21 July 1989 Administrative Letter 58356 F - Pension Fund

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.

July 21, 1989

Dear Sirs:

Re:  A Pension fund (the "Fund")

This is in reply to your letters of April 28, 1989, June 2, 1989 and July 13, 1989 wherein you requested our opinions in respect of certain proposed transactions contemplated by the Fund.

As noted in Information Circular 70-6R dated December 18, 1978, we do not give opinions in respect of specific proposed transactions other than as a reply to our advance income tax ruling request.  However, we will offer the following general comments.

It is our general position that the exercise of an exchange feature attached to a preferred share would result in a disposition, under paragraph 54(c) of the Income Tax Act (the "Act"), for proceeds equal to the fair market value of the non-cash property received on the exchange. We base this position on the conclusions reached in the case of D'Auteuil Lumber Co. Ltd. v MNR.

You have requested our opinion as to whether the proposed transactions outlined in your letter dated July 13, 1989, would constitute avoidance transactions within the meaning of section 245 of the Act. Based on the limited information contained in your letter, we are unable to provide any comments in respect of this matter. The determination of whether a transaction would be an "avoidance transaction" can only be made after a detailed examination of all the relevant facts.

The above comments are an expression of opinion only and are not binding on this Department.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate