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: Whether certain corporations are affiliated, related or associated.
Position: Depends on the facts of each situation.
Reasons: See specific fact situations.
2003-004032
XXXXXXXXXX T. Lanzer
(613) 957-2129
October 24, 2003
Dear XXXXXXXXXX:
RE: Affiliated, Related or Associated Companies
We are writing in response to your facsimile of September 22, 2003 wherein you requested a ruling on whether any of the six companies described below are affiliated, related or associated with each other.
Company A
Issued 100 common shares (assumed to be voting shares)
Father 25 common shares
Mother 25 common shares
Son 25 common shares
Wife of Son 25 common shares
Company B
Issued 100 Class A voting shares
Father 41 Class A voting shares
Mother 11 Class A voting shares
Son 39 Class A voting shares
Daughter 9 Class A voting shares
Company C
Issued 20 Class A common voting shares
Father 10 Class A common voting shares
Mother 10 Class A common voting shares
Company D
Issued 100 Class A common voting shares
Father 33 Class A common voting shares
Son 33 Class A common voting shares
Nephew of Father 33 Class A common voting shares
Company E
Issued 50 Class A common voting shares
Issued 50 Class B common voting shares
Son 50 Class A common voting shares
Wife of Son 50 Class B common voting shares
Company F
Issued 100 Class A common voting shares
Issued 50 Class C common non-voting shares
Issued 50 Class D common non-voting shares
Nephew of Father 100 Class A common voting shares
Wife of Nephew 50 Class C common non-voting shares
Son of Nephew 50 Class D common non-voting shares
The Canada Customs and Revenue Agency is unable to rule on your situation because it does not involve proposed transactions that are seriously contemplated. Rather, your letter appears to outline an actual fact situation involving specific taxpayers and transactions or events that have already taken place. The review of such transactions is the responsibility of the local tax services office where the taxpayer resides and it is not the practice of the Agency to comment on such situations when the identity of the taxpayers is unknown. We can, however, provide the following general comments which we hope will be of assistance to you.
Are the Companies Affiliated?
(1) Company A and Company B: Company A is affiliated with Company B under subparagraph 251.1(1)(c)(iii) where the group of persons consisting of Father, Mother and Son controls both companies and each member of the group that controls each company is affiliated with himself or herself as a member of the other group.
(2) Company A and Company C: Company A is not affiliated with Company C. Although the group consisting of Father, Mother and Son controls Company A and the group consisting of Father and Mother controls Company C, Son is not affiliated with either Father or Mother as a member of the other group.
(3) Company A and Company D: Company A is affiliated with Company D under subparagraph 251.1(1)(c)(iii) where the group consisting of Father, Mother and Son controls Company A and the group consisting of Father and Son controls Company D, and Father and Son are each affiliated with himself as a member of the other group and Mother is affiliated with Father as a member of the other group.
(4) Company A and Company E: Company A is not affiliated with Company E. Although the group consisting of Son, Wife of Son and either Father or Mother controls Company A and the group consisting of Son and Wife of Son controls Company E, neither Father nor Mother is affiliated with either Son or Wife of Son as a member of the other group.
(5) Company A and Company F: Company A is not affiliated with Company F.
(6) Company B and Company C: Company B is affiliated with Company C under subparagraph 251.1(1)(c)(iii) where the group of persons consisting of Father and Mother controls both companies and each member of the group that controls each company is affiliated with himself or herself as a member of the other group.
(7) Company B and Company D: Company B is affiliated with Company D under subparagraph 251.1(1)(c)(iii) where the group consisting of Father, Mother and Son controls Company B and the group consisting of Father and Son controls Company D, and Father and Son are each affiliated with himself as a member of the other group and Mother is affiliated with Father as a member of the other group.
(8) Company B and Company E: Company B is not affiliated with Company E.
(9) Company B and Company F: Company B is not affiliated with Company F.
(10) Company C and Company D: Company C is not affiliated with Company D. Although the group consisting of Father and Mother controls Company C and the group consisting of Father and either Son or Nephew of Father controls Company D, neither Son nor Nephew of Father is affiliated with either Father or Mother as a member of the other group.
(11) Company C and Company E: Company C is not affiliated with Company E.
(12) Company C and Company F: Company C is not affiliated with Company F.
(13) Company D and Company E: Company D is not affiliated with Company E.
(14) Company D and Company F: Company D is not affiliated with Company F. Although the group consisting of Nephew of Father and either Father or Son controls Company D and Nephew of Father controls Company F, neither Father nor Son is affiliated with Nephew of Father as the controller of Company F.
(15) Company E and Company F: Company E is not affiliated with Company F.
(16) Company A and Company B: Company A is related to Company B under subparagraph 251(2)(c)(i) where the group of persons consisting of Father, Mother and Son controls both companies.
(17) Company A and Company C: Company A is related to Company C under subparagraphs 251(2)(b)(ii) and (iii) where the related group consisting of Father, Mother and Son controls Company A and the related group consisting of Father and Mother controls Company C.
(18) Company A and Company D: Company A is related to Company D under subparagraphs 251(2)(b)(ii) and (iii) where the related group consisting of Father, Mother and Son controls Company A and the related group consisting of Father and Son controls Company D.
(19) Company A and Company E: Company A is related to Company E under subparagraphs 251(2)(b)(ii) and (iii) where the related group consisting of Father, Son and Wife of Son controls Company A and the related group consisting of Son and Wife of Son controls Company E.
(20) Company A and Company F: Company A is not related to Company F.
(21) Company B and Company C: Company B is related to Company C under subparagraph 251(2)(c)(i) where the group of persons consisting of Father and Mother controls both companies.
(22) Company B and Company D: Company B is related to Company D under subparagraph 251(2)(c)(i) where the group of persons consisting of Father and Son controls both companies.
(23) Company B and Company E: Company B is related to Company E under subparagraphs 251(2)(b)(ii) and (iii) where the related group consisting of Father and Son controls Company B and the related group consisting of Son and Wife of Son controls Company E.
(24) Company B and Company F: Company B is not related to Company F.
(25) Company C and Company D: Company C is related to Company D under subparagraphs 251(2)(b)(ii) and (iii) where the related group consisting of Father and Mother controls Company C and the related group consisting of Father and Son controls Company D.
(26) Company C and Company E: Company C is related to Company E under subparagraphs 251(2)(b)(ii) and (iii) where the related group consisting of Father and Mother controls Company C and the related group consisting of Son and Wife of Son controls Company E.
(27) Company C and Company F: Company C is not related to Company F.
(28) Company D and Company E: Company D is related to Company E under subparagraphs 251(2)(b)(ii) and (iii) where the related group consisting of Father and Son controls Company D and the related group consisting of Son and Wife of Son controls Company E.
(29) Company D and Company F: Company D is not related to Company F.
(30) Company E and Company F: Company E is not related to Company F.
Are the Companies Associated?
(31) Company A and Company B: Company A is associated with Company B under paragraph 256(1)(b) where the group of persons consisting of Father, Mother and Son controls both companies.
(32) Company A and Company C: Company A is associated with Company C under paragraph 256(1)(e) where the related group consisting of Father, Mother and Son controls Company A and the related group consisting of Father and Mother controls Company C, and Father owns not less than 25% of the issued shares of each company.
(33) Company A and Company D: Company A is associated with Company D under paragraph 256(1)(e) where the related group consisting of Father, Mother and Son controls Company A and the related group consisting of Father and Son controls Company D, and Father owns not less than 25% of the issued shares of each company.
(34) Company A and Company E: Company A is associated with Company E under paragraph 256(1)(e) where the related group consisting of Father, Mother and Son controls Company A and the related group consisting of Son and Wife of Son controls Company E, and Son owns not less than 25% of the issued shares of any class, other than a specified class, of each company.
(35) Company A and Company F: Company A is not associated with Company F.
(36) Company B and Company C: Company B is associated with Company C under paragraph 256(1)(b) where the group of persons consisting of Father and Mother controls both companies.
(37) Company B and Company D: Company B is associated with Company D under paragraph 256(1)(b) where the group of persons consisting of Father and Son controls both companies.
(38) Company B and Company E: Company B is associated with Company E under paragraph 256(1)(e) where the related group consisting of Father and Son controls Company B and the related group consisting of Son and Wife of Son controls Company E, and Son owns not less than 25% of the issued shares of any class, other than a specified class, of each company.
(39) Company B and Company F: Company B is not associated with Company F.
(40) Company C and Company D: Company C is associated with Company D under paragraph 256(1)(e) where the related group consisting of Father and Mother controls Company C and the related group consisting of Father and Son controls Company D, and Father owns not less than 25% of the issued shares of each company.
(41) Company C and Company E: Company C is not associated with Company E. Although the related group consisting of Father and Mother controls Company C and the related group consisting of Son and Wife of Son controls Company E, and each member of one of the related groups is related to all of the members of the other related group, there is no person who is a member of both related groups. This view assumes that neither Son nor Wife of Son is under 18 years of age such that subsection 256(1.3) would apply.
(42) Company C and Company F: Company C is not associated with Company F.
(43) Company D and Company E: Company D is associated with Company E under paragraph 256(1)(e) where the related group consisting of Father and Son controls Company D and the related group consisting of Son and Wife of Son controls Company E, and Son owns not less than 25% of the issued shares of any class, other than a specified class, of each company.
(44) Company D and Company F: Company D is not associated with Company F.
(45) Company E and Company F: Company E is not associated with Company F.
Our comments do not consider the effect that the expanded definition of control in subsection 256(5.1) could have on the affiliation or association of any of the companies described above, nor the potential impact of subsection 256(1.2) or any other anti-avoidance provision in the Act.
In accordance with paragraph 22 of Information Circular 70-6R5, the opinions expressed in this letter are not income tax rulings and are therefore not binding on the CCRA.
Yours truly,
for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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