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:
Does an agreement to buy shares exists for the purposes of 206.1, where vendor can use cash to buy out purchaser's right.
Position TAKEN:
Question of fact whether the cash buyout is legitimate or just a circular transfer of cash.
Reasons FOR POSITION TAKEN:
Positions previously taken.
950472
XXXXXXXXXX D. Duff
Attention: XXXXXXXXXX
June 2, 1995
Dear Sirs:
This is in response to your letter received by facsimile on February 16, 1995, and further to our letter of April 12, 1995, regarding the application of section 206.1.
As indicated in our previous letter, your request relates to a specific proposed transaction and should be the subject of an advance income tax ruling. However, we can make the following general statements.
It is a question of fact whether an arrangement is an agreement to sell shares. Paragraph 8 of IT-113R3 basically states that, where an employer has the option of paying cash instead of issuing shares, the arrangement is not an agreement to sell or issue shares. Consequently, where a person enters into an agreement to sell certain shares but retains the option to pay cash instead of delivering the shares, we would not consider it to be an agreement to sell shares. However, it would be our position that an agreement to sell shares exists where the vendor simply pays cash to the purchaser who must use it to purchase the shares.
We trust this is satisfactory.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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, 1995
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, 1995
Email this Content