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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Can a distribution of shares qualify for s.86.1 tax deferral if there is a "poison pill" shares rights plan attached to the shares?
Position: No.
Reasons: The rights are something other than common shares and therefore the wording of the section is not met.
XXXXXXXXXX 2002-016845
Eliza Erskine
November 25, 2002
Dear XXXXXXXXXX:
Re: Application of Section 86.1 of the Income Tax Act (the "Act")
to Foreign Spin-offs of Shares with "Poison Pill" Rights Attached
This is in reply to your letter to us of October 15, 2002, setting out your views regarding the above-noted subject matter. We appreciate your representations to us on this issue. Thank you also for the copies of the documents that you forwarded to us along with your letter, in particular the copy of the shareholder rights plan associated with your client's spin-off transaction.
As you are aware from our various telephone conversations with you (Erskine/XXXXXXXXXX and Wilson/XXXXXXXXXX), we have reviewed this matter in considerable detail and have reached the conclusion that we are not in a position to allow the application of section 86.1 of the Act to foreign spin-offs of shares with share rights attached. As you are also aware, we have obtained legal advice to this effect.
We trust that our discussions with you have been of assistance. We attach a copy of our comments on this issue, as presented to the International Tax Advisors Committee (ITAC) on November 14, 2002, as you requested in our telephone conversation with you (Erskine/XXXXXXXXXX) of earlier today. We note that we prepared our comments for the ITAC meeting prior to receiving written legal advice, however, we did receive such advice a few days before the meeting and we confirmed this verbally at the meeting.
Yours truly,
Jim Wilson
for Director
International and Trusts Division
Income Tax Rulings and
Interpretations Directorate
Enclosure
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