1993 External T.I. 9312775 F - Prescribed Share

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

September 10, 1993

Dear Sirs:

RE:  Prescribed shares

This is in reply to your letters of April 30 and July 5, 1993 concerning whether an inter-vivos spouse trust owning preferred shares would meet the ownership requirement in paragraph 6205(2)(a) of the Income Tax Regulations (the "Regulations"). We apologize for the delay in responding to your letters.

Your request relates to a transaction entered into by a specific taxpayer. As indicated in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990, requests for written opinions on completed transactions are generally considered by the taxpayer's local district taxation office. Therefore, while we are unable to provide an opinion in respect of the situation outlined in your letter, we are prepared to offer the following general comments.

Paragraph 6205(2)(a) of the Regulations requires, inter alia, that the particular share owned by the person in question be issued to that person or to a spouse of that person by the corporation. Where, as part of an arrangement, the preferred shares issued to the person causing the estate freeze are then gifted to an inter-vivos spouse trust (as described in paragraph 73(1)(c) of the Income Tax Act), it is our opinion that those preferred shares owned by the spouse trust would not meet the ownership requirements of paragraph 6205(2)(a) of the Regulations.

We will advise the Department of Finance of our position so that they may consider whether an amendment to the provision is appropriate.

Yours truly,

for Director Manufacturing Industries, Partnerships and Trusts DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch