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:
The issue is whether an interest in a Wyoming LLC receivable by a taxpayer for the disposition of shares of a foreign affiliate would constitute "shares" of the capital stock of the acquiring affiliate for the purposes of subsection 85.1(3) of the Act.
Position TAKEN:
Yes
Reasons FOR POSITION TAKEN:
We have previously stated that, based on the comments in IT-392, an interest in a Texas LLC would constitute "shares" and that each amount distributed on account of profits by the LLC would be considered dividends for the purposes of the Act and the Regulations. We have also stated that LLC's can be foreign affiliates. The above position is consistent with that approach.
942067
XXXXXXXXXX David R. Senécal
(613) 957-9796
May 24, 1995
Dear XXXXXXXXXX:
This is in reply to your letter of August 8, 1994, requesting our views on whether or not a Canadian corporation would qualify for a deferral of income tax pursuant to subsection 85.1(3) of the Income Tax Act (the "Act") on the disposition of shares of a foreign affiliate to a limited liability corporation ("LLC") formed under the laws of the State of Wyoming. We apologize for the delay in responding to your query.
It is our position that, where a LLC is considered to be a corporation for purposes of the Act, the comments contained in Interpretation Bulletin IT-392 regarding the meaning of the term "share" for the purposes of the Foreign Accrual Property Income provisions of the Act, would apply for the purposes subsection 85.1(3) as well. Consequently, an interest in a Wyoming LLC receivable by a taxpayer as consideration for the disposition of the shares of the capital stock of a foreign affiliate to the LLC would constitute "shares of the capital stock of the acquiring affiliate" provided that the LLC would otherwise qualify as a foreign affiliate of the taxpayer immediately after the disposition.
We trust that the above comments will be of assistance to you.
Yours truly,
for Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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