8 April 1993 External T.I. 9306335 F - Acquisition of Property in Contemplation of Butterfly

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.

XXXXXXXXXX

Attention:  XXXXXXXXXX

Dear Sirs:

RE:  Acquisition of Property Paragraph 55(3)(b) of the Income Tax Act (the "Act")

This is in reply to your letter of March 1, 1993 wherein you requested confirmation that, in the fact situation outlined therein, the acquisition of certain property by a corporation prior to it becoming the "particular corporation" in a proposed reorganization of the type described in paragraph 55(3)(b) of the Act (a "Butterfly Reorganization"), would not be considered to have been made "in contemplation" of the transfer of property in the course of such Butterfly Reorganization.

We are unable to provide you with a confirmation of the type described above since, as discussed in our telephone conversation, such a determination could only be made in the context of an advance income tax ruling after a review of all of the relevant facts.

However, in our opinion, if such an acquisition of property (the "Acquisition") arose where the facts of the particular situation are such that:

i)     the Acquisition would be in the ordinary course of the "particular corporation's" business and would have occurred whether or not the Butterfly Reorganization is subsequently undertaken;

ii)     neither the structure or timing of the Acquisition would be affected by considerations relating to the Butterfly Reorganization; and

iii)     the Acquisition would not be conditional on completion of the Butterfly Reorganization;

     the Acquisition would not normally be considered to have occurred in contemplation of the Butterfly Reorganization. This view is consistent with the comments found at page 14:10 of the 1991 Conference Report of the Canadian Tax Foundation to which you have referred in your letter.

The foregoing comments represent our general views with respect to the subject matter of your letter. The facts of a particular situation may lead to a different conclusion. In accordance with paragraph 21 of Information Circular 70-6R2 the comments expressed herein do not constitute an advance income tax ruling and consequently are not binding on Revenue Canada, Taxation.

Yours truly,

A/ChiefResource Industries SectionManufacturing Industries, Partnerships and Trusts DivisionRulings Directorate