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 S. Shinerock 613-996-1834
June 8, 1981
Dear Sir:
We refer to your letter of March 24, 1981 in which you requested an interpretation of "fair market value" as that term has application to paragraphs 55(3)(b) and 186(4)(b) of the Income Tax Act (the Act).
Your letter set out potential problems that could arise when deter- mining the fair market value of minority interests in a corporation for the above-mentioned purposes on the assumption that the minority discount rule (which is usually applied when valuing t minority interest) would have application.
It is our opinion that for the purposes only of:
a) determining if a payor corporation is connected with a particular corporation at any time in a taxation year (subsection 186(4)) and,
b) determining the fair market value of each type of property dis- tributed by a particular corporation to one or more other corporations in the course of a series of transactions or events the principal purpose of which was to effect a reorganization (subsection 55(3)(b)),
the Department would not normally insist on a minority discount being applied When determining the fair market value of shares of a particular corporation owned by a minority shareholder. In this regard, the fair market value of all shares owned by a minority shareholder would be determined on the basis of the rateable value of a share of a particular class before any minority discount times the number of shares of that class owned by the minority shareholder.
It is, of course, understood that the opinion expressed herein in no way is intended to comment on the evaluation of the fair market value of shares in a corporation, since fair market value is always a question of fact.
Yours truly,
RD. WEIL for Director Specialty Corporations Rulings Division Corporate Rulings Directorate Legislation Branch
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