| October 18, 1989 | |
| Mrs. P. McNally | Current Amendments and |
| Director | Regulations Division |
| Enquiries and Taxpayer | R.D. Weil / 957-2066 |
| Assistance Division | |
| F-3338 |
1989 Capital Gains Guide
As requested in your memo of October 12, 1989, we have reviewed the final draft version of the above Guide. The changes from the previous draft appear to be consistent with intended tax policy.
General Comments
1. On page 11 of the final draft, the last part of the second "bullet" should read:
"...active business carried on by you or the members of the partnership, or an interest in a partnership where all or substantially all of the partnership's assets were used in an active business carried on by the members of the partnership."
2. On page 16 of the final draft, the first sentence of the third paragraph under the heading "Employees' stock options" might be clearer if it read as follows:
"Generally the taxable benefit is included in your income in the year you acquire the shares through the option. However, the taxable benefit is not included in your income until the year you dispose of the shares if the shares were acquired through an employee stock option plan granted by an arm's length Canadian-controlled private corporation."
3. On page 62 of the final draft, where the rules in subsection 44(5) of the Act are discussed, the grammatical structure is somewhat awkward. You may wish to consider the following suggested alternative for the first paragraph under the heading "Replacement Property".
Generally speaking, a property will qualify as a replacement property if it was acquired for the same or similar use as the former property. Where the property replaces a property used in your business, it must be acquired for use in the same or a similar business. For further information on the meaning of replacement property obtain Interpretation Bulletin IT-259R2, Exchange of Property.
B.J. Bryson Acting DirectorCurrent Amendments and Regulations Division
c.c. A.G. Cockell
RDW/jab