| 24(1) | 901015 |
| G. Arsenault | |
| (613) 957-2126 | |
| 19(1) |
October 2, 1990
Dear Sirs:
Re: Non-Capital Loss of a Taxpayer for a Taxation Year During Which He Was Not Resident in Canada
This is in reply to your letter dated May 30, 1990 whereby you requested our opinion regarding the interaction of paragraphs 111(8)(c) and 111(1)(a) in the following hypothetical situation.
Hypothetical Situation
1. Mr. X was not resident in Canada for the 1989 taxation year.
2. Mr. X became resident in Canada on January 1, 1990.
3. For the 1989 and 1990 taxation years, Mr. X was a member of a partnership that carried on business in Canada. The partnership has a December 31 fiscal year end.
4. For the 1989 taxation year, the partnership incurred a loss of $100,000 in respect of its business carried on in Canada.
5. Mr. X's share of that loss was $25,000.
6. For the 1990 taxation year the partnership realized a profit of $80,000 from its business carried on in Canada. Mr. X's share of that profit was $20,000. Mr. X had other sources of income for the 1990 taxation year of $10,000.
7. Mr. X also had a loss for the 1989 taxation year of $50,000 in respect of a business carried on outside of Canada.
8. Other than those sources referred to above, Mr. X has no other sources of income or loss for the 1989 or 1990 taxation years. Mr. X also has no losses carried forward for taxation years before 1989.
Opinions
In our opinion, having regard to the provisions of subparagraphs 115(1)(a), 96(1)(c), 96(1)(g) and 111(8)(c) of the Income Tax Act, Mr. X's non-capital loss for his 1989 taxation year in the hypothetical situation set forth above would be his share of the partnership's loss from the business carried on by the partnership in Canada. Mr. X's non-capital loss would not include any loss incurred in 1989 from a business carried on outside of Canada.
We are also of the opinion that Mr. X's non-capital loss for his 1989 taxation year may be deducted by him for the purpose of computing his 1990 taxable income in accordance with the provisions of paragraph 111(1)(a).
For purposes hereof we have assumed that Mr. X was not a limited partner of the partnership and that the business of the partnership carried on in Canada was not farming.
The opinions expressed herein are not advance income tax rulings and, in accordance with paragraph 24 of Information Circular 70-6R, are not considered binding on the Department.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch