Income Tax Severed Letters - 2018-04-04

Ruling

2017 Ruling 2016-0674681R3 - Sequential Split-Up Butterfly
Unedited CRA Tags: 
55(2), 55(3)(b), 55(3.1), 55(3.2), 55(4)
Full Title: 
2017 Ruling 2016-0674681R3 - Sequential Split-Up Butterfly

2017 Ruling 2016-0674681R3 - Sequential Split-Up Butterfly -- attach -- Distribution

Submitted by narmstrong on Mon, 04/30/2018 - 15:57
sequential split-up butterfly with 1% tolerance, triggering of capital gains to generate CDA and RDTOH, and year end change to accommodate RDTOH division

Background

DC1 holds cash and cash-like assets (e.g., money market funds or GICs), marketable securities and has an RDTOH and CDA balance. Its...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 129 - Subsection 129(1) capital gain deliberately triggered to generate CDA and RDTOH addition and year end change granted to isolate dividend refund 543
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.1) - Paragraph 55(3.1)(a) sale of securities for cash proceeds that are reinvested, and tendering shares for shares of offeror 58
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(7) CRA accommodates year end change so that dividend refund of full RDTOH balance is generated in Year 1 210
Full Title: 
2017 Ruling 2016-0674681R3 - Sequential Split-Up Butterfly

2017 Ruling 2016-0674681R3 - Sequential Split-Up Butterfly -- attach -- Subsection 129(1)

Submitted by narmstrong on Mon, 04/30/2018 - 16:01
capital gain deliberately triggered to generate CDA and RDTOH addition and year end change granted to isolate dividend refund
Starting structure

An investment holding company (DC1) is held directly by A and his brother B (apparently, a non-resident) and by an upper-tier...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution sequential split-up butterfly with 1% tolerance, triggering of capital gains to generate CDA and RDTOH, and year end change to accommodate RDTOH division 747
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.1) - Paragraph 55(3.1)(a) sale of securities for cash proceeds that are reinvested, and tendering shares for shares of offeror 58
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(7) CRA accommodates year end change so that dividend refund of full RDTOH balance is generated in Year 1 210
Full Title: 
2017 Ruling 2016-0674681R3 - Sequential Split-Up Butterfly

2017 Ruling 2016-0674681R3 - Sequential Split-Up Butterfly -- attach -- Paragraph 55(3.1)(a)

Submitted by narmstrong on Tue, 05/01/2018 - 02:06
sale of securities for cash proceeds that are reinvested, and tendering shares for shares of offeror

Preliminarily to a butterfly distribution that was favourably ruled upon, DC1 sold portfolio investment units for cash, and may reinvest the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution sequential split-up butterfly with 1% tolerance, triggering of capital gains to generate CDA and RDTOH, and year end change to accommodate RDTOH division 747
Tax Topics - Income Tax Act - Section 129 - Subsection 129(1) capital gain deliberately triggered to generate CDA and RDTOH addition and year end change granted to isolate dividend refund 543
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(7) CRA accommodates year end change so that dividend refund of full RDTOH balance is generated in Year 1 210
Full Title: 
2017 Ruling 2016-0674681R3 - Sequential Split-Up Butterfly

2017 Ruling 2016-0674681R3 - Sequential Split-Up Butterfly -- attach -- Subsection 249.1(7)

Submitted by narmstrong on Tue, 05/01/2018 - 12:30
CRA accommodates year end change so that dividend refund of full RDTOH balance is generated in Year 1

Following a split up butterfly and winding-up of a corporation (DC1) for which DC2 had been a holding company, DC2 is held by three corporations,...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution sequential split-up butterfly with 1% tolerance, triggering of capital gains to generate CDA and RDTOH, and year end change to accommodate RDTOH division 747
Tax Topics - Income Tax Act - Section 129 - Subsection 129(1) capital gain deliberately triggered to generate CDA and RDTOH addition and year end change granted to isolate dividend refund 543
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.1) - Paragraph 55(3.1)(a) sale of securities for cash proceeds that are reinvested, and tendering shares for shares of offeror 58

Principal Issues: Whether the proposed transactions qualify for the butterfly exemption found in paragraph 55(3)(b).

Position: Yes.

Reasons: See below.

2017 Ruling 2017-0693271R3 - Split-Up Butterfly
Unedited CRA Tags: 
55(2), 55(3)(b)

Principal Issues: Whether the proposed transactions qualify for the butterfly exemption found in paragraph 55(3)(b).

Position: Yes.

Reasons: Wording of the Act and previous positions.

Technical Interpretation - External

20 February 2018 External T.I. 2017-0727811E5 F - Synthetic disposition
Unedited CRA Tags: 
80.6(1), 248(1)
Full Title: 
20 February 2018 External T.I. 2017-0727811E5 F - Synthetic disposition

20 February 2018 External T.I. 2017-0727811E5 F - Synthetic disposition -- attach -- Synthetic disposition arrangement

Submitted by narmstrong on Fri, 04/06/2018 - 02:28
an arrangement which eliminates all risk of loss nonetheless “appears” not to be a synthetic disposition arrangement if there is 20% profits participation

Ten months after the formation by him of a small business corporation, Mr. A agrees with an arm’s length employee of the corporation to sell 1/3...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 110.6 - Subsection 110.6(1) - Qualified Small Business Corporation Share disposition could be deferred to end of 24 month period if deferred-closing agreement was not a synthetic disposition agreement 204
Full Title: 
20 February 2018 External T.I. 2017-0727811E5 F - Synthetic disposition

20 February 2018 External T.I. 2017-0727811E5 F - Synthetic disposition -- attach -- Qualified Small Business Corporation Share

Submitted by narmstrong on Fri, 04/06/2018 - 02:31
disposition could be deferred to end of 24 month period if deferred-closing agreement was not a synthetic disposition agreement

10 months after the formation by him of a small business corporation, A agrees with an arm’s length employee of the corporation to sell 1/3 of...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Synthetic disposition arrangement an arrangement which eliminates all risk of loss nonetheless “appears” not to be a synthetic disposition arrangement if there is 20% profits participation 264

Principales Questions: Whether subsection 80.6(1) will apply to the scenario presented.

Position Adoptée: Question of fact.

Raisons: Wording of the provision.

10 November 2017 External T.I. 2017-0688831E5 - 110.6(1.1) and AgriInvest
Unedited CRA Tags: 
110.6(1.1)

Principal Issues: Is the value of an “excess deposit” in a taxpayer’s AgriInvest Account considered a “net income stabilization account” under subsection 110.6(1.1) and therefore deemed nil for purposes of the capital gains deduction?

Position: No.

Reasons: See below.