”) and held LP debt. In finding that s. 181.2(3)(g) should be applied on...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Corporation Quebec government is a corporation 34

Subsection 181.2(4) - Investment allowance

Cases

Federated Cooperatives Ltd. v. The Queen, 2001 FCA 217, 2001 DTC 5414

Bankers acceptances held by the taxpayer were not "advances" to the issuer because the issuer had no obligation to repay the same sum of money to...

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See Also

Federated Co-operatives Ltd. v. The Queen, 2000 DTC 1946 (TCC), aff'd supra.

Bankers' acceptances purchased by the taxpayer were not eligible for an investment allowance. In finding that they did not qualify as an "advance"...

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TransCanada Pipelines Ltd. v. Minister of Revenue (1992), 62 O.A.C. 105

The respondent (a pipeline company) agreed to purchase certain minimum quantities of gas each year. If it was unable to take delivery of the...

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Words and Phrases
advance

Administrative Policy

14 November 2000 Internal T.I. 2000-005117 - INVESTMENT ALLOWANCE COMBINED SURPLUS

In the situation where a parent has made a contribution of capital to a subsidiary (in this case a foreign subsidiary), GAAP views the resulting...

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21 March 2001 Internal T.I. 2000-0056297 - TENANT INDUCEMENT INVESTMENT ALLOWANCE

Where landlords agree to pay tenant inducements over a period of twenty years, the taxpayers would account for the amounts payable as "secured...

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Words and Phrases
loan

IT-532 "Income Tax Act, Part I.3 - Tax on Large Corporations"

22 February 1996 Internal T.I. 9604507 - PART I.3 - CAPITAL LEASES & CONDITIONAL SALES AGREEMENTS

A lease obligation reflected as an asset on the balance sheet of a lessor corporation is not eligible for an investment allowance as a loan or...

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10 August 1995 External T.I. 9518455 - STRIPPED BONDS - ELIGIBLE FOR INVESTMENT ALLOWANCE?

"Where a corporation acquires a 'stripped bond' (i.e., a bond certificate from which the interest coupons have been detached prior to maturity),...

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27 June 1994 External T.I. 9410195 - LARGE CORPORATION TAX & CONDITIONAL SALES CONTRACTS

Where a party (other than a financial institution) acquires a note issued by the purchaser under a conditional sales agreement, the note will be...

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Revenue Canada Round Table TEI, 16 May 1994, Q. 6 (C.T.O. "Part I.3 Tax - Deferred Revenue")

Generally, where an amount of expenses is paid before it is due by one corporation to another corporation that is not a "financial institution",...

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93 CPTJ - Q.15

RC will consider applying s. 245(2) where the primary purpose of a transaction is to obtain a tax advantage through a temporary acquisition of...

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December 1992 B.C. Tax Executives Institute Round Table, Q. 7 (October 1993 Access Letter, p. 479)

Prepaid expenses paid to another corporation (other than a financial institution) will qualify for inclusion in the investment allowance of the...

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27 September 1991 T.I. (Tax Window, No. 11, p. 21, ¶1510)

A promissory note issued by a corporation (other than a financial institution) is included in the investment allowance even if the notice is...

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27 September 1991 T.I. (Tax Window, No. 10, p. 19, ¶1486)

Bankers acceptances are not "loans and advances" and accordingly do not qualify for the investment allowance.

25 June 1990 T.I. (November 1990 Access Letter, ¶1544)

Instruments issued by foreign corporations also are included.

Paragraph 181.2(4)(a)

Administrative Policy

11 May 2005 Roundtable, 2005-0118691C6 F - Certificat américain d'actions étrangères

Does an American Depository Receipt represent shares of a corporation so that the certificate will qualify for the s. 181.2(4)(a) deduction? CRA...

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Paragraph 181.2(4)(b)

Administrative Policy

25 March 2002 T.I.

A lease receivable reported on the financial statements of a lessor that is not a financial institution generally will not be eligible for an...

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Paragraph 181.2(4)(d.1)

Administrative Policy

21 February 1994 External T.I. 9333035 F - Investment Allowance - Large Corporations Tax

Where one or more of the members of a partnership is an individual, the pro-rata capital component of loans made to the partnership must be...

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