19 November 1990 Income Tax Severed Letter

24(1)
                                        900316
                                        G. Arsenault
                                        (613) 957-2126
          19(1)

Dear Sir:

Re: Ontario Foreign Tax Credit - Form T2036

This is in reply to your letter dated March 26, 1990 whereby you inquired as to whether there is an error in Form T2036 and in the manner in which the Department calculates the Ontario Foreign Tax Credit.

The second last line of Form T2036 provides for the determination of an amount designated as "(B)" by the following formula:

     Net Foreign Income     Provincial Income Tax
     Net Income          X    before Foreign Tax Credit-B

We agree with your submission that the "Provincial Income Tax before Foreign Tax Credit" in the formula should be the amount of Ontario provincial income tax that would be payable had no dividend tax credit been available to or deducted by the taxpayer and that Form T2036 does not indicate this but rather implies that the "Provincial Income Tax before Foreign Tax Credit" is the amount equal to the sum of (a) the Basic Federal Tax multiplied by the provincial tax rate, and (b) the provincial surtax.

Form T2036 and the Department's computer system will be revised to ensure that Provincial Income Tax before Foreign Tax Credit is determined for residents of Ontario on the assumption that no dividend tax credit had been available to or claimed by the taxpayer.

We wish to thank you for bringing this matter to our attention.

We understand that you are representing

          24(1)

and that you have requested that this appeal be held in abeyance pending receipt of a response to your letter of March 26, 1990. A copy of this letter is being forwarded to Olga Hawkins of the North York Appeals Branch who is responsible for administering the appeal of 19(1) and we ask that you contact Ms. Hawkins upon receipt of this ----- so as to permit the processing of the appeal to proceed. Ms Hawkin's telephone number is 973-4159.

Yours truly,

for Director Reorganizations and Non-Resident Division Rulings Directorate Legislative and Intergovernmental Affairs Branch

c.c. Revenue Canada
     North York Appeals
     36 Adelaide Street East
     9th floor West
     Attention:Olga Hawkins
               Section 130-4-0