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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
1.Whether 149(1)(d)(i) applies where Corporation has right to redeem its shares?
2.Whether 149(10) applies if status of corporation is unchanged?
Position TAKEN:
1.149(1)(d)(i) applies where corporation has right to redeem its shares.
2.149(10) only has application where the corporation becomes or ceases to be exempt.
Reasons FOR POSITION TAKEN:
Positions previously taken.
940775
XXXXXXXXXX W.P. Guglich
Attention: XXXXXXXXXX
March 29, 1994
Dear Sirs:
Re: Application of Paragraph 149(1)(d) and Subsection 149(10) of the Income Tax Act (the "Act")
This is in reply to your letter of March 18, 1994 wherein you requested our views as to the applicability of paragraph 149(1)(d) and subsection 149(10) of the Act in a hypothetical situation.
In your hypothetical situation a crown corporation as agent of Her Majesty in the right of a province would purchase at least 90% of the shares of a taxable corporation ("CORPCO"). CORPCO has the right to redeem its preferred shares pursuant to the rights attached to such shares. We assume that all property acquired and held by CORPCO does not vest in Her Majesty in the right of Canada or a province or a Canadian municipality, (i.e., it vests in CORPCO).
Where the 90% share ownership test is met but CORPCO has the right to redeem its preferred shares, it could, for purposes of subparagraph 149(1)(d)(i) of the Act, be considered that "a person other than her Majesty in right of Canada or a province or a Canadian municipality had during the period a right under a contract, in equity or otherwise either immediately or in the future and either absolutely or contingently, to, or to acquire shares or capital of CORPCO". As a result CORPCO, by virtue of subparagraph 149(1)(d)(i) of the Act, would not qualify for exempt status under paragraph 149(1)(d).
As CORPCO would neither become or cease to be exempt subsection 149(10) of the Act would not apply. Subsection 149(10) of the Act only has application where a corporation becomes or ceases to be exempt.
We trust our comments will be of assistance to you.
Yours truly,
R. Albert
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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