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: Application of Parthenon case to non-CCPC situations.
Position: Application limited -see commentary below.
Reasons: Our interpretation of the FCA decision.
CASE SUMMARY PREPARED FOR 2000 CTF CONFERENCE BUT NOT ON FINAL LIST OF CASES WHICH WERE PRESENTED THERE - IF CASE HAD BEEN PRESENTED OUR POSITION WOULD HAVE BEEN AS SET OUT BELOW.
Canadian Tax Foundation Conference
Parthenon Investments Limited v. MNR
Federal Court of Appeal
May 30, 1997
In Parthenon Investments Limited v. M.N.R 97 DTC 5343, all the voting shares of the appellant were owned by a Canadian corporation all the voting shares of which were owned by an American corporation ("Pacific U.S.") which in turn was controlled by Canadian corporations. The Court concluded that despite being indirectly controlled by Pacific U.S., a non-resident, the appellant was a CCPC. In coming to this conclusion the court stated that "... the concept of control has necessarily latent within it the notion of ultimate control."
The November 1999 Legislative Proposals contain new subsection 256(6.1) which clarifies that for purposes of the Act a corporation may be controlled simultaneously by persons or groups at more than one level above it in the corporate chain. Subsection 256(6.1) will be effective after November 1999.
With respect to cases prior to December 1999, the Agency will apply Parthenon to situations involving a corporation's status as a CCPC. Where a corporation's taxation year straddles November 30, 1999, assuming a similar fact situation to that in Parthenon, it is our view that the corporation will not be a CCPC throughout the year and consequently will not qualify for the small business deduction, for example.
It is our view that Parthenon does not apply to restrict control of a corporation to only ultimate control for purposes of provisions other than the CCPC definition such as paragraph 55(3.1)(a), paragraph 88(1)(d) and the definition of restricted financial institution.
Author: D.A. Palamar
File: 2000 -003796
Date: August 2000
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2000
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2000