Income Tax Severed Letters - 2018-08-01

Ruling

2017 Ruling 2017-0699201R3 - Cross-border Butterfly

Unedited CRA Tags
55(2), 55(3)(b), 55(3.1), 55(3.2)(h), 212.1(1), 212.1(1.1), 212.1(1.2)
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution
cross-border butterfly with 4-party exchange and preceding distribution of DC to foreign parent to qualify as permitted exchange/rental property valued at nil/post-butterfly equaling cash payment
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Permitted Exchange - Paragraph (b)
cross-border butterfly including preliminary transfer of DC to foreing parent to come within “permitted exchange”
Summary Under
Tax Topics - Income Tax Act - Section 143.3 - Subsection 143.3(3)
s. 143.3(3) inapplicable on a 4-party exchange
Summary Under
Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base
full cost of property acquired under 4-party exchange
Summary Under
Tax Topics - Income Tax Act - Section 212.1 - Subsection 212.1(1.1) - Paragraph 212.1(1.1)(b)
application on 4-party exchange

Principal Issues: Whether the Canadian Butterfly Transactions, in the context of a cross-border butterfly, as described below, meet legislative and administrative requirements?

Position: Transactions meet requirements.

Reasons: Consistent with law and administrative requirements.

2016 Ruling 2016-0648991R3 - Internal spinoff reorganization of XXXXXXXXXX

Unedited CRA Tags
55(3)(a), 86(1), 85(1), 85.1(3), 245(2)
Summary Under
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a)
spin-off from one sub of public company to another with no streaming of cost base and cross redemption of preferred shares
Summary Under
Tax Topics - Income Tax Act - Section 85.1 - Subsection 85.1(3)
a double transfer of shares under s. 85(1) and 85.1(3) would not affect the shares’ capital property status
Summary Under
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Shares
shares did not lose capital property character on internal spin-off transfer with a view to their further dorp-down

Principal Issues: 1. Does paragraph 55(3)(a) apply in the context of this internal reorganization? 2. Does subsection 245(2) apply with respect to this internal reorganization? 3. Do the back-to-back transfers of shares of XXXXXXXXXX subsidiaries (i.e., the property) cause the characterization of the property to change from capital property, for purposes of subsection 85.1(3)?

Position: 1. Yes; 2. No 3. No.

Reasons: 1. There is no transaction described in subparagraphs 55(3)(a)(i) to (v) that forms a part of the same series of transactions or events that include the deemed dividends; 2. The Proposed Transactions do not include an avoidance transaction; furthermore, there is no creation or streaming of cost base and the preferred shares in the Proposed Transactions are cross-redeemed for notes that are set-off and cancelled; 3. XXXXXXXXXX.

Technical Interpretation - External

1 June 2018 External T.I. 2017-0723051E5 - Meaning of "Relieved from Tax"

Unedited CRA Tags
Article 27(2) of the Canada-UK Income Tax Convention
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 29
Canadian royalties received exempt of U.K. tax by non-dom U.K. resident not eligible for Treaty-reduced rate
Words and Phrases
relieved from tax
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 12
rate reduction inapplicable where received by remittance-based UK resident free of UK tax

Principal Issues: What is the meaning of the phrase "relieved from tax" in Article 27(2) of the Canada-UK Income Tax Convention (“the Canada-UK Treaty”)?

Position: "Relieved from tax" means that the tax otherwise imposed by Canada is partly or wholly reduced under a provision of the Canada-UK Treaty.

Reasons: Such interpretation is consistent with the object and scheme of the Canada-UK Treaty.