28 May 1990 Ministerial Letter 900378 F - Provision of Benefit from Single Purpose 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.

May 28, 1990

Dear Sirs:

This is in reply to your letter of March 26, 1990 concerning a "single purpose corporation".

Question and Answer 20 of the 1980 Revenue Canada Round Table sets out the Departments practice not to assess a benefit based on fair market value where a corporation's sole purpose is to hold personal use property for a shareholder and all the operating expenses are charged to the shareholder so that there is no profit or loss recorded by the corporation.  This position was reaffirmed in Question and Answer 14 of the 1985 Revenue Canada Round Table.

You have requested our comments on the situation of an individual owning all the shares of a company which holds a foreign condominium for the individual's personal enjoyment.  The funds to acquire the condominium were supplied interest free by an operating company in which the individual is a shareholder.

As you have noted the position on a "single purpose corporation" will not necessarily apply were funds are advanced for the purchase of the property from someone other than the individual. It seems clear this is the case in the example and that the operating company confers a benefit by providing interest free funds.  Consequently, the position set out in the Question and Answers does not apply.

When the individual provides personal funds which are used by the corporation to repay the interest free loan, the specific facts will determine whether or not the position will apply.  In any event, the repayment will not have any retroactive effect and a benefit may be assessed for the period prior to the repayment.

Yours sincerely,

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch