| July 27, 1990 | |
| K. Hillier | Rulings Directorate |
| Director | G. Arsenault |
| Non-Resident Taxation Division | 957-2126 |
| 7-4731 |
SUBJECT: Employees of a Country other than Canada
This is in reply to your Memorandum dated February 16, 1990 whereby you requested our opinion as to whether the exemption from tax liability under Part I of the Act granted by paragraph 149(1)(a) of the Act applies to all types of income, including capital gains. In particular you inquired as to whether the exemption applies where the individual (who is not engaged in business) disposes of several rental properties purchased and sold while residing in Canada.
In our opinion, provided all of the conditions of paragraph 149(1)(a) are satisfied, the individual will be exempt from tax liability under Part I in respect of all types of income that are included in determining the individual's taxable income, including capital gains. However, if the individual is in receipt of business income or income from employment from a source in Canada, other than from his employment with the foreign government, the requirements of clause (iii) of paragraph 149(1)(a) will not be net and the exemption will not be available.
It is principally a question of fact whether gains realized on the disposition of property constitute capital gains or business income. Business income of course includes gains realized from an adventure in the nature of trade.
for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch