Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Are XXXXXXXXXX amounts deductible for purposes of computing income pursuant to section 9 of the Act?
Position:
Yes, subject to the limitations of paragraph 18(1)(a), 18(9), and 67.1(1) of the Act.
Reasons:
XXXXXXXXXX, as such these payments should be currently deductible provided they are incurred for the purpose of gaining or producing income. However, subsection 18(9) will defer the deduction of the deposit to the years when XXXXXXXXXX. The requirement to provide XXXXXXXXXX can be considered a service to be rendered in the future. In addition, subsection 67.1(1) will limit the deduction over the years to 50% of the actual payment.
XXXXXXXXXX
XXXXXXXXXX 1999-000577
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 1999
Dear Sirs:
Re: Advance Income Tax Ruling Request
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
This is in reply to your letter of XXXXXXXXXX requesting an advance income tax ruling on behalf of the above named taxpayer.
We understand that, to the best of your knowledge, none of the issues raised in this ruling is being considered by a Taxation Services Office or Taxation Centre in connection with an income tax return already filed, is the subject of any notice of objection or is under appeal.
Our understanding of the facts, proposed transactions and the purpose of the proposed transactions is as follows:
Facts:
1. XXXXXXXXXX is a Limited Partnership for Canadian tax purposes and also a "Canadian Partnership" within the meaning assigned to that term in section 102 of the Act since all its members are resident in Canada. The taxation year of XXXXXXXXXX ends on XXXXXXXXXX and the taxation year of the XXXXXXXXXX ends on XXXXXXXXXX.
2.
XXXXXXXXXX
3.
XXXXXXXXXX
4.
XXXXXXXXXX
5.
XXXXXXXXXX
6.
XXXXXXXXXX
7.
XXXXXXXXXX
8.
XXXXXXXXXX
(i) XXXXXXXXXX
(ii) XXXXXXXXXX
(iii) XXXXXXXXXX
(iv) XXXXXXXXXX
9.
XXXXXXXXXX
10.
XXXXXXXXXX
11.
XXXXXXXXXX
12.
XXXXXXXXXX
Proposed Transaction
13.
XXXXXXXXXX
14.
XXXXXXXXXX
15.
XXXXXXXXXX
16.
XXXXXXXXXX
a) XXXXXXXXXX
b) XXXXXXXXXX
c) XXXXXXXXXX
i. XXXXXXXXXX
ii. XXXXXXXXXX
iii. XXXXXXXXXX
iv. XXXXXXXXXX
d) XXXXXXXXXX
i. XXXXXXXXXX
ii. XXXXXXXXXX
iii. XXXXXXXXXX
- XXXXXXXXXX
- XXXXXXXXXX
- XXXXXXXXXX
iv. XXXXXXXXXX
v. XXXXXXXXXX
- XXXXXXXXXX
- XXXXXXXXXX
vi. XXXXXXXXXX
vii. XXXXXXXXXX
e) XXXXXXXXXX
f) XXXXXXXXXX
17.
XXXXXXXXXX
Purpose of the Proposed Transaction
18. The purpose of the proposed agreement is to raise funds to XXXXXXXXXX.
Rulings Requested and Given
Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions, and purpose of the proposed transactions and provided further that the proposed transaction is carried out as described above, we confirm that:
1. The deduction of XXXXXXXXXX payments to XXXXXXXXXX under the Agreement by XXXXXXXXXX will not be subject to the limitation in paragraph 18(1)(a) of the Act if incurred for the purpose of earning income from a business or property.
2. The XXXXXXXXXX payments will be subject to the limitation on deductibility of prepaid expenses pursuant to subsection 18(9) of the Act for amounts paid in advance on account XXXXXXXXXX.
3. The XXXXXXXXXX payments will be subject to the limitation on deductibility of entertainment expenses pursuant to subsection 67.1(1) of the Act.
These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 dated December 31, 1996 and are binding on the Department with respect to Agreements entered into on or before XXXXXXXXXX.
The above rulings are based on the draft Agreement described in paragraph 16 above. Any substantive differences between this version and the final version could invalidate the rulings.
These rulings should not be construed as implying that XXXXXXXXXX have incurred the XXXXXXXXXX payments for the purpose of gaining or producing income from a business or property. In the context of these rulings, we have made no attempt to confirm or deny this assertion.
Yours truly,
XXXXXXXXXX
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch