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.
APFF - 1995
Question 5
Rights to acquire shares
For purposes of determining whether two persons are related, paragraph 251(5)(b) of the Act provides generally that where a person has a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently to shares in a company or to acquire them, that person is deemed to have the same position with respect to the control of the corporation as if the person owned the shares at that time. Similar provisions can be found in paragraph 256(1.4)(a) when it comes to determining whether two corporations are associated.
In some cases, a person may have a future right to acquire shares in a corporation but the number of shares that can be acquired in this manner must be calculated on the basis of the fair market value of the shares at a future date. It is therefore not possible to determine at the current time the number of shares to which the person in question is entitled.
How are the provisions of paragraphs 251(5)(b) and 256(1.4)(a) of the Act to be applied when the number of shares to which the person is entitled cannot be determined?
Answer by the Department of Revenue
Under such circumstances, there are various possibilities open for applying this provision. It seems to us that the interpretation that we may put on it would depend in large measure on the rights of the parties and the terms of their agreements. Since we have not had the opportunity to consider the application of this provision in this type of situation with actual facts, we prefer not to speculate on the position(s) that we could adopt.
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