Dear Sirs:
Re: Refund or reimbursement of the purchase price of shares
This is in reply to your letter dated March 26, 1991, requesting our interpretation of the following situation:
24(1)
Since the situation described above appears to involve actual taxpayers and completed transactions, we are unable to comment specifically on the situation set out in your letter. However, we offer the following general comments regarding paragraph 12(1)(x) of the Income Tax Act (the "Act").
Where a taxpayer receives a reimbursement in respect of the cost of a property, the amount received must be included in computing his income for a taxation year from business or property if it was received by the taxpayer in the course of earning income from a person who pays the amount in the course of earning income from a business or property, or
- in order to achieve a benefit or advantage for himself or for persons with whom he does not deal at arm's length.
The amount to be included in income is limited to the amount that has not otherwise reduced the capital cost of the property pursuant to paragraph 53(2)(s) of the Act.
We trust our comments will be of assistance to you.
Yours truly,
for DirectorBusiness and GeneralLegislative and Intergovernmental Affairs Branch