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:
ALLOCATION OF PROCEEDS WHERE THE SHARES OF SEVERAL AFFILIATES ARE TRANSFERRED TO ANOTHER AFFILIATE IN RETURN FOR REDEEMABLE PREFERRED SHARES OF THE AFFILIATE ALL OF WHICH ARE OF THE SAME CLASS.
Position:
PROVIDED THAT THE AGREEMENT STIPULATES THE NUMBER OF REDEEMABLE PREFERRED SHARES THAT WILL BE ISSUED BY THE TRANSFEREE IN RESPECT OF THE SHARES OF EACH CORPORATION IT RECEIVES, THE PROCEEDS TO THE TRANSFEROR WILL BE ALLOCATED TO EACH SUCH ITEM (SUBSIDIARY) TRANSFERRED ACCORDINGLY.
Reasons:
XXXXXXXXXX 951459
Attention: XXXXXXXXXX
November 15, 1995
Dear Sirs:
Re: Paragraph 95(2)(c) of the Income Tax Act
This is in response to your facsimile dated May 30, 1995 wherein you request our opinion in reference to the operation of the above provision in the following hypothetical situation.
1)Canco is a corporation resident in Canada.
2)Aco is a wholly-owned foreign affiliate as defined in subsection 95(1) of the Income Tax Act (the "Act"), of Canco.
3)Aco owns capital property comprised of shares of several other corporations (the "Subcos") each of which is also a foreign affiliate of Canco.
4)Aco transfers all of the shares of the Subcos to Bco in return for preferred shares of Bco with a fair market value ("FMV") equal to the aggregate FMV of the shares of the Subcos transferred. Immediately after the transfer, Bco will be a foreign affiliate of Canco.
5)A single agreement of purchase and sale will document the share exchange referred to in paragraph 4 above. However, that agreement will specify that the shares of each Subco will be transferred as a separate transaction for a specific number of preferred shares of Bco with a fair market value equal to the FMV of the shares of such Subco.
It is our opinion that in the above circumstances, the provisions of paragraph 95(2)(c) of the Act will apply and pursuant to subparagraph (iii) thereof, the amount of the proceeds of disposition to Aco of the shares each Subco will be equal to the relevant cost base as defined in subsection 95(4) of the Act, of the shares of that particular Subco for the purposes of the transfer.
We trust that this is the information you require.
Yours truly,
for Director
Reorganizations and Foreign 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