| 903539 | |
| 24(1) | F. Francis |
| (613) 957-8953 |
Attention: 19(1)
May 5, 1992
Dear Sirs:
Re: Subsection 18(13) of the Income Tax Act (the "Act")
This is in reply to your letter of November 30, 1990, wherein you requested a technical interpretation with respect to the applicability of subsection 18(13) of the Act to certain fact situations. We regret that our advance rulings workload has precluded an earlier response.
The situation outlined in your letter appears to relate to specific factual transactions. It is the practice of this Department not to comment on such transactions where the identities of the taxpayers are not known. However, we can provide you with the following general comments which we hope will be of assistance to you.
Subsection 18(13) of the Act denies a superficial loss sustained on the disposition of specified non-capital properties by a taxpayer whose oridinary business includes the lending of money. Any disallowed loss is added to the cost of the reacquired property. It is our view that subsection 18(13) of the Act is not applicable where the non-capital property represents inventory and the taxpayer recognizes a loss as a result of valuing his inventory at the lower of cost and market pursuant to subsection 10(1) of the Act.
Furthermore, it is our view that for purposes of paragraph 18(13)(c) of the Act, the "person that does not deal at arm's length with the taxpayer" would include a non-resident who carried on business in Canada.
The opinions expressed in this letter do not constitute an advance income tax ruling and, as stated in paragraph 21 of Information Circular 70-6R2, are not binding on the Department.
Yours truly,
for DirectorFinancial Industries DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch