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: How does the RDTOH balance get divided in a butterfly?
Position TAKEN: RDTOH does not have to be valued see 89 conf report Question 4 on page 20:36
Reasons FOR POSITION TAKEN: Published position
Revised Draft
Question - Butterfly Transfer of a Proportionate Share of a Significant RDTOH Balance
Does Revenue Canada have a policy which would allow for the transfer of a corporation's RDTOH balance as part of a butterfly reorganization such that each shareholder receives its proportionate share of the RDTOH balance pursuant to paragraph 55(3)(b) of the Act?
Department's Position
The Department does not have a general policy relating to the proportionate transfer of a corporation's RDTOH balance as part of a butterfly reorganization. Each case will be decided on its own merits.
In a paper titled "The Butterfly Reorganization: Revenue Canada's Approach" presented at the 1989 Conference of the Canadian Tax Foundation, the Department stated in its response to Question 4 on page 20:36 that tax-related amounts (including RDTOH) do not have to be valued for the purposes of a butterfly reorganization. Consequently, there is no requirement that each shareholder receive its proportionate share of the corporation's RDTOH because RDTOH is not considered property for the purposes of paragraph 55(3)(b) of the Act. However, the Department will rule favourably if the parties are able to structure their transactions to achieve a proportional allocation of the corporation's RDTOH balance and the proposed series of transactions otherwise comply with the requirements of paragraph 55(3)(b).
M. Sarazin
941336
May 24, 1994
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1994
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1994
Email this Content