19(1) 5-8973
C. Robb
(613) 957-2744December 11, 1989
Dear 19(1)
We are writing in response to your letter of October 18, 1989 concerning the inter-relationship between paragraph 88(1)(a) and certain terms defined in section 248 of the Income Tax Act (the "Act").
Your concerns appear to relate to a specific proposed transaction. Accordingly, your query should take the form of a request for an advance income tax ruling. We do, however, offer the following comments.
We confirm that subparagraph 88(1)(a)(iii) will deem the receivable to be disposed of at its "cost amount" as defined in subsection 248(1). The applicable paragraph in the definition of "cost amount" is a question of fact to be determined by all of the circumstances in each case. The Department's position regarding which paragraph is applicable can be found in paragraph 9 of IT-488R .
If, as a result of your analysis, paragraph (e) is found to be applicable it will again be a question of fact regarding paragraph (e)'s application. Where the debt or right to receive an amount has an amortized cost, that amortized cost will be considered to be the proceeds. Where the debt or right to receive an amount does not have an amortized cost the proceeds will be the amount of the debt or right at that time. We interpret the "amount" to mean the face value of the debt or right to receive an amount and not necessarily its fair market value.
The terms "amortized cost" and "lending asset" ordinarily are relevant to insurance companies and taxpayers whose ordinary business includes the lending of money.
The above comments are general in nature. In accordance with paragraph 24 of Information Circular IC 70-6R the comments expressed herein do not constitute advance income tax rulings and consequently are not binding on the Department.
Yours truly,
for Director Financial Industries Division Rulings Directorate