15 September 1986 Income Tax Severed Letter 5-1889 - [860915]

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.

Revenue Canada Taxation Head Office

XXXX

D.S. Delorey (613) 057-2125

Attention: XXXX

September 15, 1986

Dear Sirs:

This is in reply to your letter of July 16 and further to our letter of July 9.

The income (or capital gain) resulting from the disposition of a common share in a company resident in Canada will normally arise where the sale takes place. Generally, the place where a share is sold is the securities or stock exchange in which it is sold, regardless of the location of the issuer's transfer office. Where a sale is not made through a securities or stock exchange, as is normally the case with a private corporation's shares, factors such as where the negotiations take place, where the agreement of sale is executed, the location of the property, the place of payment and any relevant provisions in the governing corporation statutes should be considered in order to establish where the sale is made. Generally, if the only share transfer office of a private corporation resident in Canada is located in Canada and the share transfer register is maintained at all times at that office, the sale of that corporation's shares will be considered to have taken place in Canada notwithstanding that the relevant agreement of purchase and sale was executed elsewhere and the closing thereof took place elsewhere.

It is not clear where the sale of a "life insurance policy in Canada", as defined in paragraph 138(12)(g) of the Income Tax Act (the "Act"), takes place when a U.S. resident disposes of his interest in such a policy to another U.S. resident and the sale takes place in the U.S. We are prepared to follow up on this point if a particular situation is presented to us in the form of an advance income tax ruling request. In any event, the views expressed in our July 9 letter, as discussed below, would not differ regardless of where the sale of the policy is considered to have taken place.

When a U.S. resident disposes of a "life insurance policy in Canada", subparagraph 115(l)(a)(vi) of the Act requires the U.S. resident to include in income an amount computed in accordance with the provisions of subsection 148(1) of the Act. For the reasons set out in our letter of July 9, we remain of the view that for the purpose of Article XXII of the Canada-U.S. Income Tax Convention (1980), such income is considered to arise in Canada.

We trust the above comments are of assistance.

Yours truly,

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