| July 25, 1990 | |
| Appeals Branch | Business and General |
| Division | |
| Bill Guglich | |
| 957-2102 | |
| Dave Turner | |
| Appeals and Referrals | EACC9394 |
| 900616 |
SUBJECT: 19(1) Paragraph 5 of IT-479R
This is in reply to your memorandum of May 3, 1990 concerning the Department's interpretation, in paragraph 5 of IT-479R, of the term "trader or dealer in securities".
Subsection 39(4) of the Act permits certain taxpayers to elect capital treatment in respect of all their Canadian security dispositions. The intent of the election is to provide guaranteed capital gain treatment and remove uncertainty for certain taxpayers who might otherwise be required to report transactions in Canadian securities on income account. If the election is considered to be available only to investors, who would be entitled to the capital treatment in any case, no greater certainty is achieved and the election becomes almost meaningless.
Subsection 39(5) of the Act lists certain categories of taxpayers who are not entitled to elect this capital treatment. One of the categories of taxpayers not entitled to elect is a "trader or dealer in securities". The broad concept of a trader envisaged by the courts for other purposes of the Act as being anyone' other than an investor differs from the more narrow and restrictive concept of a trader contemplated in paragraph 39(5)(a) of the Act. Paragraph 5 of IT-479R sets out the Department's interpretation of the term "trader or dealer in securities" This position was finalized after extensive consultations with policy and Systems Branch, Legal Services and the Department of Finance.
Mr. Short's letter of March 23, 1989 did not criticize the Department's position as set out in paragraph 5 of IT-479R. Instead, he pointed out that the application of the law to, the facts of a case is a task to be performed by this Department. The IT bulletin contains guidelines for that purpose which, if applied, provide greater certainty, as intended by the Budget Notes.
We are not in a position at this time to recommend reconsideration of the Department's interpretation of the term "trader or dealer in securities" as set out in paragraph 5 of IT-479R.
Your appeals folder, containing the independent report relating to the 24(1) case and your research working papers, is enclosed. The 1985, 1986 and 1987 T1 returns for, 19(1) were returned on May 22, 1990 to Marie Lapointe, Unit Head H.O. Registration Section, Appeals Branch.
M.G. Hiltz for Director GeneralSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch