Finance has issued a comfort letter respecting umbrella corporation interests where there is no tax avoidance purpose

Following some discussions and consultations with the funds industry and their advisors, the Department recently issued a comfort letter. The comfort letter provides an exception from the tracking interest rules if it cannot reasonably be considered that one of the purposes for the creation or issuance of a tracking interest in an umbrella corporation or for the acquisition of the interest by a taxpayer is to avoid the corporation being a CFA for the year. Thus, if the purpose is commercial rather than tax-related, there can be an exception from the tracking interest rules.

Neal Armstrong. Summary of 15 May 2019 IFA Finance Roundtable – “Tracking Interest Rules & Umbrella Corporations” under s. 95(8).