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.
| 24(1) |
5-9074 |
| |
P.W. Osborn |
| |
(613) 957-2130 |
| Attention: 19(1) |
July 30, 1990
Dear Sir:
Re: Qualifying Small Business Corporation Share
This is in reply to your letter of November 14, 1989. You requested a technical interpretation of the definition of a qualified small business corporation share contained in subsection 110.6(1) of the Income Tax Act (the "Act").
You described a situation in which a corporation holds shares of another corporation. The assets of this second corporation include amounts receivable form its shareholder. You conclude that any determination is circular for the purposes of the definition of a small business corporation and a qualifying small business corporation share under subsections 248(1) and 110.6(1) of the Act. You questioned if the Department would ignore upstream indebtedness in determining the statuses of the corporations.
The second corporation could qualify as a small business corporation under the provisions of subsection 248(1) of the Act if the loan was made in the ordinary course of its business of lending money and made under the same terms and conditions as other loans. If the intercorporate receivable cannot be classified as an active business asset then the conditions under paragraph (b) of the definition of a small business corporation in subsection 248(1) of the Act must be satisfied.
It is the Department's position not to ignore upstream indebtedness between connected corporations in the determination of their qualifications as small business corporations and whether the shares of the corporations are qualifying small business corporation shares.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch
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