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:
A parent corporation that is controlled by one individual sells an automobile to its subsidiary for proceeds equal to fair market value. The issue is whether the standby charge for the purposes of subsection 6(2) of the Income Tax Act (the Act) should be computed on the basis of the cost of the automobile to the parent or by reference to the cost of the automobile to the subsidiary.
Position:
The original cost to the parent would be used.
Reasons:
No change in the circumstances under which automobile made available.
960070
XXXXXXXXXX M. Eisner
Attention: XXXXXXXXXX
April 16, 1996
Dear Sirs:
Re: Benefits - Automobile Standby Charges
This is in reply to your letter of December 7, 1995 in which you requested our views on the automobile standby charge rules in the Income Tax Act (the Act).
The situation with which you are concerned appears to relate to a specific taxpayer. Confirmation of the tax consequences of proposed transactions will only be provided by this Directorate in response to a request for an advance income tax ruling. The procedures for requesting such a ruling are set out in Information circular 70-6R2 and the related Special Release dated September 30, 1992. On the other hand, if the transactions have already occurred, you should submit the relevant facts and documentation to your local tax services office. We are, however, providing you with the following general comments.
You are concerned with the type of situation where an automobile (as defined in subsection 248(1) of the Income Tax Act (the Act), which had been previously owned by a corporation (the Parent) controlled by one individual, was sold to a subsidiary (the Subsidiary) wholly owned by the Parent. The selling price of the automobile was equal to its fair market value at the time it was sold to the Subsidiary. The original cost of the automobile to the Parent exceeded the purchase price paid by the Subsidiary.
It is not apparent from the information provided in your letter whether the automobile was made available at the relevant time to the individual in his/her capacity as a shareholder or employee of the Parent or as an employee of the Subsidiary. In any event, if the sale of the automobile to the Subsidiary is simply to reduce the amount of the standby charge to be included in the individual's income, we would ignore the sale for purposes of the standby charge calculation. In such circumstances, the original cost of the automobile to the Parent would be used in the calculation of the standby charge for the purpose of subsection 6(2) of the Act.
We trust our comments will be of assistance to you.
Yours truly,
P.D. Fuoco
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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