29 April 1986 Income Tax Severed Letter 5-0493 - []

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.

XXXX M. Carsley (613) 957-2116

XXXX

April 29, 1986

Dear Sirs:

This is in reply to your letter of January 29, 1986 in which you requested our opinion as to whether subsections 111(4), (5) and (5.1) of the Income Tax Act (the "Act") would apply in the following hypothetical situation:

1. Corporation A, a public company owns 100 percent of the common shares of Corporation B.

2. A sells its shareholdings in B to Corporation C, a public company.

3. As consideration for the disposition of B's shares, A receives 67 percent of the common shares of C, issued from treasury stock, and thereby controls C.

4. After the reorganization A owns 67 percent of C, which owns 100 percent of B.

5. A and B were not related to C prior to the transaction.

Although paragraph 256(7)(a) of the Act does not specifically address this type of transaction it is our view that as the "ultimate control" of B has not changed the provisions of subsections 111(4), (5) and (5.1) of the Act should not be applied in the situation described above.

This opinion is not a ruling and may not be appropriate in the circumstances of a particular case, and as stated in paragraph 24 of Information 70-6R it is not binding on the Department.

We trust this information will be of assistance to you.

Yours truly,

for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch