6 December 1990 Administrative Letter 902636 F - Rollover of Assets Followed by Immediate Sale of Assets

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85(1)

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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.

File 902636

1990 Round Table

QUESTION A3

Income or Capital Gain: Rollover of Assets Followed by Immediate Sale of Assets

With respect to income/capital determinations, what is Revenue Canada's present policy where:

(a) An individual rolls a capital asset with an accrued gain to a corporation which he controls and the corporation sells the asset and realizes the gain soon after the rollover?

(b) A parent corporation rolls a capital asset with an accrued gain to a controlled subsidiary corporation and the subsidiary sells the asset and realizes the gain soon after the rollover?

DEPARTMENT'S POSITION

We addressed these questions at the 1984[1] and 1983 [2] tax conferences, and our positions then announced remain unchanged. In both situations we are prepared to accept that the transfer of property pursuant to subsection 85(1) of the Act, in itself, does not change the nature of the property transferred, even when the property that is the subject of the transfer is sold to an arm's-length third party within a very short time thereafter.

1 "Revenue Canada Round Table", in Report of Proceedings of the Thirty-Sixth Tax Conference, 1984 Conference Report (Toronto: Canadian Tax Foundation, 1985), 783-847, at 820.

2 Robert J.L. Read, "Technical Matters", in Report of Proceedings of the Thirty-Fifth Tax Conference, 1983 Conference Report (Toronto: Canadian Tax Foundation, 1984), 783-795, at 785.

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6 December 1990 Administrative Letter 902636 F - Rollover of Assets Followed by Immediate Sale of Assets

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