11 July 1990 External T.I. 900705 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.

July 11, 1990

Dear Sirs:

Re: Subsections 56(4.1), 245(2) and 245(3) of the Income Tax Act (Canada) (the "Act")

This is in reply to your letter dated May 4, 1990 in which you requested an opinion regarding the application of subsection 245(2) of the Act to the following hypothetical situation.

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4.     24(1)

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You have requested an opinion as to whether subsections 245(2) and 245(3) of the Act would applied to attribute the property income into the hands of M. 

It appears that the opinion you seek relates to a specific taxpayer and, therefore, we bring to your attention Information Circular 70-6R dated December 18, 1978 issued by Revenue Canada, Taxation and the related Special Release thereto. Confirmation with respect to proposed transaction involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling for a particular taxpayer with respect to specific transactions which are contemplated, a written request for an advance income tax ruling can be submitted in accordance with the Information Circular. Nevertheless, we can offer the following general comments.

In order to determine whether subsection 245(2) of the Act applies to a particular situation, it is essential to review all of the facts to identify the existence of any tax benefits as defined in subsection 245(1) of the Act and any avoidance transactions within the meaning of subsection 245(3) of the Act. We regret that we cannot provide you with any meaningful comments without a review of all of the relevant facts.

With reference to the application of subsection 56(4.1) of the Act, the loaning of property to a corporation where the income will be generated at the corporate level does not violate the purpose test in the subsection. Unless the corporation advances the property to the adult children, then subsection 56(4.1) would have no application to this particular situation.

Our comments herein are provided in accordance with the practice referred to in paragraph 24 of Information Circular 70-6R.

Yours truly,

for Director Reorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch