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: Technical Interpretation - Meaning of "Shareholder"
This is in reply to your letter dated April 13, 1993 wherein you requested a technical interpretation pertaining to the term "shareholder corporation" which is defined at paragraph 66(15)(i) of the Income Tax Act (the "Act").
Specifically, your request concerns whether a corporation which owns a nominal number of preferred shares of a joint exploration corporation ("JEC"), within the meaning of this term at paragraph 66(15)(g) of the Act, would be considered to be a "shareholder" for the purposes of subparagraph 66(15)(i)(i) of the definition of shareholder corporation.
Assuming the above corporation qualifies as a shareholder of a JEC, you also requested our views as to whether it would qualify as a shareholder corporation if it makes an investment in the JEC by way of cash and a promissory note pursuant to all of the requirements of subparagraph 66(15)(i)(ii) of the Act.
Our Comments:
It is our view that a corporation which owns a nominal number of preferred shares of a JEC would be considered as a "shareholder" for purposes of subparagraph 66(15)(i)(i) of the Act. Such corporation would also qualify for treatment as a "shareholder corporation" within the meaning of paragraph 66(15)(i) of the Act for the period that the corporation was a shareholder of the JEC and the corporation made an investment in the JEC of cash or promissory note in respect of the expenses referred to in subparagraph 66(15)(i)(ii) of the Act, incurred or to be incurred by the JEC.
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, Customs, Excise and Taxation.
Yours truly,
for Director Manufacturing Industries, Partnerships and Trusts DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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