27 October 1988 Income Tax Severed Letter 5-6715 - []

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.

J. Shaw

XXXX

OCT 27 1988

Dear Sirs:

Re: Subsection 111(4), 249(4) of the Income Tax Act (the "Act")

This is in reply to your letter of October 6, 1988 in which you requested our opinion as to whether, for the purposes of the above-captioned subsections, there would be an acquisition of control where:

1. Shareholder A owns all of the shares of Company A. A sells two-thirds of his shares: one-third to B and one-third to C. A, B and C are unrelated.

2. Shareholders A, B, C and D each own twenty-five percent of OPCO. OPCO redeems A's shares, leaving B, C and D each with one-third shareholding in OPCO.

3. More than fifty percent of a widely-held public corporation is held by another widely-held public corporation. The controlling corporation disposes of a sufficient number of shares so that it no longer controls the public corporation and no single person owns more than fifty percent of that corporation.

With respect to item 1, we believe an acquisition of control would occur. This is quite similar to the situation dealt with in item 4 of Question 42 at the 1984 Revenue Canada Round Table. With respect to item 2, if B, C and D controlled the corporation prior to the share redemption, there has been no acquisition of control. Otherwise, there has been. Our answer with respect to item 3 remains that given to part 1) of question 42 at the 1984 Revenue Canada Round Table - if persons can be identified after the sale who own in the aggregate more than 50 percent of the shares of the loss corporation and who also act together to control it, we would consider control to have been acquired as a result of the sale.

As noted in paragraph 24 of Information Circular 70-6R, our comments are our opinion only and are in no way binding on Revenue Canada.

Yours truly,

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