Subject: Triennial Accrual Method - C.S.B.
This is in reply to your Round Trip Memorandum of December 12, 1990 asking that we review your response to 19(1) November 22, 1990 enquiry regarding the above captioned subject.
Your letter correctly addresses 19(1) problem, however we suggest you add to your third paragraph something along the lines of the following:
Subsection 12(4) of the Income Tax Act ("the Act") is statutory authority to bring into income in a particular year all interest income earned on investment contracts owned on or over any third anniversary of such contracts that has accrued to the particular year, to the extent it has not otherwise been reported in that year or any preceding taxation year after December 31, 1981. The statute barred rules have no application to the operation of subsection 12(4). Even though a 1985 Return may be statute barred, the interest income that accrued to December 31, 1985, in the case of series 37 Canada Savings Bonds, is included in 1988 income (to the extent it was not included in income for a prior year), and the 1988 Return would not yet be statute-barred.
We trust our comments will prove helpful.
ChiefBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch