CRA discusses the interrelationship between s. 15(1.4)(c) and s. 246(1)

Opco is held somewhat equally by three holding companies, each wholly-owned by an individual (A, B or C) who is unrelated to the others. Opco sells an asset to B’s child for 1/2 its fair market value. CRA found that:

• If the benefit conferred by Opco on B’s child was not also indirectly conferred by B’s holding company (Holdco B) on B or B’s child, then such benefit would be deemed by s. 15(1.4)(c) to be a benefit conferred on Holdco B by Opco, so that it would be included in Holdco B’s income.
• On the other hand, if the benefit had been indirectly conferred by Holdco B on B or B’s child (which CRA would generally infer if Holdco B influenced Opco’s conferral of the benefit), s. 246(1) could apply to include the benefit in B's income.
• If Holdco B had concurred in the benefit conferral, s. 56(2) could be an alternative basis for including the benefit in Holdco B’s income.

CRA did not discuss what criteria it would apply to determine whether it would assess Holdco B, or B, for the benefit (or even do both).

Neal Armstrong. Summaries of 6 December 2016 External T.I. 2016-0666841E5 Tr under s. 15(1.4)(c) and s. 56(2).