| September 12, 1989 | |
| Toronto District Office | Head Office |
| Chief of Audit | Rulings Directorate |
| A.L. Wilson | Resource Industries |
| Basic Files | Section |
| 142.3.3 | (613) 957-8968 |
| 3-60 Adelaide | |
| File No. 7-3511 |
Subject: 24(1)
This is in reply to your round trip memorandum of August 15, 1989 requesting that we provide our views on the "trading issue" in the 24(1) matter.
24(1)
One matter which might also be worth further examination is the authority required for stock purchases and sales. We would expect that most stock purchases and sales. We would expect that most stock transactions involving significant amounts required the approval of, or were initiated by, senior management, including 19(1) whose contemporaneous involvement with 24(1) securities dealers, is given substantial weight in your arguments.
As with virtually any trading issue, some arguments are available to support both the proposition that all, or at least some, of 24(1) share transactions are on account of capital. As Mr. Durnfork suggests in his examination of "Profits on the Sale of Shares" in the July/August 1987 issue of the Canadian Tax Journal, the matter involves a weighing of the arguments available with respect to each accepted test used in determining the nature of the gains, and a somewhat subjective weighting of the result. On balance, the position that 24(1) gains are on income account seems much the better of the two views available.
Section ChiefResource Industries SectionBilingual Services and ResourceIndustries DivisionRulings Directorate