19 June 1989 Administrative Letter 58126 F - Shareholder Benefits

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.

June 19, 1989

Dear Sirs:

Re:  Shareholder Benefits

This is in reply to your letter of May 18, 1989, and further to our telephone conversation of June 12, 1989 regarding shareholder benefits in respect of a "single purpose corporation" holding personal use property in the United States.

19(1)

In this manner your client will, you state, personally defray all operating cost of the apartment net of the charge-back to the operating company.  In your view this arrangement in consistent with the Department's administrative policy set out at the 1980, 1985 and 1987 Revenue Canada Round Tables.

OUR COMMENTS

As discussed with you (Thornley 19(1) on June 12, 1989, an individual's decision to stay in his own apartment rather than in a hotel is a personal choice. This is consistent with the Department's position in condition 1 of Question 20 of the 1980 Revenue Canada Round Table that the corporation is holding the property for the personal use or enjoyment of the shareholder.

Where, however, business use is made of the apartment that is reflected in a charge-back to an operating company or other business entity it could not be said that the single purpose corporation's only objective is the holding of the property for personal use or enjoyment of the shareholder.  Where such rental recovery is made by a corporation in the circumstances of your enquiry it would no longer be a "single purpose corporation" for purposes of the Department's administrative policy referred to above. 

We trust our comments will prove helpful.

Yours truly,

E.M. Wheeler for DirectorSmall Business and General DivisionSpecialty Rulings Directorate Legislative and Intergovernmental Affairs Branch