26 April 1995 External T.I. 9511125 - CAPITAL GAINS EXEMPTION

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:

Application of subsections 84.1(1) and 110.6(1) to a completed series of transactions.

Position TAKEN:

Referred him to the the local tax services office and some of the publications available that deal with the sections of the Act that he is concerned with.

Reasons FOR POSITION TAKEN:

The responsibility for determining the tax consequences of completed transaction lies with the local tax services office.

		951112
XXXXXXXXXX	A. Seidel

Attention: XXXXXXXXXX

April 26, 1995

Dear Sirs:

This is in reply to your letter dated March 31, 1995 requesting confirmation of the application of various sections of the Income Tax Act (the "Act") to a series of transactions that includes the disposition of qualified small business corporation shares. The expression "qualified small business corporation share" has the meaning assigned by subsection 110.6(1) of the Act.

Your letter outlines a series of completed transactions. The determination of the tax consequences of a completed series of transactions is the responsibility of your local tax services office. Accordingly, we regret that we are not able to comment on the specific series of transactions outlined in your letter.

For your information, we refer you to the following publications which deal with some of the tax concerns you have raised in your letter:

1.Interpretation Bulletin IT-489R which deals with non-arm's length dispositions of shares;

2.Information Circular 88-2 which deals with the application of the general anti-avoidance rule. In particular, paragraphs 3 and 4 of the first supplement to this information circular deal with the crystallization of a capital gain and the application of section 84.1 of the Act;

3.The Department's comments regarding the crystallization of the capital gains deduction and qualified small business corporation shares in the Revenue Canada Round Table in the Report on the Proceedings of the Fortieth Tax Conference, 1988 Conference Report at 53:7 to 53:9.

4.Published advanced income tax ruling ATR-55 discusses the application of subsections 84.1(1), 110.6(1) and 245(2) in the "Law and Analysis" section of the publication.

Yours truly,

for Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch