Income Tax Severed Letters - 2022-04-20

Ruling

2021 Ruling 2019-0800431R3 - Alter Ego Post-mortem Pipeline and Bump Planning

Unedited CRA Tags
84.1; 84(2); 88(1)(d.3); 104(4); 120.4; 251; 245(2); 256(7)
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2)
pipeline for alter ego trust with preliminary elimination of NR beneficiary and application of s. 88(1)(d.3)
Summary Under
Tax Topics - Income Tax Act - Section 212.1 - Subsection 212.1(6) - Paragraph 212.1(6)(b)
pipeline ruling for an alter ego trust includes a preliminary deletion of a non-resident beneficiary
Summary Under
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(d.3)
s. 88(1)(d.3) applied to securities held by investing corportions whose shares were stepped up in hands of alter ego trust and then transferred to and amalgamated under pipeline

Principal Issues: 1) Whether section 84.1 applies to deem the alter ego trust to have received a dividend on the disposition of shares to the new corporation or to reduce the PUC of the shares of the new corporation received as consideration for the disposition of the shares. 2) Whether subsection 84(2) applies to the proposed transactions. 3) Whether paragraph 88(1)(d.3) applies for purposes of the paragraph 88(1)(d) bump provisions and the determination of the timing of any acquisition of control. 4) Whether subsection 245(2) applies to the proposed transactions.

Position: 1) No. 2) No. 3) Yes. 4) No.

Reasons: Based on the provisions of the Act, jurisprudence and CRA publications.

2020 Ruling 2020-0848081R3 F - Subsection 104(4) and pipeline transaction

Unedited CRA Tags
84(2), 84.1, 104(4), 245
Summary Under
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2)
pipeline transaction implemented after a discretionary inter vivos trust voluntarily realizes capital gains on its 21st anniversary

Principales Questions: A trust will realize a capital gain as a result of the application of subparagraph 104(4)(b)(ii) to shares of a Canadian-controlled private corporation and will include the taxable capital gain realized in its income. After the 21st anniversary of the trust, the trust will enter into a pipeline type transaction (the Proposed Transactions). The trust will continue to hold the shares or substituted shares of the company involved in the pipeline transaction. The assets of the company that are the subject of the pipeline transaction consist solely of shares of a subsidiary which holds portfolio investments. The company involved in the pipeline transaction will continue to own the shares of its subsidiary and the operations of the subsidiary will be maintained for the years following the completion of the pipeline transaction. The shares or substituted shares of the company involved in the pipeline transaction will not be redeemed (or their paid-up capital reduced) for many years after the completion of the pipeline transaction. The trust will use the proceeds of partial notes receivable repayments to pay its income taxes arising from taxable dividends and taxable capital gains realized in connection with the disclosed transactions. 1) Does section 84.1 apply to the Proposed Transactions? 2) Does subsection 84(2) apply to the Proposed Transactions? 3) Does section 245 apply to the Proposed Transactions?

Position Adoptée: 1) No. 2) No. 3) No.

Raisons: Wording of the Act and previous positions.

Technical Interpretation - Internal

16 July 2020 Internal T.I. 2019-0817271I7 F - Indemnités reçues à la suite de la négociation

Unedited CRA Tags
54 (produit de disposition), 43(1), 40(1), 9, 12(1)(x), 12(1)f), 12(2.2), 13(7.1), 53(2)d), 53(2)k)
Summary Under
Tax Topics - Income Tax Act - Section 54 - Proceeds of Disposition - Paragraph (e)
compensation for loss of value to lands left after the government agreed to purchase a portion thereof, would constitute proceeds of disposition of such remainder
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x)
compensation paid to land owners for their restoration of the portion of their lands not sold to the government would be a s. 12(1)(x) receipt
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(f)
compensation for damages to depreciable property would be included under s. 12(1)(f) rather than under proceeds of disposition, but the related repaid expenses would be deductible

Principales Questions: Quel est le traitement fiscal de différentes sommes reçues à titre d’indemnité à la suite d’une négociation de gré à gré dans le cadre de la réalisation du projet de construction XXXXXXXXXX? / What is the tax treatment of various amounts received as compensation resulting from a mutual agreement in the context of the construction XXXXXXXXXX?

Position Adoptée: Le traitement fiscal de chaque somme reçue à titre d’indemnité dépend de sa nature. / The tax treatment of each amount received as compensation depends on its nature.

Raisons: Commentaires généraux. La nature de chaque somme reçue est une question de fait. / General comments. The nature of each amount received is a question of fact.