Cases
Des Groseillers v. Quebec (Agence du revenu), 2022 SCC 42
An individual who donated some of his employee stock options on the shares of a public company to arm's length registered charities, claimed the...
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| Tax Topics - Income Tax Act - Section 7 - Subsection 7(3) - Paragraph 7(3)(a) | s. 7(3)(a) does not override s. 69(1)(b) | 274 |
Bouchard v. The Queen, 83 DTC 5193, [1983] CTC 173 (FCTD)
S.69(1)(b)(i) did not apply to a transfer of land by the taxpayer to his son and daughter-in-law where they already had the beneficial ownership...
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| Tax Topics - General Concepts - Effective Date | parol trust over land has effect for tax purposes from its formation - at least, if subsequently confirmed in writing | 160 |
| Tax Topics - General Concepts - Evidence | 74 | |
| Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(2) | 78 | |
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(e) | 70 |
See Also
Lauria v. The Queen, 2021 TCC 66
On April 1, 2006, the taxpayers, who were executives of Gluskin Sheff+Associates Inc. (“GS+A”) (but with less clout than the founders), sold a...
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| Tax Topics - General Concepts - Fair Market Value - Shares | shares transferred 3 weeks prior to filing the IPO preliminary valued at a 40% “marketability” discount to the IPO value | 373 |
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) | sophisticated taxpayers were careless in not valuing shares at a value reflecting an imminent IPO | 613 |
Agence du revenu du Québec v. Des Groseillers, 2021 QCCA 906, aff'd 2022 SCC 42
An individual who donated some of his employee stock options on the shares of a public company to arm's length registered charities, claimed...
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| Tax Topics - Income Tax Act - Section 7 - Subsection 7(3) - Paragraph 7(3)(a) | s. 7(3)(a) accords precedence of s. 7 over ss. 5 and 6, but not over s. 69 computation rules | 326 |
Godcharles v. Agence du revenu du Québec, 2020 QCCQ 2219, aff'd 2021 QCCA 1843
A retirement home was co-owned by eight individuals and operated by a corporation of which they were the shareholders. The home and operating...
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| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | a sale of goodwill occurred between parties acting in concert given the role of a dominant player | 410 |
| Tax Topics - General Concepts - Fair Market Value - Land | retirement home valued using cost method with residual to goodwill | 127 |
DMWSHNZ Ltd. v. Commissioners for Her Majesty's Revenue and Customs, [2015] BTC 32, [2015] EWCA Civ 1036
The taxpayer, which had been issued 10-year floating-rate notes on its sale of shares of a New Zealand subsidiary to a third party, subsequently...
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| Tax Topics - Statutory Interpretation - Purpose | purposive approach entails checking whether overall effect of transaction answers the statutory description | 173 |
Shepp v. The Queen, 99 DTC 510, [1999] 1 CTC 2889 (TCC)
In obiter dicta, Lamarre Proulx TCJ. doubted that s. 69(1)(b) could be applied on the basis that there was a disposition of an "economic interest"...
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| Tax Topics - General Concepts - Fair Market Value - Shares | 103 |
Gee-Gee Investments Ltd. v. MNR, 94 DTC 1419, [1994] 1 CTC 2707 (TCC)
The date at which a residence was to be valued for purposes of determining the capital gain realized by the taxpayer with respect to the transfer...
Berry v. Warnett, [1980] T.R. 299 (C.A.), rev'd [1980] BTC 239 (HL)
"[T]he ordinary primary meaning of 'gift' is a voluntary transfer of property made without consideration."
The Queen v. Littler, 78 DTC 6179, [1978] CTC 235 (FCA)
A sale by the taxpayer to his sons of shares for their market price at a time when the taxpayer had insider knowledge that an offer would be made...
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| Tax Topics - Other Legislation/Constitution - Federal - Federal Courts Rules - Rule 408(1) | 107 | |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Property | 26 |
Administrative Policy
2021 Ruling 2020-0862431R3 F - Variation of a trust deed and addition of new beneficiaries
A trust deed for a family trust (whose current named beneficiaries were family individuals) was to be amended by court order to expand the range...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition | trust deed amendment by court order to permit addition of corporations that were only indirectly owned by family beneficiaries did not trigger a disposition/ such addition triggered disposition of trust interests but without proceeds | 444 |
7 October 2016 APFF Roundtable Q. 19, 2016-0655841C6 F - Reimbursement of attributed income
CRA assesses corporation A under s. 56(2) and s. 69(1)(b) on a capital gain of $99,990 on the basis that it had exchanged preferred shares with a...
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| Tax Topics - Income Tax Act - 101-110 - Section 103 - Subsection 103(1) | no obligation to repay income reallocated to other partner | 170 |
| Tax Topics - Income Tax Act - Section 74.1 - Subsection 74.1(1) | no domestic secondary adjustment doctrine | 218 |
3 March 2015 External T.I. 2014-0519981E5 F - Donation avec charge / Gift with a charge
An individual donates a real estate property with a fair market value of $200,000 that is charged with a hypothec of $100,000. After noting that...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Property | real estate property is one property | 75 |
25 October 2013 External T.I. 2013-0484321E5 F - Donation entre vifs / inter vivos gift
Does s. 69(1)(b)(ii) apply only to individuals? CRA indicated that the interpretation of the term "gift inter vivos" is not a tax issue but a...
6 August 2013 External T.I. 2012-0469481E5 F - Benefit under trust
An estate sold personal-use real estate to one of its beneficiaries for a price less than the property's fair market value, so that s. 69(1)(b)(i)...
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| Tax Topics - Income Tax Act - 101-110 - Section 105 - Subsection 105(1) | taxable benefit on sale to beneficiary at undervalue was not eliminated under s. 105(1)(a) when beneficiary sold the property | 132 |
| Tax Topics - Income Tax Act - Section 52 - Subsection 52(1) | benefit on estate sale to beneficiary at under-value added to property's ACB | 133 |
23 April 2013 Internal T.I. 2012-0466081I7 F - Usufruct created under French legislation
A Canadian-resident taxpayer who lived outside Canada made a transfer without consideration (the "Gift") to her adult children of a building and...
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| Tax Topics - Income Tax Act - Section 43.1 | gift of immovable subject to reservation of a usufruct gave rise to a disposition under s. 43.1 | 282 |
| Tax Topics - General Concepts - Foreign Law | 2-step approach to characterizing a French civil law transaction | 244 |
31 May 2012 External T.I. 2011-0426091E5 - 98(5) - ptnsp's leasehold int if ptnr is lessor
A partnership was leasing property from a partner, and then is wound up as described in s. 98(5), with the former partner continuing to use the...
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| Tax Topics - Income Tax Act - Section 98 - Subsection 98(5) | 89 |
3 July 2012 Internal T.I. 2012-0450821I7 F - Interaction of 84(3) and 69(1)(b)
A CCPC ("Opco"), whose voting common shares were owned by two individuals (B and R) and by a Canadian-controlled private corporation ("M Holdco")...
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| Tax Topics - Income Tax Act - Section 84 - Subsection 84(3) | s. 84(3) deemed dividend based on actual redemption proceeds rather than s. 69 | 245 |
12 August 2010 External T.I. 2010-0370991E5 - Debt forgiveness
Corporation A, an operating company, lent money to Corporation B, its holding company which Corporation B used to purchase a building. ...
19 May 2010 External T.I. 2010-0364131E5 F - Issuance - Discretionary shares
Upon the incorporation of Opco, X subscribed for and continued thereafter to hold all the Class A voting participating shares of Opco, whose terms...
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| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | subscription for discretionary shares of Opco might represent a s. 15(1) benefit conferred by Opco on subscriber, or engage s. 69(1)(b) where this is benefit conferred by existing shareholder | 203 |
| Tax Topics - Income Tax Act - Section 74.1 - Subsection 74.1(1) | application of Kiebom to consider interest in corp to have been transferred to spouse could engage s. 74.1(1) | 221 |
16 December 2008 External T.I. 2008-0279741E5 F - Renonciation au capital d'une fiducie
CRA indicated that the renunciation of a capital interest in a discretionary family trust would give rise to nil proceeds of disposition, stating...
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| Tax Topics - Income Tax Act - Section 75 - Subsection 75(2) | settlor’s valid renunciation of capital interest (but not income interest) prior to trustees’ exercise of discretion to distribute a capital gain would avoid application of s. 75(2)(a)(i) | 199 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(9) - Disclaimer | legally impossible for a beneficiary of a discretionary trust to partially renounce income from a specific trust property | 262 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition - Paragraph (i) | non-disposition distribution of non-taxable portion of trust capital gains avoids a gain under s. 107(2.1) | 375 |
| Tax Topics - Income Tax Act - Section 54 - Proceeds of Disposition | settlor’s renunciation of capital interest (but not income interest) prior to trustees’ exercise of discretion to distribute a capital gain would generate nil proceeds and not engage s. 56(2) or (4) | 194 |
| Tax Topics - Income Tax Act - Section 56 - Subsection 56(2) | s. 56(2) inapplicable to renunciation of capital interest in a trust | 45 |
| Tax Topics - Income Tax Act - Section 56 - Subsection 56(4) | s. 56(4) inapplicable to disclaimer of capital interest in a trust | 43 |
20 November 2008 Internal T.I. 2008-0281411I7 - Addition of Beneficiaries
The sole trustee (the Trustee) of a family trust who also was one of the "Existing Beneficiaries" exercised a power under the Trust Indenture to...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition | addition of unrelated beneficiaries | 298 |
26 January 2007 External T.I. 2005-0157751E5 F - Don d'un duplex et changement d'usage
Mrs. X, who owned a duplex, 2/3 of which was her principal residence and 1/3 of which was rented to a third party, made a gift of the duplex to...
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| Tax Topics - Income Tax Act - Section 13 - Subsection 13(7) - Paragraph 13(7)(b) | 1/2 step-up limitation where change of use | 215 |
31 December 2004 Internal T.I. 2004-0091781I7 - Redemption for Proceeds Less than FMV
Our position is that where, in a non-arm's-length situation, the fair market value of the shares exceeds the redemption amount, the difference...
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| Tax Topics - Income Tax Act - Section 84 - Subsection 84(3) | 94 |
9 May 2007 External T.I. 2006-0189931E5 F - Renonciation à une fiducie par un conjoint
What are the tax consequences of the renunciation by the beneficiary of a testamentary spousal trust of all entitlements under the trust (other...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition | extinguishment of trust interests on their renunciation is a disposition of the renounced interest, but resulting variation of trust to accelerate distribution entitlements is not | 167 |
| Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(4) - Paragraph 104(4)(a) | variation of spousal trust, following renunciation by spouse, to accelerate distribution entitlement of residuary beneficiaries would not engage s. 104(4) until distribution | 195 |
| Tax Topics - Income Tax Act - Section 70 - Subsection 70(6) | variation of spousal trust, following renunciation by spouse, to accelerate distribution entitlement of residuary beneficiaries would not deny s. 70(6) rollover | 211 |
8 October 2004 APFF Roundtable Q. 15, 2004-0086821C6 F - Interaction of 84(3) and 69(1)(b)
Respecting the situation where a subsidiary purchases for cancellation a portion of the common shares in its capital held by its wholly-owning...
14 September 2004 External T.I. 2004-008220
When asked whether the demolition of a rental property would trigger a disposition at fair market value, the Directorate indicated that the...
23 December 2003 External T.I. 2003-0008145 F - TRANSFERT ENTRE EX-CONJOINT
CCRA noted that if a spouse elected out of the application of s. 73(1) to the transfer of property to her divorced husband pursuant to an...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(23) | deemed transfer to spouse before divorce where property was subject to matrimonial regime to which s. 248(3) applied, so that no need to rely on being in settlement of matrimonial rights | 258 |
| Tax Topics - Income Tax Act - Section 73 - Subsection 73(1.01) - Paragraph 73(1.01)(b) | property transferred in settlement of rights arising out of marriage also includes property transferred in settlement of rights arising out of a matrimonial regime | 278 |
16 December 2003 Internal T.I. 2003-0046167 F - Section 50- Shares of Insolvent Corporation50(1)
Parentco elected under s. 50(1) respecting its shares of one of a wholly-owned subsidiary ("Lossco") with non-capital loses but no assets or...
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| Tax Topics - Income Tax Act - Section 50 - Subsection 50(1) - Paragraph 50(1)(b) - Subparagraph 50(1)(b)(iii) | corporation not insolvent if affiliates intend to pay its creditors, and its shares have value if it has non-capital losses | 264 |
| Tax Topics - General Concepts - Fair Market Value - Shares | shares of corporation that had ceased business and had no assets but had non-capital losses had a significant value | 75 |
1 April 2003 External T.I. 2003-0004125 F - Freeze by Paying a Stock Dividend
A CCPC (Opco) paid a stock dividend of preferred shares with a fair market value of $800,00 and a paid-up capital of $80 to its sole shareholder,...
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| Tax Topics - Income Tax Act - Section 74.4 - Subsection 74.4(2) | non-application to stock dividend | 108 |
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1.1) | s. 15(1.1) inapplicable to stock dividend paid to wholly-owning shareholder | 98 |
| Tax Topics - General Concepts - Effective Date | price-adjustment clause to redemption value of preferred shares did not accord with IT-169 | 183 |
11 March 2003 External T.I. 2002-0179095 F - Issuance-Discretionary Shares non-Consid.
A and B, who were the equal common shareholders of Opco, each had personal holding companies (Holdco A and B) form an equally owned holding...
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| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | a benefit can be conferred on a taxpayer even where no net economic benefit | 213 |
| Tax Topics - Income Tax Act - Section 56 - Subsection 56(2) | s. 56(2) inapplicable to discretionary-dividend shares | 217 |
14 February 2003 External T.I. 2002-0173195 F - Transfer of Shares
Mr. X, who wholly-owned Canco, gifts, at a time that he is withdrawing from Canco’s management, 51% of his shares to his son (Mr. Y), who is a...
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| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) | s. 6(1)(a) generally applicable to gift of shares by majority owner to key employee, but not to employee son | 97 |
2001 Ruling 2001-0070943 - PARTNERSHIP INTEREST PENSION CORP.
Although the issue is not referred to, the disposition of property by a corporation pursuant to the exercise of an option by a partnership of...
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| Tax Topics - Income Tax Act - Section 253.1 | 48 | |
| Tax Topics - Income Tax Act - Section 97 - Subsection 97(2) | question of fact whether post-drop-down loan is boot | 81 |
2000 Ruling 2000-002395
A vertical merger between a US corporation with a Canadian branch business ("Absorbco") and its US parent ("Subco 3") under which Absorbco...
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| Tax Topics - Income Tax Act - Section 87 - Subsection 87(8.1) | 71 |
17 April 2000 External T.I. 1999-0009285 - RIGHT TO USE PROPERTY
S.69(1)(b) could apply to the granting of a non-exclusive licence of intellectual property to a related person.
14 January 1999 External T.I. 9828555 - CHANGE TO DIVIDEND RATE
Where shares bearing a non-cumulative dividend of 10% are exchanged on an s. 86 reorganization for shares bearing a non-cumulative dividend of...
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| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | 54 |
6 November 1997 External T.I. 9728755 - BENEFIT CONFERRED ON ISSUANCE OF SHARES
An individual shareholder ("A") owns 20 preferred shares of a CCPC ("Opco") having a fair market value of $20 and an unrelated individual ("B"),...
14 November 1996 External T.I. 9635535 - TAX CONSEQUENCES RE EMPLOYEE STOCK OPTIONS
In a response to several questions concerning the tax consequences to both the employee and the non-arm's length transferee where the transferee...
12 April 1994 External T.I. 9402315 - INTELLECTUAL PROPERTY
S.69(1)(b) would apply where a parent corporation owns patents, trademarks and copyright used exclusively by one of its subsidiaries in the...
93 C.R. - Q. 39
If a person enters into an agreement of purchase and sale (or an option) with a person with whom he does not deal at arm's length on fair market...
Revenue Canada Round Table TEI Conference, 7 December 1993, Q. 9 (C.T.O. "Non-Arm's-Length Purchase and Sale Arrangement")
Where there is an extended delay between the date a non-arm's agreement is entered into and the closing of the agreement, RC generally would...
8 December 1993 Income Tax Severed Letter 9333680 - Option Agreements—Non-arm's length Situations
Where a company acquires from a person with whom it does not deal at arm's length an option to acquire property at a fixed price, s. 69(1)(b)...
26 January 1993 T.I. 923284 (November 1993 Access Letter, p. 512, ¶C245-051; Tax Window, No. 28, p. 1, ¶2383)
S.69(1)(b) does not apply to the provision of services for less than their fair market value.
92 C.R. - Q.21
S.69(1)(b)(i) will apply to a transfer of ownership of equity in a corporation in circumstances such as those in The Queen v. Kieboom, 93 DTC 6382...
17 February 1992 T.I. (Tax Window, No. 16, p. 21, ¶1752)
A conveyance will not be precluded from being considered a gift by the payment by the donee of $1 as a legal formality.
30 November 1991 Round Table (4M0462), Q. 3.3 - Issuing of Shares: Consideration Less than the F.M.V. (C.T.O. September 1994)
Where a corporation that has two unrelated shareholders (Mr. A and Mrs. B) each holding one share, issues a third common share for nominal...
18 December 1989 T.I. (May 1990 Access Letter, ¶1219)
s. 69(1)(b) will apply to a purchase for cancellation of shares held by a non-arm's length shareholder for a purchase price less than fair market...
86 C.R. - Q.23
The existence of a fixed price in a buy-sell agreement is not conclusive that the shareholders were not dealing at arm's length.
85 C.R. - Q.9
"Anything" includes intangible property, such as the right to use property. For example, s. 69(1) will apply where an individual rents farmland to...
Articles
Marie Emmanuelle Vaillancourt, Alan Shragie, "Non-Arm's Length Stock Options Transfers", CCH Tax Topics, No. 1985, 25 March 2010, p. 1.
Innes, "If the Tax Treatment of Accrued Gains on Inventory at Death", Estates and Trust Journal, Vol. 12, 1992, p. 122.
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| Tax Topics - Income Tax Act - Section 70 - Subsection 70(2) | 0 |
Subparagraph 69(1)(b)(i)
See Also
Godcharles v. Agence du revenu du Québec, 2021 QCCA 1843
A group of unrelated individuals were the co-owners of a seniors’ residence, which was leased by them to the corporate operator of the residence...
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| Tax Topics - Income Tax Act - Section 68 - Paragraph 68(a) | s. 68 reallocated between a retirement home’s business operations sold by one vendor and the home sold by the other vendors | 424 |
| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | transaction was not at arm’s length given the dominant role of their architect | 413 |
| Tax Topics - General Concepts - Fair Market Value - Land | goodwill portion of retirement residences business determined as the residual from valuing the residence using the cost method | 272 |
Mady v. The Queen, 2017 TCC 112
On the same day as the taxpayer and (as described below) his family members closed the sale of the shares of his dental corporation (“MDPC”)...
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| Tax Topics - Income Tax Act - Section 74.5 - Subsection 74.5(11) | transfer from wife to higher-income husband was infused with his income-splitting purpose (as well as regulatory breach if she didn’t transfer) | 393 |
| Tax Topics - General Concepts - Ownership | wife and children did not acquire beneficial interest in shares the taxpayer was to transfer to them, under tax plan, until the share transfer occurred | 263 |
| Tax Topics - Income Tax Act - Section 86 - Subsection 86(2) | family members did not acquire beneficial interest in new shares until after completion of s. 86 reorg | 297 |
| Tax Topics - General Concepts - Fair Market Value - Shares | arm’s length sales price established FMV for closing-date internal transfer of same shares | 482 |
| Tax Topics - Income Tax Act - Section 163 - Subsection 163(2) | was not responsible under s. 163(2) for the unbeknownst sharp practice of his tax advisor | 692 |
| Tax Topics - General Concepts - Price Adjustment Clause | no jurisdiction to comment on application of price adjustment clause where the affected taxpayers are not appellants | 233 |
Administrative Policy
2 July 2003 External T.I. 2002-0180015 F - Usufruit d'un immeuble
Mr. X disposes of his principal residence and the underlying land to a corporation (whose shareholders are his son and an arm’s length person)...
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| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | transferor to a deemed s. 248(3) trust who receives a usufruct does not deal at arm’s length with the trust | 266 |
| Tax Topics - Income Tax Act - 101-110 - Section 105 - Subsection 105(1) | no benefit re use of personal-use property | 180 |