5-911515
24(1) J.P. Dunn
(613) 957-8953
19(1)July 2, 1991
Dear Sirs:
Re: Banker's Acceptance Large Corporation Tax
We are writing in response to your correspondence of May 30, 1991 concerning the treatment of banker's acceptance in the calculation of the capital and the investment allowance of a corporation for the purpose of Part I.3 Tax on Large Corporations.
It is presently the opinion of the department that banker's acceptances do not constitute a loan, advance or indebtedness of the drawer corporation and, accordingly, would not be included in the calculation of the capital of a corporation pursuant to subsection 181.2(3) of the Income Tax Act (the "Act").
With respect to the calculation of the investment allowance of the holder corporation pursuant to subsection 181.2(4) of the Act, we would advise that it is the opinion of the department that a banker's acceptance constitutes a direct obligation of the accepting bank. Accordingly, as the definition of a "financial institutions" in subsection 181(1) of the Act includes a bank, the acceptance would not qualify for inclusion in the calculation of the investment allowance of the holder corporation pursuant to any of paragraphs 181.2(4)(b), (c) or (d) by virtue of the exclusion in those provisions relating to obligations of financial institutions. While we trust that our comments are of assistance to you, we would advise that they do not constitute an advance income tax ruling and are, therefore, not binding upon the Department in respect of any particular situation.
Yours truly,
for Director Financial Industries Division Rulings Directorate
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