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.
MEMORANDUM
MAR 21 1989
TO TORONTO DISTRICT OFFICE
G.A. Troy Chief of Audit
FROM HEAD OFFICE Specialty Rulings Directorate M.F. Symes (613) 957-2110
SUBJECT: XXXX Advance Income Tax Ruling
Attached is a copy of the above-noted ruling which we provided in respect of the take-over of XXXXXXXX
Prior to the sale of the Holdco shares, XXXX declared certain cash dividends and dividends in kind (referred to herein as the "Pre-sale Dividends"). The Pre-sale Dividends are described in general terms in paragraph 5 of Part A of the ruling.
We were not asked to provide any rulings concerning the tax consequences of the proposed transactions to the Controlling Shareholders; however, in determining whether we could provide a favourable subsection 55(2) ruling in respect of the receipt by a subsidiary of ( XXXX Acquireco") of the Pre-Sale Dividends, we had to consider the potential application of that provision to the Controlling Shareholders. A description of this matter is contained in the "Statement of Principal Issues" attached to the ruling (see Issue #3).
We would recommend that your audit of the taxpayers involved in the take-over include the confirmation that Holdco's share of the Pre-Sale Dividends did not exceed the safe income on hand referrable to the Controlling Shareholders' Holdco Shares prior to the declaration of the Pre-Sale Dividends. Should that not be the case, it is our view that the application of subsection 55(2) should be considered, or in the alternative subsection 245(2), to add the appropriate portion of the Pre-Sale Dividends to the Controlling Shareholders' proceeds of disposition in respect of their Holdco Shares. We would be available, in response to a request from you, to provide assistance in your consideration of the application of subsection 55(2) or 245(2).
Chief Corporate Reorganizations I Section 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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