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.
May 25, 1993
| J. Walker |
Resource Industries Section |
| A/Chief of Audit |
B. Rankin (613) 957-8974 |
| Calgary District Office |
Attention: S. Kanji
Meaning of Control - 66.7(10)
This is in reply to your memorandum of March 11, 1993 wherein you request our opinion regarding the meaning of "control" with respect to 66.7(10) of the Act and the application of the successor corporation rules to undeducted resource pool balances.
We note that paragraph 66.7(10)(a) requires that control of the corporation is acquired in order for the subsection to apply. In our view, there is a distinction to be made between the meaning of control in 66.7(10) of the Act in the phrase,
"control of a corporation has been acquired by a person or group of persons,",
and the meaning of control for the purpose of 256(5.1) of the Act as seen in the expression,
"controlled, directly or indirectly in any manner whatever,".
The former refers to de jure control in accordance with the 1967 Supreme Court decision for MNR v. Dworkin Furs (Pembroke) Ltd. 67 DTC 5035, the 1967 Exchequer Court decision for Buckerfields Ltd. v. MNR 64 DTC 5301, and the 1971 Supreme Court decision for Oakfield Developments v. MNR 71 DTC 5175. These decisions suggest the requirement that there is ownership of sufficient shares to vote a majority of the Board of Directors or to authorize the surrender of the company's letters patent. The latter refers to de facto control which contemplates control directly or indirectly in any manner whatever.
We are of the view that the application of de facto control as described in subsection 256(5.1) of the Act is limited to provisions where the expression, "controlled, directly or indirectly in any manner whatever" is used. Subsection 256(1) serves as such an example.
It follows, that de facto control is not relevant to the application of subsection 66.7(10) of the Act because of the absence of the expression that requires de facto control. This conclusion is supported by Interpretation Bulletin IT-64R3 paragraph 15.
In view of the above conclusion, and in accordance with your analysis, there does not appear to be an acquisition of control of XXXXXXXXXX for the purpose of 66.7(10) of the Act.
If you have any questions or would like to discuss our comments further, please feel free to contact the rulings officer.
for Director Manufacturing Industries, Partnerships and Trusts DivisionRulings Directorate
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