19 December 1990 Income Tax Severed Letter 902543 F - Notion of Control

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.

19(1)

December 19, 1990

Dear Sirs:

We are writing in response to your letter dated September 14, 1990 wherein you requested technical interpretations regarding the application of the provisions of subsection 85(4) of the Income Tax Act (Canada) (the "Act") to the following situations.

Facts

24(1)

It appears that the interpretation you seek relates to specific taxpayers and therefore, we bring to your attention Information Circular 70-6R2 dated September 28, 1990 issued by Revenue Canada, Taxation. Confirmation with respect to proposed transactions 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.

Control of a particular corporation may be direct or indirect, de jure or de facto and as such, it would be essential to review all of the facts in the determination of who ultimately controls the particular corporation. The provisions of subsection 256(5.1) of the Act defines the expression "controlled, directly or indirectly in any manner whatever", for purposes of the Act, including subsection 85(4).

In each particular situation, the facts would have to be reviewed to determine whether a particular taxpayer may be considered to control, directly or indirectly in any manner whatever, a corporation. It is our view that where a taxpayer disposes of capital property to a corporation that, immediately after the disposition, was not controlled, directly or indirectly in any manner whatever, by the taxpayer then the provisions of subsection 85(4) of the Act would not generally apply to disallow the capital loss realized on the disposal of the capital property.

The foregoing comments represent our general views with respect to the subject matter of your letter. The facts of a particular situation may lead to a different conclusion. The foregoing opinions are not rulings and in accordance with the guidelines set out in Information Circular 70-6R are not binding on the Department.

Yours truly,

for DirectorReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch