| 24(1) | File No. 5-9441 |
| J.P. Dunn | |
| (613) 957-8961 |
Attention: 19(1)
June 1, 1990
Dear Sir:
We are writing in response to your correspondence of January 16, 1990 wherein you requested an opinion as to whether bonds issued by 24(1) considered to be eligible 24(1) in determining the reduction of paid-up capital in the calculation of the proposed Part I.3 tax on large corporations.
We are assuming that your reference to paid-up capital is meant to refer to the investment allowance of a corporation other than a financial institution as this term is defined in proposed subsection 181.2(4) of the Income Tax Act (the "Act").
The investment allowance of a corporation other than a financial institution is comprised of several elements including a bond, debenture or similar obligation of another corporation. Excluded from this definition, however, is indebtedness of any corporation that is exempt from tax under section 149 of the Act on all of its taxable income. Pursuant to paragraph 149(1)(d) of the Act no tax is payable upon the taxable income of a person for a period when that person was a corporation, commission or association not less than 90% of the shares or capital of which was owned by Her Majesty in right of Canada or a province.
24(1)
Consequently, the debt obligations of neither of these entities would qualify for inclusion in the calculation of a corporation's investment allowance.
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