19 June 1992 Income Tax Severed Letter 9214355 - Realization of Cap,gain by Single-purpose Corporation

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: REALIZATION OF CAP,GAIN BY SINGLE-PURPOSE CORP SECTION: 15(1)] 5-921435 Charles Theriault (613) 957-8953

June 19, 1992

Dear Sirs:

This is in reply to your letter dated May 6, 1992 in which you requested our confirmation that the realization of a capital gain by a single-purpose corporation in connection with the disposition of personal-use property held by the corporation for the sole shareholder would cause the Department to assess a shareholder benefit to its shareholder for the use of the corporate-owned property pursuant to subsection 15(1) of the Income Tax Act.

More specifically, you make reference to the second paragraph of our reply to question 9 of the 1989 Revenue Canada Round Table that reiterates the four conditions that must be satisfied in order to avoid that a shareholder be assessed a shareholder benefit for the use of corporate-owned property and want to know if the realization of a capital gain by a single-purpose corporation would be considered as "income earned" for the purpose of determining if the first condition mentioned in response to question 20 of the 1980 Revenue Canada Round Table is satisfied.

Our comments

The objective of a single-purpose corporation has to be the holding of one property for the sole use and enjoyment of its shareholder(s). Therefore, our view is that if a single- purpose corporation disposes of its property it will cease to qualify as a single-purpose corporation from the moment of said disposition because it will no longer hold the property. The fact that the corporation realised a capital gain on the sale of the property is not relevant in determining if all the conditions to qualify as a single-purpose corporation are satisfied.

These comments are made subject to the general limitations and qualifications set in Information Circular 70-6R2 dated September 28, 1990, and are not binding on the Department.

Yours truly,

for Director
Reorganization and Foreign
Division
Rulings Directorate
Legislation and Intergovernmental
Affairs Branch