To date, only brief notes of CRA remarks at the 2016 APFF Roundtable are available

We have summarized questions posed at the October 7, 2016 APFF Roundtable for which we have brief written notes of the oral response, together with a summary of those notes. Points covered include:

• Q.1B: After studying the issue, CRA has determined that it will not be providing relief from the requirement to issue T4As for fees paid for services.
• Q.1C: Where there is an acquisition of control of a corporation with a calendar year end, thereby resulting in two taxation years ending in that year, CRA will permit the filing of a T106 to cover both taxation years.
• Q.3: Where a purchaser defaults on its purchase of a rental property, CRA considers that the damages paid by the purchaser to the vendor cannot be recognized as a capital loss given that there has been no disposition of property by it.
• Q.4: A right which otherwise might be taxable under the salary deferral arrangement rules is excluded from the SDA definition if it is a right to a bonus for services rendered in Year 1 which is paid within three years following the end of Year 1 (i.e., by the end of Year 4). CRA will not extend this deadline by a few months to permit performance-based criteria for Year 4 (which affect the amount of the ultimate payout) to be measured based on year-end results for Year 4.
• Q.7: Ss. 256(1.4) and 251(5)(b) reference a right (including a contingent right) to shares and a right to cause a corporation to redeem shares. There is not considered to be such a right where the shareholders’ agreement for a corporation carrying on a franchised operation (“Franchisee”) specifies that in the event that the individual manager of Franchisee (who holds 50% of Franchisee’s commons shares) departs, the other 50% common shareholder (the Franchisor) has the mandate to find a third party to purchase the manager’s shares – or that, in such event, the manager’s shares are to be automatically redeemed by Franchisee.
• Q.20: CRA accepts the finding in Poulin that the structuring of a sale transaction so that the vendor secured a tax advantage (the capital gains deduction) “does not mean that the parties acted in concert without separate interests.” However, if the only reason for the existence of a Buyco is a tax benefit to the vendor, then there is an accommodation, so that the transaction is not an arm’s length one.
• Q.21: Where a Canadian-controlled private corporation has agreed in writing to pay specified bonuses in its shares, the value of the shares will not be included in the employee’s income when issued, and their paid-up capital can be equal to that value.

Neal Armstrong. Summary of 7 October 2016 APFF Roundtable.