Peter Lee, Paul Stepak, "PE Investments in Canadian Companies", draft 2017 CTF Annual Conference paper

Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 10

Application of 10%-of-voting power test where sister companies held through holding “Aggregator” LP (pp. 5, 9)

[A] PE fund limited partnership...

The text of this content is paywalled except for the first five days of each month. Subscribe or log in for unrestricted access.

Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(b) - Subparagraph 95(2)(b)(i) - Clause 95(2)(b)(i)(B)

Use of holding “Aggregator” LP to hold CFAs may generate FAPI (pp. 9-10)

The potential FAPI issue arises from the fact that the income of the...

The text of this content is paywalled except for the first five days of each month. Subscribe or log in for unrestricted access.

Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(5) - Equity Amount - Paragraph (a) - Subparagraph (a)(iii)

Potential adverse thin cap consequences of U.S. lenders pushing for a single U.S. borrower (pp. 10-11)

One of the Canadian tax issues that can...

The text of this content is paywalled except for the first five days of each month. Subscribe or log in for unrestricted access.

Summary Under
Tax Topics - Income Tax Act - Section 212.3 - Subsection 212.3(1) - Paragraph 212.3(1)(b)

No s. 245(4) abuse where use of a Canadian GP to avoid FAD rules (pp. 15, 16)

[T]he purpose of the FAD rules is to deter foreign multi-nationals...

The text of this content is paywalled except for the first five days of each month. Subscribe or log in for unrestricted access.

Summary Under
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(c) - Subparagraph 88(1)(c)(vi)

Potential unavailability of “bump and run” where management are expected to retain interest in company (p. 15)

Where Target is a 10(f)...

The text of this content is paywalled except for the first five days of each month. Subscribe or log in for unrestricted access.

Summary Under
Tax Topics - Income Tax Act - Section 212.3 - Subsection 212.3(18) - Paragraph 212.3(18)(a) - Subparagraph 212.3(18)(a)(ii) - Clause 212.3(18)(a)(ii)(B)

No relief for a non-s. 87(11) amalgamation of Acquireco, Target and Target subs (p. 15)

[T]here is no explicit relief for an amalgamation is not...

The text of this content is paywalled except for the first five days of each month. Subscribe or log in for unrestricted access.

Summary Under
Tax Topics - Income Tax Act - Section 212.3 - Subsection 212.3(1)

Quaere whether FAD rules apply to a non-s. 87(11) amalgamation (pp. 15-16)

[T]here is no explicit relief for an amalgamation is not described in...

The text of this content is paywalled except for the first five days of each month. Subscribe or log in for unrestricted access.

Summary Under
Tax Topics - Income Tax Act - Section 212.3 - Subsection 212.3(16) - Paragraph 212.3(16)(b)

Scope of requirement for exercise of principal decision-making authority under more closely connected business (MCCB) activities exception...

The text of this content is paywalled except for the first five days of each month. Subscribe or log in for unrestricted access.

Summary Under
Tax Topics - Income Tax Act - Section 7 - Subsection 7(1) - Paragraph 7(1)(b)

Difficulty in having employee optionholders share in post-closing adjustments (p. 24)

Sellers, especially PE sellers, will often expect that...

The text of this content is paywalled except for the first five days of each month. Subscribe or log in for unrestricted access.

Summary Under
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)

Difficulty of determining FMV of management’s optioned shares where they rank lower in the waterfall (pp.20-21)

[S]tock options are typically...

The text of this content is paywalled except for the first five days of each month. Subscribe or log in for unrestricted access.

Summary Under
Tax Topics - Income Tax Act - Section 256 - Subsection 256(9)

Use of s. 256(9) election for seller of Target to get benefit of debt repayment by Target immediately before the closing (pp. 22-23)

The payoff of...

The text of this content is paywalled except for the first five days of each month. Subscribe or log in for unrestricted access.

Summary Under
Tax Topics - General Concepts - Payment & Receipt

Efficacy of payments by direction (p. 24)

[W]ires are often made directly from the source of the funds (e.g. the PE [private equity] fund capital...

The text of this content is paywalled except for the first five days of each month. Subscribe or log in for unrestricted access.

Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 110 - Subsection 110(1) - Paragraph 110(1)(d) - Subparagraph 110(1)(d)(ii) - Clause 110(1)(d)(ii)(A)

Difficulty of determining FMV of management’s optioned shares where they rank lower in the waterfall (pp.20-21)

[S]tock options are typically...

The text of this content is paywalled except for the first five days of each month. Subscribe or log in for unrestricted access.