9 June 1989 Ministerial Correspondence 73534 F - Application of General Anti-avoidance Rule

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.

Subject: 24(1) (the "Advance Ruling")

We are attaching copies of the Advance Ruling (dated August 19, 1988) and our subsequent letters of September 13 and 30 and December 22, 1988.  The general anti-avoidance rule (GAAR), now included in section 245 of the Act, had not been enacted at the time the Advance Ruling was issued.  We stated in the Advance Ruling that we were not providing any opinion on the application of GAAR to the proposed transactions described therein.  Our opinion on the application of GAAR to these proposed transactions was later provided to the taxpayer's representative, 24(1) in our letter of September 30, 1988 and confirmed in our letter of December 22, 1988.

21(1)(a)

The coming into force provision for section 245 of the Act provides in part as follows:

     s. 245 substituted by c. 55, s. 185, applicable with respect to transactions entered into on or after September 13, 1988 other than (a) transactions that are part of a series of transactions, determined without reference to subsection 248(10), commencing before September 13, 1988 and completed before 1989,or...

RCT's interpretation of "...a series of transactions, determined without reference to subsection 248(10)..." was stated as follows at the 1988 CTF Conference:

     A series of transactions determined without reference to subsection 248(10) would not include related transactions carried out in contemplation of the series.  The series itself would include a preliminary and subsequent transaction only if at the time the preliminary transaction is carried out, all important elements of the subsequent transaction are settled and the subsequent transaction is carried out.

21(1)(a)

If the parties completed the transactions described in the Advance Ruling before 1989 by having the partnership carry on business for less than one year, the transactions may not be grandfathered with respect to GAAR as such a shortened series of transactions that commenced prior to September 13, 1988, as the communication of our comments on GAAR to 24(1) which would have probably preceded the commencement of such a series, did not occur until after September 13, 1988.  Therefore, transactions that were part of such a shortened series may not have been grandfathered with respect to GAAR.  21(1)(b)

If you have any questions concerning the Advance Ruling or our subsequent contacts with 24(1) in this matter, please contact Wyman Webb at 957-2109 or John Clark at 957-2091.

M.A. HiltzDirectorReorganization and Non-Resident DivisionSpecialty Rulings Directorate Legislative and IntergovernmentalAffairs Branch

Attachments

c.c.     Toronto District OfficeG.A. Troy, Chief of Audit