Subsection 181.3(1) - Taxable capital employed in Canada of financial institution
See Also
Royal Trustco v. The Queen, 2001 DTC 52 (TCC)
The taxpayer, and a partnership of which it was a member, leased equipment. Sarchuk T.C.J. accepted evidence that upon execution of the leases the taxpayer or the partnership was treated for accounting purposes as having disposed of the assets to the lessees and that the accounting carrying value of the resulting amounts on its or the partnership's balance sheet represented financial assets (i.e., amounts receivable by it). Given that the whole of Part I.3 of the Act relied on balance sheets and GAAP in the determination of a corporation's taxable capital employed in Canada, Sarchuk T.C.J. found (at p. 64) that:
"It seems only reasonable to conclude that the technical terms referable to the balance sheet ought to be defined and characterized for the purposes of Part I.3 of the Act by reference to accounting terminology."
Therefore, because the amounts were not tangible property for accounting purposes, they were not tangible property for the purposes of s. 181.3(1).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Accounting Principles | 47 | |
| Tax Topics - Income Tax Act - Section 181 - Subsection 181(3) | 38 |
Manufacturers Life Insurance Co. v. The Queen, 2000 DTC 1600 (TCC)
In the financial statements of the taxpayer (a life insurance company) that were prepared in accordance with the OSFI rules, gains or losses realized from the disposition of investments together (in some cases) with unrealized gains and losses were amortized as an addition to (or deduction from) income over time on a systematic basis, with the unamortized gain (or loss) being subtracted (or added) to the carrying value of the taxpayer's investments shown on its balance sheet. O'Connor TCJ. found that because the taxpayer thus did not treat the unamortized gains as "surplus" or a "reserve" in its balance sheet, they were not included in capital under s. 181.3(3)(b)(ii) or s. 181.3(1)(c)(ii)(B)(I).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 181.3 - Subsection 181.3(3) | 118 |
Administrative Policy
Revenue Canada Round Table TEI, 16 May 1994, Q. 6-3 (C.T.O "Whether Lease Receivable Constitutes Tangible Property")
Leased receivables do not constitute tangible property.
7 June 1990 T.I. (November 1990 Access Letter, ¶1546)
Property which is acquired and held in the ordinary course of a particular business is considered to be "used in Canada" for purposes of the calculation.
1 June 1990 T.I. (November 1990 Access Letter, ¶1545)
Cash on hand, term deposits, marketable securities, funds on deposit and other financial institutions, accounts receivable, and mortgages or notes receivable are not tangible property.
Paragraph 181.3(1)(a)
Administrative Policy
16 February 1999 Internal T.I. 9901667 F - PATIE I.3
Inventories of supplies, paper for printing, photocopying and printers, as well as stocks of promotional material of a financial institution constituted tangible property, i.e., assets with a physical existence for purposes of s. 181.3(1)(a).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 181.3 - Subsection 181.3(3) - Paragraph 181.3(3)(a) | deferred revenue is not a liability | 64 |
| Tax Topics - Income Tax Act - Section 181 - Subsection 181(1) - Reserves | provision for future retiring allowances was a contingent liability included in reserves | 36 |
30 November 1998 External T.I. 9827575 F - IMPÔT DES GRANDES SOCIÉTÉS - C/R
Although the Department generally considers an account receivable to not be tangible property, where a financial institution owns a leased asset, the Department will view the carrying value of the leased asset as the amount receivable under the lease as reflected on the financial institution’s balance sheet. In this situation, the issue to determine is the legal issue as to whether the financial institution had ownership of the leased asset under the Civil Code of Quebec or the common law.
Subsection 181.3(3) - Capital of financial institution
See Also
Manufacturers Life Insurance Co. v. The Queen, 2000 DTC 1600 (TCC)
In the financial statements of the taxpayer (a life insurance company) that were prepared in accordance with the OSFI rules, gains or losses realized from the disposition of investments together (in some cases) with unrealized gains and losses were amortized as an addition to (or deduction from) income over time on a systematic basis, with the unamortized gain (or loss) being subtracted (or added) to the carrying value of the taxpayer's investments shown on its balance sheet. O'Connor TCJ. found that because the taxpayer thus did not treat the unamortized gains as "surplus" or a "reserve" in its balance sheet, they were not included in capital under s. 181.3(3)(b)(ii) or s. 181.3(1)(c)(ii)(B)(I).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 181.3 - Subsection 181.3(1) | 118 |
Administrative Policy
18 July 1991 T.I. (Tax Window, No. 5, p. 18, ¶1330)
Non-equity shares of a credit union governed by the Credit Union Incorporation Act (B.C.) constitute capital for large corporations tax purposes (s.181.3(3)(a)(ii)).
Paragraph 181.3(3)(a)
Administrative Policy
16 February 1999 Internal T.I. 9901667 F - PATIE I.3
Early loan repayments received and loan commissions received by a financial institution were treated as deferred revenue that was amortized over the term of the loans made. CRA found that the deferred revenue constituted surplus for purposes of s. 181.3(3)(a)(ii), given that an amount of income earned that is deferred to subsequent taxation years under accounting principles is not a liability.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 181.3 - Subsection 181.3(1) - Paragraph 181.3(1)(a) | supplies were “tangible property,” i.e., had a physical existence | 37 |
| Tax Topics - Income Tax Act - Section 181 - Subsection 181(1) - Reserves | provision for future retiring allowances was a contingent liability included in reserves | 36 |
Paragraph 181.3(3)(d)
Administrative Policy
30 September 1997 Internal T.I. 9703217 F - DEFINITION DU MOT "SURPLUS" SELON SON SENS COMMUN
The "head office" account of a Canadian branch of a non-resident insurer is included as "any other surpluses" under s. 181.3(3)(d)(ii) to the extent not already included under s. 181.3(3)(d)(i).
Subsection 181.3(4) - Investment allowance of financial institution
Paragraph 181.3(4)(a)
Administrative Policy
12 June 1990 T.I. (November 1990 Access Letter, ¶1547)
Where the financial institution has made a contribution of capital to one of its subsidiaries which is recorded as contributed surplus, the amount will be included in the investment allowance of the financial institution provided that it is required to include the amount of the contributed surplus as an asset in its financial statements.