2003 Ruling 2003-0020683 - exempt income

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

1) Can certain income be exempt from taxes under Parts I.3, IV and IV.1 of the Act?

2) Can we rule on the application of the XXXXXXXXXX Income Tax Act?

Position:

1) Yes.

2) Yes.

Reasons.

1) The XXXXXXXXXX specifically exempts the income from the taxes.

2) Since the CCRA administers the XXXXXXXXXX Income Tax Act, we are responsible for issuing rulings on its application.

XXXXXXXXXX 							2003-002068

XXXXXXXXXX, 2003

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling
XXXXXXXXXX (the "Company") (Account XXXXXXXXXX)

This is in reply to your letters of XXXXXXXXXX, requesting an advance income tax ruling on behalf of the above-noted taxpayer. We also acknowledge the information provided during our various telephone conversations (XXXXXXXXXX).

We understand that, to the best of your knowledge and that of the taxpayer, none of the issues involved in the Ruling request:

(i) is in an earlier return of the Company or a related person;

(ii) is being considered by a Tax Services Office or Taxation Centre in connection with a previously filed tax return of the Company or a related person;

(iii) is under objection by the Company or a related person;

(iv) is before the courts; or

(v) is the subject of a Ruling previously issued by this Directorate to the Company or a related person.

Unless otherwise stated, all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended, (the "Act") and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.

Our understanding of the facts, proposed transactions and purpose of the proposed transactions is as follows:

Definitions

(a) "Business" means the XXXXXXXXXX;

(b) "Business Act" means the XXXXXXXXXX;

(c) "Provincial Tax Act" means the XXXXXXXXXX;

(d) "Minister" means the Minister of National Revenue; and

(e) "Regulations" mean the Income Tax Regulations, CRC 1979, c.945, as amended.

Facts

1. XXXXXXXXXX.

2. The Company is a corporation without share capital incorporated under Part II of the Canada Corporations Act, R.S.C., 1970, c. C-32. XXXXXXXXXX.

3. XXXXXXXXXX .

4. On XXXXXXXXXX transferred the Business to the Company.

5. The Company's only source of income and gross revenue is and will be from carrying on an "XXXXXXXXXX business" as that expression is defined in section XXXXXXXXXX of the Business Act. XXXXXXXXXX.

6. Section XXXXXXXXXX of the Business Act reads as follows:

XXXXXXXXXX.

7. XXXXXXXXXX.

Proposed Transaction

8. The Company will file a tax return for its fiscal year ended XXXXXXXXXX.

Purpose of the Proposed Transaction

9. The Company would like confirmation that, effective XXXXXXXXXX, income derived from its XXXXXXXXXX operations will be exempt from taxes in accordance with the provisions of section XXXXXXXXXX of the Business Act.

Rulings Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transaction and purpose of the proposed transactions, and provided that the proposed transaction is as described above, we rule as follows:

A. Provided that XXXXXXXXXX, the Company's income from the Business for the period commencing XXXXXXXXXX and ending XXXXXXXXXX will be exempt from taxes under Part I of the Act.

B. Provided that XXXXXXXXXX, the Company will be exempt from taxes under Parts I.3, IV and IV.1 of the Act for the period commencing XXXXXXXXXX and ending XXXXXXXXXX.

C. XXXXXXXXXX, the Company's income from the Business for any fiscal periods beginning after XXXXXXXXXX will be exempt from taxes under Part I of the Act.

D. XXXXXXXXXX, the Company will be exempt from taxes under Parts I.3, IV and IV.1 of the Act for any fiscal periods beginning after XXXXXXXXXX.

E. XXXXXXXXXX, the Company will not have any "taxable income earned in the year in XXXXXXXXXX", within the meaning assigned by section XXXXXXXXXX of the Provincial Tax Act.

The above rulings, which are based on the Act and the Provincial Tax Act in their present form and do not take into account any proposed amendments thereto, are given subject to the general limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002, and are binding on the Canada Customs and Revenue Agency provided that the proposed transactions are completed by XXXXXXXXXX.

Yours truly,

XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate