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.
MAR 8 1989
Specialty Rulings Directorate S. Leung (613)957-2116
Paragraph 85(1)(e.2)
Further to our telephone conversation, we are responding to the questions presented by the Edmonton District Office.
When a taxpayer transfers property to a taxable Canadian corporation pursuant to subsection 85(1) of the Income Tax Act (Canada) (the "Act") and receives shares of the corporation having an aggregate fair market value less than the fair market value of the property transferred, he is considered to have conferred a benefit on the corporation pursuant to paragraph 85(1)(e.2) of the Act if the corporation was related to him. The purpose of the amendment to paragraph 85(1)(e.2) of the Act was to prevent the shifting of values of shares among related corporations and stop transactions commonly known as "wingless butterflies".
If the fair market value of the common shares immediately after the transfer is not less than the fair market value of the transferred property immediately before the transfer, no benefit is considered to have been conferred on the transferee.
for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1989
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© Sa Majesté la Reine du Chef du Canada, 1989
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