CRA reports on rulings which it refused to give on GAAR grounds

Highlights from yesterday’s Roundtable at the CTF Annual Conference in Vancouver include:

• Q.1 CRA indicated that there is essentially no difference between exchangeable shares and exchangeable units under the derivative forward agreement rules, so that in both cases (where the call right is not contained in a separate agreement) an assessment must be made as to whether the holder has retained the equity-type attributes referred to in the DFA definition.
• Q.2 In order to rule on loss transfers between corporations which are affiliated but not related, CRA at a minimum will require that they be affiliated for s. 69(11) purposes, i.e., only common de jure rather than de facto control is accepted.
• Q.3 CRA has reversed its position at the 2014 STEP Roundtable (2014-0522961C6) that the standard contractual recital of $1 (but not a dollar more) of consideration will cause the safe harbour - from deemed s. 68 allocation to a restrictive covenant – to not be available.
• Q.4 Where a foreign acquirer does pre-acquisition planning respecting the capitalization of a Canadian Buyco to acquire a non-resident target holding a Canadian Opco, with a view to being able to then effectively step up the PUC of the shareholding in the Canadian Opco through a series of transactions, CRA considers that GAAR would apply on the basis that the application of Part XIII tax to the surplus of the Canadian Opco has been avoided.
• Q. 5 CRA is not receptive to arrangements under which different types of income are streamed to different partners.
• Q. 6 Where a resident rolls a building into a new subsidiary partnership for a note and units, a non-resident subscribes cash for units a day later and the cash is used to pay off the note, CRA will apply GAAR as if the resident had instead dropped the building down only for units, and then sold half its units to the non-resident.
• Q. 9 CRA accepts Lehigh, so that s. 95(6)(b) applies principally respecting status manipulation.

Neal Armstrong. Summary of 2014 Annual CTF Roundtable.