Author: Alfred Ho
TEI ANNUAL CANADIAN CONFERENCE
MAY 1992
QUESTION 11 - ELECTION UNDER SUBSECTION 13(7.4)
Paragraph 12(1)(x) provides that amounts received as inducements are to be included in income, unless the taxpayer makes an election under subsection 13(7.4). This latter section prescribes no particular format for filing the election.
The Department has stated that an acceptable form of election is a statement which sets out the amount of the inducement, the year of receipt, the year property was acquired and the capital cost of the property acquired. Is this the only acceptable form of election? If the inducement and property acquisition happen in the same year, is it acceptable to consider the netting of these on the tax return as "the election"? This approach is desired because many taxpayers use the same accounting method on their financial statements, and thus have assumed that since there is no "book/tax difference", no specific election is required.
DEPARTMENT'S POSITION
Since there is no prescribed form, the Department does not insist on a particular format. However, some positive indication that an election has been made is necessary. The Department prefers to have a statement which sets out the information as stated above. The jurisprudence relating to inducements has generally not confirmed the accounting treatment as being acceptable for tax purposes. Accordingly, the Department is unable to rely solely on the accounting treatment for inducements as being indicative of whether an election is being made by a taxpayer under subsection 13(7.4).
Section 31