19 April 1990 Ministerial Letter 59428 F - Butterfly Reorganizations - Whether "Property has Become Property of the Particular Corporation"

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.

April 19, 1990

Dear Sirs:

Re:  Paragraph 55(3)(b) of the Income Tax Act (Canada) (the "Act")

This is in response to your letter of January 19, 1990 in which you requested our views as to whether "property has become property of the particular corporation" within the meaning of paragraph 55(3)(b) of the Act in the situation described below.

Opco has three types of properties for purposes of paragraph 55(3)(b): cash or near-cash property; business property; and investment property. The assets which constitute investment property consist of rental properties, one of which is held by a partnership of which Opco is a member. In contemplation of transfers of property by Opco (the Transfers") to its shareholders as part of a reorganization, which would otherwise qualify under paragraph 55(3)(b) (the "reorganization"), the partnership is dissolved such that an undivided interest in each of its in each of its assets in each of the partners, including Opco. The property to be distributed by Opco by the partnership.

Opinions

In our view, property will have become property of Opco by virtue of the dissolution of the partnership and the associated distribution of partnership property to Opco. As such distribution would have occurred in contemplation of the Transfers and as such distribution is not a permitted transaction described in subparagraphs 55(3)(b)(iii) to (viii) to (viii) of the Act, the Reorganization would not be one to which the provisions of paragraph 55(3)(b) would apply. Our views would be the same even f the property distributed by the partnership to Opco.

The comments contained herein are only expressions of opinion given in accordance with the practice explained in paragraph 24 of Information Circular 70-6R.

Yours truly,

for DirectorReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch