Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether a debit note issued to a corporation must be included in computing the corporation’s capital under subsection 181.2(3).
Position:
Provided general comments only.
Reasons:
Depends on the legal nature of the obligation.
XXXXXXXXXX 991842
Attention: XXXXXXXXXX
July 21, 1999
Dear Sirs:
Re: Large Corporations Tax
This is in reply to your facsimile letter dated July 6, 1999, wherein you requested our views on the application of subsection 181.2(3) of the Income Tax Act (the “Act”) where a corporation issues a debit note to another corporation that is not a financial institution in respect of GST paid by the first corporation on the second corporation’s behalf.
Your request relates to a completed transaction involving specific taxpayers. As indicated in paragraph 22 of IC 70-6R3, confirmation of the income tax consequences of a completed transaction should be referred to the appropriate tax services office. Although we are not able to comment specifically on the situation you have described, we can offer some very general comments.
Whether an obligation is included in the calculation of capital of a corporation under subsection 181.2(3) of the Act would depend on the legal nature of the obligation. Such a determination can only be made after a review of all of the relevant facts. If the obligation constitutes a loan or an advance, the amount of the obligation would be included in computing the corporation’s capital pursuant to paragraph 181.2(3)(c) of the Act. If, however, the obligation represents an indebtedness (other than an indebtedness in respect of a lease) that is not already included in computing the corporation’s capital, the amount of such indebtedness would be included in its capital pursuant to paragraph 181.2(3)(f) of the Act to the extent that it has been outstanding for more than 365 days before the corporation’s year-end.
We trust that our comments will be of assistance to you.
Yours truly,
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1999
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1999
Email this Content