Dear Sirs:
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This is in reply to your letter of February 15. 1991 requesting our opinion
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Our Comments
As the situation described in your letter involves both a specific taxpayer and a completed transaction, the confirmation which you seek regarding your queries falls within the responsibility of the District Taxation Office with which the Credit Union files its income tax returns. The policy of directing such requests to the District Taxation Office is contained in Information Circular IC 70-6R2 (see paragraph 21). However, we offer the following by way of general comments.
The types of receipts subject to income inclusion under the provisions of paragraph 12(1)(x) of the Income Tax Act (the "Act") are very broad. Included are grants, subsidies, forgivable loans, deductions from tax, allowances or any other form of inducement. Any reimbursement, contribution, allowance, or assistance in respect of the taxpayer's cost of property or in respect of an expense or outlay, is also included in income. However, certain types of payment are expressly excluded from the application of paragraph 12(1)(x) of the Act. A taxpayer is not required to include the receipt in income if it is a prescribed amount section 7300 of the Income Tax Regulations defines a prescribed amount; for the purposes of paragraph 12(1)(x) of the Act and that definition must be met in its entirety in order to exclude the grant from income. Other excluded payments include those that were otherwise included in the taxpayer's income for the year or any preceding taxation year; that reduced the cost of capital property or the amount of an expense except as required by subsection 127(11.1) of the Act; that reduced the cost or capital by an election trade either under subsection 13(7.4) of the Act or paragraph 53(2)(s) of the Act; or, that were paid in situations were it is reasonable to consider that the payment were in respect of the acquisition by the public authority of an interest in the taxpayer, his business or property.
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We trust our comments are of assistance.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch