| 24(1) | 5-903268 |
| Kevin J. Donnelly | |
| (613) 957-3500 |
Attention: 19(1)
December 16, 1990
Dear Sirs:
Re: Paragraph 20(1)(bb) of the Income Tax Act (the "Act")
We are replying to your letter dated November 15, 1990 concerning the application of paragraph 20(1)(bb) of the Act.
If a person's principal business "...is advising others as to the advisability of purchasing or selling specific shares or securities..." and if a reasonable amount other than a commission is paid by a taxpayer to that person "...for services in respect of the administration or management of shares or securities of the taxpayer..." or if a reasonable amount other than a commission is paid by a taxpayer to that person "...for advice as to the advisability of purchasing or selling a specific share or security of the taxpayer...", it is our opinion that such amounts would be deductible by the taxpayer pursuant to paragraph 20(1)(bb) of the Act.
If a person's principal business "...includes the provision of services in respect of the administration or management of shares or securities..." and if a reasonable amount other than a commission is paid by a taxpayer to that person for the advice described in subparagraph 20(1)(bb)(i) of the Act or for the services described in subparagraph 20(1)(bb)(ii) of the Act, it is our opinion that such amounts would be deductible by the taxpayer pursuant to paragraph 20(1)(bb) of the Act.
In summary, we acknowledge that either one or both of the services described in subparagraphs 20(1)(bb)(i) and (ii) of the Act could be provided to a taxpayer by either a person described in subparagraph 20(1)(bb)(iii) or a person described in subparagraph 20(1)(bb)(iv) of the Act and that reasonable amounts paid for such services other than commissions would entitle the taxpayer to a deduction under paragraph 20(1)(bb).
It is a question of fact whether a person's principal is ones described in subparagraph 20(1)(bb)(iii) of the Act or includes the provision of services in respect of the administration or management of shares or securities as described in subparagraph 20(1)(bb)(iv) of the Act. The extent to which a particular fee satisfies the reasonableness test in section 67 is also a question of fact.
Our opinions are provided in accordance with the practice described in paragraph 21 of Information Circular 70-6R2 and are not binding on Revenue Canada, Taxation in respect of any transaction or taxpayer.
Yours truly,
for DirectorFinancial Industries DivisionRuling Directorate