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.
Re: INCOME ATTRIBUTION
Question
Will Section 74.4 of the Income Tax Act (the "Act") apply where non-income producing property, such as vacant land, is transferred to a corporation of which family members of the transferor are shareholders ?
Answer
Section 74.4 requires that one of the main purposes of the transfer may reasonably be considered to be to reduce the income of the individual and to benefit a designated person, as defined in subsection 74.5(5) of the Act. Whether one of the main purposes of a transfer described in subsection 74.4(2) is to reduce the transferor's income and to benefit a designated person is a question of fact.
The circumstance that the property was non-income producing may be an indication that the reduction of the transferor's income was not one of the main purposes of the transfer.
The Department is of the opinion that the right conferred upon a designated person (as defined by subsection 74.5(5) of the Act) to share in dividends or capital appreciation of a corporation is considered to be a benefit for the purposes of subsection 74.4(2) of the Act.
Prepared forBC Tax Study Groups Round TableJune 11,1991L. HollowaySection 23
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