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:
85.1(1) and 7(1.5) apply to share for share exchanges; the Department allows 85.1(1) to apply to some transfers where non-share consideration was also received. Will it take the same position for 7(1.5)
Position TAKEN:
IT and Technical Notes state 7(1.5) applies to 85.1(1) transfers but request ruling.
Reasons FOR POSITION TAKEN:
As stated
5-942547
XXXXXXXXXX D. Duff
Attention: XXXXXXXXXX
October 13, 1994
Dear Sirs:
This is in response to your letter of October 3, 1994, requesting the Department to review its administrative position regarding the application of subsection 7(1.5) of the Income Tax Act ("Act").
The provisions of subsection 7(1.5) of the Act apply to essentially deem there not to be a disposition of shares on a share for share exchange. It applies where a taxpayer disposes of shares acquired pursuant to an agreement referred to in subsection 7(1.1) of the Act, and among other things, does not receive consideration other than shares of another corporation. Section 85.1 has similar rollover provisions for share for share exchanges, and also does not apply where there was consideration received other than shares.
The Department has stated in Interpretation Bulletin IT-450R that subsection 85.1(1) can still be used where non-share consideration was received if the vendor can identify the proportion of each share or group of shares for which only shares were received as consideration. You have requested that we take a similar position for the application of subsection 7(1.5) of the Act.
Although we have not ruled or given an opinion on whether subsection 7(1.5) of the Act would apply in these situations, both the Technical Notes and paragraph 14 of IT-113R3 state that it applies to a share for share exchange to which subsection 85.1(1) applies. If you have a specific proposed transaction we can consider the application of subsection 7(1.5) of the Act if it is submitted in the form of a request for an advanced income tax ruling.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch
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