12 October 1988 Income Tax Severed Letter 5-6351 - []

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.F. Symes (613) 957-2110

XXXX

OCT 12 1988

Dear Sirs:

Re: Acquisition of Control Subsections 111(5) and 249(4) of the Income Tax Act (Canada)(the "Act")

This is in reply to your letter of July 18, 1988, as revised by your letter of August 23, 1988, in which you requested our views concerning the above-noted matter.

As your letter appears to deal with actual fact situations and proposed transactions, your request should have been the subject of an advance income tax ruling. The procedures and the requirements for obtaining an advance income tax ruling are set out in Information Circular 70-6R issued December 18, 1978 by Revenue Canada - Taxation. We are, however, prepared to offer the following comments concerning the transactions described in your letters.

Your letter is essentially concerned with the question of when control of a corporation can be viewed as having been acquired by an unrelated group of persons for purposes of subsections 111(5) and 249(4) of the Act, when no person alone is in a position to control the corporation.

The general position of the Department with respect to this question continues to be as stated in response to Question 42 of the Revenue Canada Round Table at the Thirty-Sixth Tax Conference of the Canadian Tax Foundation:

It is our view that "persons" will be considered as having collectively acquired control where there is evidence that they have a common link or interest or they act together to control the corporation.

Whether control of a corporation has been acquired by a person or persons is a question of fact, however, which must be determined based upon a review of the circumstances of each particular case.

The above comments are based only on the provisions of the Act referred to above and should not be interpreted as implying that any other provision of the Act would or would not apply to, or as a result of, any actual transactions or events similar to those described in the situation above. In particular, our comments do not deal with the question of whether a corporation is "controlled, directly or indirectly in any matter whatever", within the meaning assigned to that expression by subsection 256(5.1) of the Act, because subsections 111(5) and 249(4) of the Act contain the reference to "control" alone, and not to the expression "controlled, directly or indirectly in any matter whatever".

In accordance with the practice described in paragraph 24 of Information Circular 70-6R, the foregoing responses are opinions and not rulings.

Yours truly,

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