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.
941409
XXXXXXXXXX T.B. Kuss
Attention: XXXXXXXXXX
October 25, 1994
Dear Sirs:
Re: Subsection 85.1(4) - Technical Interpretation
This is in reply to your letter dated May 26, 1994 regarding the application of subsection 85.1(4) to the following hypothetical situation.
1.Canco, a taxable Canadian corporation, owns 100% of USco, a foreign affiliate of Canco.
2.Prior to taking USco public, Canco transfers its shares in USco to a U.S. holding company (Holdco") for fair market value consideration consisting of Class A common shares of Holdco. Holdco is a foreign affiliate of Canco.
3.USco carries on an active business and all of its assets are "excluded property" as defined in subsection 95(1).
4.Holdco issues additional Class A common shares from treasury to the public for fair market value consideration.
5.Canco subsequently sells some of its shares of Holdco to the public.
In the above circumstances, subsection 85.1(4) would not apply to preclude the application of subsection 85.1(3), as a result of the above transactions in and by themselves, as the shares that were subject to the rollover (the shares of USco) are not the shares that are now being disposed of as part of the series of transactions or events.
We hope our comments are of assistance.
Yours truly,
for Director
Reorganizations and Foreign Division
Rulings Directorate
Policy and Legislation Branch
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