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:
Whether the deemed disposition and reacquisition of property contemplated by subsection 149(10) of the Income Tax Act would be considered to be a non-arm's length acquisition of property for all purposes of the Act and the Income Tax Regulations.
Position:
Question of fact whether it is a non-arm's length acquisition of property, except where specifically provided in the Act or the Regulations.
Reasons:
A person is not related to himself, herself or itself and it is a question of fact whether persons not related to each other deal at arm's length. Accordingly, it is also a question of fact whether such a transaction is at non-arm's length.
5-960465
XXXXXXXXXX C. Chouinard
Attention: XXXXXXXXXX
May 23, 1996
Dear Sir/Madam:
Re: Subsection 149(10) of the Income Tax Act
We are writing in reply to your letter of January 25, 1996, wherein you inquired whether the deemed disposition and reacquisition of property contemplated by subsection 149(10) of the Income Tax Act (the "Act") would be considered to be a non-arm's length acquisition of property for all purposes of the Act and the Income Tax Regulations (the "Regulations") and, more specifically, for purposes of paragraph 13(7)(e) and 13(21.1) of the Act, paragraph 20(1)(b) and subsection 26(5) of the Income Tax Application Rules and subsections 1100(2.21), 1102(14) and 1102(14.1) of the Regulations.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R2. The following comments are, therefore, of a general nature only, and are not binding on the Department.
Pursuant to subsection 251(1) of the Act, related persons are deemed not to deal with each other at arm's length and it is a question of fact whether persons not related to each other are dealing at arm's length. In our view, given the definition of "related persons" in subsection 251(2) of the Act and the wording of paragraph 251(5)(c) of the Act, a person is not considered to be a person related to himself, herself or itself, unless the Act specifically provides otherwise. Since a person is not considered to be related to themself, it is a question of fact whether, at a particular time, that person is dealing with themself at arm's length. Therefore, the question of whether a deemed disposition and reacquisition of property is a non-arm's length transaction will turn upon the facts, unless a provision of the Act or the Regulations, such as paragraph 13(7)(e.1) of the Act and subsection 1100(2.21) of the Regulations, specifically provides that such a transaction is not at arm's length.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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