| October 25, 1989 | |
| TO - SCARBOROUGH DISTRICT OFFICE | FROM - HEAD OFFICE |
| Business Audit | Financial Industries Division |
| Clayton Robb | |
| Attention: V. Emery | (613) 957-2744 |
| Clearance Manager | |
| File No. 7-4410 |
SUBJECT: 24(1) Request for Clearance Certificates Subsection 159(2) of the Income Tax Act (the "Act")
We are writing in response to your memorandum of October 10, 1989 wherein you have requested a ruling regarding 24(1) request for either a clearance certificate or comfort letters in respect of corporate income taxes payable and source deductions.
The following is a brief summary of the facts as we understand them:
24(1)
Analysis:
24(1)
However, a distribution is required for subsection 159(2) to be operative. Distribution is defined in the Concise Oxford Dictionary as an apportionment or dispersal among consumers effected by commerce; the extent to which individuals or classes share in aggregate products of community; or the way in which a characteristic is spread over members of a class. For example, in the context of subsection 159(2) a distribution would seem to entail a pro rata distribution to one or more creditors.
In our view, subsection 159(2) is not applicable to 24(1) since no distribution has occurred. Payments to one or more creditors in the course of carrying on the business would not constitute a distribution within the meaning of that subsection. Therefore, it is not necessary for the Department to issue a clearance certificate in these circumstances.
With respect to 24(1) request for comfort letters, there is no provision in the Income Tax Act that requires the Department to issue such a letter.
R.J. KauffmanChiefLeasing and Financing SectionFinancial Industries DivisionRulings Directorate