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.
Canadian Tax Foundation November 1992
Question 26 - Single Purpose Corporation and the Attribution Rules
Revenue Canada has given a number of guidelines in previous Round Table sessions regarding the ownership by Canadians of a residential property in the United States through single purpose corporations.
Where the shares of such a single purpose corporation are owned equally by two spouses, but only one spouse (the "Contributor") financed the acquisition of the property by the corporation either by way of loan or by way of contribution of capital, will the attribution rules in subsection 74.4(2) of the Act apply to deem interest to have been received by the Contributor?
Department's Position
Since each shareholder did not contribute their pro rata share of the funds required to acquire the U.S. residential property, the corporation would not satisfy all of the conditions necessary to qualify as a single purpose corporation and the shareholders would be subjected to the provisions of subsection 15(1) of the Act.
The provisions of subsection 74.4(2) of the Act may apply if one of the main purposes for the loan or the contribution of capital by the Contributor would be to reduce the Contributor's income and to benefit the Contributor's spouse.
Over the years the Department has provided guidelines concerning the conditions which have to be met in order to qualify as a single purpose corporation. The conditions are as follows:
1. The corporation must be a Canadian corporation.
2. The corporation's only objective is the holding of a residential real property located in the United States for the personal use or enjoyment of the shareholder.
3. The shares of the corporation are held by an individual or an individual and persons (other than a corporation) related to the individual.
4. The only transactions of the corporation relate to its objective of holding property for the personal use or enjoyment of the shareholder.
5. The shareholder would be charged with all the operating expenses of the property by the corporation, with the result that the corporation would show no profit or loss with respect to the property on any of its returns.
6. The corporation acquired the property with funds provided solely by the shareholder and not by virtue of his holdings or that of a related person in any other corporation.
7. The property must be acquired by the corporation on a fully taxable basis (that is, without the use of any of the rollover provisions in the Act).
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