| 24(1) | File No. 5-9570 |
| J.P. Dunn | |
| (613) 957-8961 | |
| Attention: 19(1) |
June 12, 1990
Dear Sir:
We are writing in response to your correspondence of February 8, 1990 wherein you requested a technical interpretation with respect to the proposed Part 1.3 Tax on Large Corporations. More specifically your request relates to a situation in which an operating 24(1) received an injection of capital from its parent corporation. The operating 24(1) accounts for the amount is included in the calculation of the taxable capital employed in Canada of that corporation pursuant to draft subsection 181.2(1) of the Income Tax Act (the "Act"). The parent corporation pursuant to draft subsection 181.2(1) of the Income Tax Act (the "Act"). The parent corporation is a prescribed corporation pursuant to section 8604 of the Draft Regulations on Large Corporations Tax, released by the Department of Finance on February 1, 1990, for the purposes of the definition of "financial institution" and accounts for the aforementioned capital injection to the operating company as an investment. Your concern is that the calculation of the investment allowance of a financial institution pursuant to draft paragraph 181.3(4) of the Act includes the carrying value at the end of the year of an asset that is a share of the capital stock of another financial institution that is related to the particular institution and does not specifically include the amount recorded by your parent corporation as the investment in the operating corporation.
It seems to us that this amount would be included in the investment allowance of the parent corporation provided that all of the pertinent provisions of draft paragraph 181(3)(b) of the Act regarding the determination of the carrying value of this particular asset are applicable with respect to the financial statements of the parent corporation. Should you have a specific concern with the proposed legislation we would be prepared to consider it.
We would also advise that the opinions expressed above are based upon the amendments to the Income Tax Act proposed in Bill C-28 as passed by the House of Commons on December 20, 1989. Further, while we trust that our comments are of assistance to you, they do not constitute an advance income tax ruling and are, therefore not binding upon the Department in respect of a particular situation.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate