Words and Phrases - "inventory"
25 September 2007 Internal T.I. 2007-0226751I7 F - Gain en capital versus revenu d'entreprise
The corporation’s regular activities involved the purchase of particular (redacted) types of equipment or vehicles that were damaged and/or out-of-use in order to restore them and rent them, following which, it would sell them at a gain over its cost. Some were sold without even having been rented previously. It also purchased items for parts only, which were disassembled so that the parts could be used in refurbishing the other items.
Before finding that the items (both those purchased for parts and those purchased for refurbishment and sale) were inventory rather than depreciable property, the Directorate noted, regarding the latter, the three criteria in IT-102R2, para. 4 for the sale of leased property not constituting income from the sale of inventory, including (in subpara. 4(c),) that the properties “are normally sold for an amount that is less than their cost to the taxpayer,” and stated that this condition was not satisfied since the items were sold at a profit.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Machinery and Equipment | the regular refurbishing, rental then sale at a gain of machines gave rise to business profits | 109 |
Ted Davy Finance Co. Ltd. v. MNR, 64 DTC 5124, [1964] CTC 194 (Ex Ct)
Proceeds received by the taxpayer, which carried on the business of purchasing conditional sales contracts (mostly from a related used car dealer) and lending on the security of chattel mortgages, from the sale of its contracts and mortgages, were capital receipts. In finding that what was sold was not "inventory," Gibson J stated (at p. 5126) that the "definition of inventory...should not be given the broadest meaning that could be attached to it."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Account Receivable | sale of conditional sales contracts and chattel mortgages occurred on sale of business | 102 |
Kruger Incorporated v. Canada, 2016 FCA 186
The taxpayer ("Kruger") engaged in extensive trading of FX options, mostly writing European style puts and calls, although it also purchased FX options. Noël CJ found that Kruger was entitled to use mark-to-market accounting for tax purposes in recognizing a loss on its FX option position for its 1998 year.
He went on to find (at para. 84) that “the Tax Court judge properly held that because the written options only embody a liability, they are not ‘property’ and therefore cannot form part of ‘inventory’;” and (at para. 91) that the purchased options also were not inventory, on the basis that Friesen had established that
although the requirement that qualifying property be “held for sale” is not spelled out in express terms, it nevertheless forms part of the defined meaning of “inventory” [in s. 248(1)]
He added (at para. 95):
It necessarily follows that the purchased options are a type of property that is neither capital property nor inventory.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Timing | non-statutory mark-to-market accounting was permissible under s. 9 | 468 |
| Tax Topics - Income Tax Act - Section 171 - Subsection 171(1) | Minister implicitly directed to reduce taxpayer's income below that originally filed | 100 |
23 September 2014 External T.I. 2013-0509021E5 F - Rajustement obligatoire
In the course of confirming its position in 9328315 F, CRA stated (TaxInterpretations translation):
[S]ows or boars which are still in inventory at the end of the fiscal period and which the producer purchased and paid for, could be property held in inventory even if they were not used in the production of piglets.
Likewise, pigs or piglets still in inventory at the end of the year that the producer purchased and paid for could be property held in inventory even if they were not used in the producer’s operation of raising animals.
Canadian Imperial Bank of Canada v. Canada, 2000 DTC 6207 (FCA)
Before finding that gold and silver bullion of the taxpayer qualified as inventory, Sharlow J.A. indicated (at p. 6210):
"Property is 'described in a' taxpayer's inventory if it is inventory as a matter of fact and law. Inventory in its ordinary sense is simply stock in trade, or property held for sale in the ordinary course of a business."