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.
5-951545
XXXXXXXXXX J. Teixeira
(613) 957-8953
Attention: XXXXXXXXXX
August 18, 1995
Dear Sirs:
Re: Application of subsection 69(11) of the Income Tax Act (the "Act")
This letter is in reply to your request, dated June 6, 1995, for a technical interpretation regarding the application of subsection 69(11) of the Act to the following situation:
1. Individual A owns all the shares of Oldco. The only asset owned by Oldco is land that has a low cost amount and high fair market value.
2. Individual B has recently incorporated Newco for the purpose of acquiring the shares of Oldco. Individual A will utilize the capital gains deduction on the sale of the shares of Oldco.
3. Individual A and Individual B deal at arm's length with each other.
4. Newco will wind up Oldco following the acquisition of the shares of Oldco from Individual A.
5. The cost amount of the land to Newco will be increased by an amount determined under paragraph 88(1)(d) of the Act.
6. The land will be transferred by Newco to Individual B immediately after the wind-up to be used in a business he currently operates as a proprietor.
In the situation described above, where Newco has no losses, tax credits or balance of undeducted outlays or expenses of any kind, it is our opinion that subsection 69(11) of the Act would not ordinarily apply to deem the disposition of land to be at a cost amount other than the amount determined by subparagraph 88(1)(a)(iii) of the Act.
The foregoing comments are not rulings and, in accordance with the practice referred to in Information Circular 70-6R2 dated September 28, 1990, are not binding on Revenue Canada. Our comments address only the application of subsection 69(11) of the Act and should not be construed as our confirmation of the tax consequences under any other provision of the Act.
Yours truly,
for Director
Reorganization and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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© Her Majesty the Queen in Right of Canada, 1995
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© Sa Majesté la Reine du Chef du Canada, 1995
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