Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Contingent share rights - Are options or rights described in subparagraph 251(5)(b)(i) relevant for the purpose of paragraph 125(7)(b) of the CCPC definition.
Position: Yes.
Reasons: The law.
XXXXXXXXXX 1999-000866
Attention: XXXXXXXXXX
February 23, 2000
Dear Sirs:
Re: Definition of Canadian-controlled Private Corporation
This is in reply to your letter dated October 1, 1999, wherein you requested our views on whether a corporation would be a Canadian-controlled private corporation ("CCPC") as that term is defined in subsection 125(7) of the Income Tax Act (the "Act").
Specifically, your question is whether it is our interpretation that stock option rights and other similar rights described in subparagraph 251(5)(b)(i) would be relevant in determining a corporation's status as a CCPC under paragraph (b) of the CCPC definition in subsection 125(7) of the Act.
It is your view that since subparagraph 251(5)(b)(i) does not deem the shares that a person has a right to acquire under a stock option to be shares owned by that person, that such rights would not be relevant for the purpose of paragraph (b) of the CCPC definition.
We do not agree with your view. While subparagraph 251(5)(b)(i) of the Act does not specifically deem a person to actually own the shares which are the subject of a right described in that subparagraph, it is our view that for the purposes of determining whether a corporation is controlled by a non-resident, a public corporation, or any combination thereof such rights must be considered as if the person owned the shares at that time. Therefore, for the purpose of determining whether a particular person would be in a position of control of the corporation for the purposes of paragraph (b) of the CCPC definition the shares that could be acquired by a non-resident person under a stock option described in subparagraph 251(5)(b)(i) must be taken into account.
Our comments are provided in accordance with the practice outlined in paragraph 22 of IC-70-6R3.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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