9 January 1992 Income Tax Severed Letter 9131355 - CCPC Shares Purchased under Stock Option - S. 85 Roll

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Subject: CCPC SHARES PURCHASED UNDER STOCK OPTION & S. 85 ROLL Section(s): 7(1.1), 85(1)]

913135
L. Holloway
(613) 957-2104

XXX

Attention: XXX

January 9, 1992

Dear Sirs:

Re: Subsections 7(1.1) and 85(1) of the Income Tax Act (the "Act")

This is in reply to your letter of November 6, 1991 regarding the operation of subsection 7(1.1) of the Act. In particular you were enquiring at what time an employment benefit would be realized if an individual transfers shares of a Canadian Controlled Private Corporation, acquired under circumstances outlined in subsection 7(1.1), to his wholly-owned corporation, electing under subsection 85(1) of the Act. In such circumstances, you asked whether the Department was of the opinion that the employment benefit is realized in the year of the transfer to the corporation or alternatively that realization is deferred until the corporation disposes of these shares.

Our Comments

A transfer of shares to a corporation under subsection 85(1) effects a disposition of these shares. For purposes of subsection 7(1.1), a disposition of shares will result in a taxable benefit when the shares are transferred. Relief from realization is provided only in the case of amalgamations and s.85.1 transfers pursuant to subsection 7(1.5) of the Act. Neither legislative nor administrative relief is provided in the case of subsection 85(1) transfers.

We trust these comments will be of assistance to you.

Yours truly,

for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch