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.
Principal Issues: Whether the 5% safe harbour in paragraph 149.1(12)(a) applies for the purposes of subsection 188.1(3).
Position: Yes, the entirety of paragraph 149.1(12)(a) is to be taken into account in determining whether a charitable foundation has acquired control of a particular corporation for the purposes of subsection 188.1(3).
Reasons: Legislation
XXXXXXXXXX 2006-021704
December 20, 2006
Dear XXXXXXXXXX:
Re: Subsections 188.1(3) and 149.1(12)
This is in reply to your letter of December 5, 2006 wherein you requested our interpretation with regard to the bracketed words "within the meaning of subsection 149.1(12)" contained in the preamble of subsection 188.1(3) of the Income Tax Act (the "Act").
Subsection 188.1(3) of the Act subjects a charitable foundation to the penalty provided therein if at a particular time the foundation has acquired control, within the meaning of subsection 149.1(12) of the Act, of a particular corporation.
We can confirm that in determining whether a charitable foundation has acquired control of a particular corporation for the purposes of subsection 188.1(3) of the Act, the entirety of paragraph 149.1(12)(a) of the Act will be taken into account such that a foundation will not be considered to have acquired control of a corporation if it has not purchased or otherwise acquired for consideration more than 5% of the issued shares of any class of the capital stock of that corporation.
Yours truly,
F. Lee Workman
Manager
Charitable and Financial Institution Sectors
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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