Regulation 700

Subsection 700(1)

Cases

Macmillan Bloedel Ltd. v. The Queen, 90 DTC 6219 (FCTD)

Collier J. was satisfied that mortgages or advances made to assist employees in moving were made as part of the taxpayer's logging operations, and also regarded it as "a perfectly normal business transaction to charge interest on overdue accounts" to customers of its logging operations. Similarly, loans or advances to customers, and loans to subsidiaries to provide working capital, were made as an integral part of the taxpayer's operations in order to facilitate the marketing of its products. Therefore, interest from the above sources constituted income from its logging operations. However, funds from its logging operations, when put on short-term deposits, gave rise to a new source of income that was not from its logging operations.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Accounting Principles 14
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) loss on forward contract to lock in Canadian dollar cost of U.S.-dollar borrowing was issue expense 185
Tax Topics - Income Tax Act - Section 4 - Subsection 4(1) - Paragraph 4(1)(a) 37

Paragraph 700(1)(d)

Cases

Macmillan Bloedel (Alberni) Ltd. v. MNR, 73 DTC 5264, [1973] CTC 295 (FCTD)

The taxpayer transferred its logging operations to a subsidiary in consideration for an interest-bearing promissory note. Although the subsidiary continued to carry on the logging operation, the logging income was "his" income and not that of the taxpayer. In s. 700(1)(d), "the 'sources' referred to are the sources carried on or operated by the taxpayer and not some third person", and the interest received by the taxpayer was investment income.

See Also

Weyerhaeuser Company Limited v. The Queen, 2012 DTC 1132 [at 3166], 2012 TCC 106

The taxpayer, an integrated forest products company, realized net capital gains from the disposition of two BC saw mills and a capital loss from the disposition of Ontario housing assets that had been used for managers of an Ontario pulp and paper mill. After being assessed in British Columbia for BC logging tax on the basis that the net capital gains were "income derived from logging operations," and therefore subject to the logging tax under BC's Logging Tax Act, the taxpayer amended its federal income tax return in order to claim logging tax credits under s. 127(1) of the federal Act.

Paris J. found (at para. 50) that "logging operations" and "processing..and sale of logs, timer and products produced therefrom" in Reg. 700(1)(d)(i) refers to "ongoing activities that are carried on by a taxpayer" . He stated (at para. 51):

I find that, according to their ordinary meaning, the words "logging operations" denote the ongoing activity of physical cutting of trees into logs and transporting those logs and the words "processing and sale" connote an ongoing activity involving manufacturing or production and sale.

Under those definitions, "logging operations" could not encompass a taxpayer's capital dispositions (para 69). The taxpayer's logging tax credits were therefore denied.

Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Legislative History 308

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