| 24(1) | 901818 |
| W.C. Harding | |
| (613) 957-8953 | |
| 19(1) |
October 22, 1990
Dear Sirs:
Re: Definition of Foreign Property
This is in reply to your letter of July 20, 1990, concerning the definition of "foreign property" as set out in paragraph 206(1)(d.1) of the Income Tax Act (the "Act").
Generally, when the word "primarily" is used in the Act, the Department considers that it means a percentage which is greater than 50%. Accordingly, in applying the provisions of paragraph 206(1)(d.1) the appropriate test, in our view, is to determine if greater than 50% of the value of a share being considered is derived directly or indirectly from investments in foreign property.
The value of a share of a company may or may not be analogous to the value of the assets of the company. The value of a share may also take into account such things as the prospective yield and marketability of the share and the type of business conducted by the corporation or a number of other factors which may be relevant in a particular case. Therefore, we cannot say whether or not a share would be a foreign property under the provisions of paragraph 206(1)(d.1) based solely on a company's property holdings.
In a similar fashion, it is a question of fact whether or not an encumbered asset vis a vis an unencumbered asset will contribute more or less to the value of a corporate share.
We trust these comments will be satisfactory to your needs.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate