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.
3-960806
XXXXXXXXXX XXXXXXXXXX
Attention XXXXXXXXXX
XXXXXXXXXX, 1996
Dear Sirs:
Re: XXXXXXXXXX
This is in reply to your letter of XXXXXXXXXX, 1996 in which you requested various advance income tax rulings on behalf of the above-noted taxpayers. We also acknowledge your letter of XXXXXXXXXX, 1996 and our telephone conversations in connection herewith.
We understand that, to the best of your knowledge and that of the taxpayers involved, none of the issues involved in the requested rulings is being considered by a tax services office or a taxation centre in connection with a tax return already filed, or is under objection or appeal.
Definitions
In this letter unless otherwise expressly stated:
(a)"Act" means the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1 as amended to the date hereof, and unless otherwise stated, every reference herein to a part, section, subsection, paragraph or subparagraph is a reference to the relevant provision of the Act;
(b)"adjusted cost base" has the meaning assigned by section 54;
(c)"CBCA" means the Canada Business Corporations Act;
(d)"capital dividend account" has the meaning assigned by subsection 89(1);
(e)"capital property" has the meaning assigned by section 54;
(f)"distribution" has the meaning assigned by subsection 55(1);
(g)"guarantee agreement" has the meaning assigned by subsection 112(2.2);
(h)"paid-up capital" has the meaning assigned by subsection 89(1);
(i)"private corporation" has the meaning assigned by subsection 89(1);
(j)"RDTOH" means "refundable dividend tax on hand" which has the meaning assigned by subsection 129(3);
(k)"restricted financial institution" has the meaning assigned by subsection 248(1);
(l)"series of transactions or events" has the meaning assigned by subsection 248(10);
(m)"specified financial institution" has the meaning assigned by subsection 248(1); and
(n)"taxable Canadian corporation" has the meaning assigned by subsection 89(1).
Our understanding of the facts and of the proposed transactions is as follows:
FACTS
1. XXXXXXXXXX are residents of Canada for purposes of the Act.
2. XXXXXXXXXX is a corporation incorporated under the CBCA on XXXXXXXXXX with its registered office located in the province of XXXXXXXXXX is a taxable Canadian corporation and a private corporation.
The issued and outstanding shares of XXXXXXXXXX are held as follows:
Shares Shares
Class of SharesAuthorizedIssuedXXXXXXXXDescription of Share Characteristics
XXXXXXXXXX
The paid-up capital and adjusted cost base to each of XXXXXXXXXX of their shares in XXXXXXXXXX are as follows::
Paid-Up Adjusted
Class of Share # of Shares Capital Cost Base
XXXXXXXXXX
The XXXXXXXXXX shares are capital property to XXXXXXXXXX
3.XXXXXXXXXX is a holding company with short-term investments in Canadian, U.S. and foreign securities, units of XXXXXXXXXX limited partnerships and long-term investments.
The fair market value of the assets of XXXXXXXXXX on the XXXXXXXXXX are as follows:
Short-term investments $XXXXXXXXXX
Long-term investments XXXXXXXXXX
Liabilities XXXXXXXXXX
Net fair market value $XXXXXXXXXX
XXXXXXXXXX does not have significant influence, within the meaning of section 3050 of the CICA Handbook, over any corporation or partnership.
4.As at XXXXXXXXXX had a balance of $XXXXXXXXXX in its capital dividend account. As at XXXXXXXXXX had RDTOH of $XXXXXXXXXX
5.Immediately before the transfers of property described in paragraph 20 below (the "Butterfly Transfer"), the property of XXXXXXXXXX will be classified into two types of property for the purposes of a distribution, as follows:
(a)cash or near cash property, comprising all of the current assets of the XXXXXXXXXX including any cash, deposits, marketable securities, accounts receivable, inventory and rights arising from prepaid expenses (hereinafter referred to as "prepaid expenses"); and
(b)investment property, comprising all of the assets of XXXXXXXXXX other than cash or near cash property, any income from which would, for the purposes of the Act, be income from property or a specified investment business.
For the purpose of determining the types of property, a right to receive an amount as its dividend refund for the year by XXXXXXXXXX will be classified as cash or near cash property.
6.XXXXXXXXXX (a corporation to be incorporated as described in paragraph 12 below) and XXXXXXXXXX (a corporation to be incorporated as described in paragraph 13 below) are neither restricted financial institutions nor specified financial institutions.
7.No property has or will become property of, and no liabilities have been or will be incurred by, XXXXXXXXXX in contemplation of and before the Butterfly Transfer, except as described herein.
8.Neither XXXXXXXXXX will dispose of any of the assets owned by XXXXXXXXXX immediately before the Butterfly Transfer, following the Proposed Transactions as part of the same series of transactions or events, other than in the ordinary course of business.
9.There are not, and will not be at any time prior to the completion of the Proposed Transactions, any guarantee agreements in respect of any of the shares of XXXXXXXXXX
10.None of the shares of XXXXXXXXXX will be issued or acquired as part of a series of transactions described in subsection 112(2.5).
PROPOSED TRANSACTIONS
11.The shareholders of XXXXXXXXXX will approve a corporate resolution to have the paid-up capital of its common shares reduced to $XXXXXXXXXX, an amount equal to the adjusted cost base to XXXXXXXXXX of such shares. No payment will be made by XXXXXXXXXX on the reduction of the paid-up capital of its common shares.
12.XXXXXXXXXX will incorporate a new corporation ("XXXXXXXXXX") under the CBCA. XXXXXXXXXX will be a taxable Canadian corporation and a private corporation.
The authorized share capital of XXXXXXXXXX will consist of an unlimited number of non-voting Class A preferred shares, an unlimited number of non-voting Class B preferred shares, XXXXXXXXXX voting Class C preferred shares, and an unlimited number of voting participating common shares.
The Class A preferred shares will be redeemable and retractable at the amount of $XXXXXXXXXX each, entitled to a XXXXXXXXXX% non-cumulative dividend and will have preference over the Class B preferred shares, Class C preferred shares and common shares in the event of any liquidation, dissolution or winding-up of XXXXXXXXXX
The Class B preferred shares will be redeemable and retractable at the amount of $XXXXXXXXXX each, entitled to a XXXXXXXXXX% non-cumulative dividend and will have preference over the Class C preferred shares and common shares in the event of any liquidation, dissolution or winding-up of XXXXXXXXXX
Each Class C preferred shares will be redeemable and retractable at an amount equal to the fair market value of the XXXXXXXXXX common shares held by XXXXXXXXXX divided by XXXXXXXXXX entitled to a XXXXXXXXXX% non-cumulative dividend and will have preference over the common shares in the event of any liquidation, dissolution or winding-up of XXXXXXXXXX
XXXXXXXXXX will subscribe for XXXXXXXXXX common share of XXXXXXXXXX on incorporation for $XXXXXXXXXX
13.XXXXXXXXXX will incorporate a new corporation ("XXXXXXXXXX") under the CBCA. XXXXXXXXXX will be a taxable Canadian corporation and a private corporation.
The authorized share capital of XXXXXXXXXX will consist of an unlimited number of non-voting Class A preferred shares, an unlimited number of non-voting Class B preferred shares, XXXXXXXXXX voting Class C preferred shares, and an unlimited number of voting participating common shares.
The Class A preferred shares will be redeemable and retractable at the amount of $XXXXXXXXXX each, entitled to a XXXXXXXXXX% non-cumulative dividend and will have preference over the Class B preferred shares, Class C preferred shares and common shares in the event of any liquidation, dissolution or winding-up of XXXXXXXXXX
The Class B preferred shares will be redeemable and retractable at the amount of $XXXXXXXXXX each, entitled to a XXXXXXXXXX% non-cumulative dividend and will have preference over the Class C preferred shares and common shares in the event of any liquidation, dissolution or winding-up of XXXXXXXXXX
Each Class C preferred shares will be redeemable and retractable at an amount equal to the fair market value of the XXXXXXXXXX common shares held by XXXXXXXXXX divided by XXXXXXXXXX entitled to a XXXXXXXXXX% non-cumulative dividend and will have preference over the common shares in the event of any liquidation, dissolution or winding-up of XXXXXXXXXX
XXXXXXXXXX will subscribe for XXXXXXXXXX common share of XXXXXXXXXX on incorporation for $XXXXXXXXXX
14.XXXXXXXXXX will incorporate a new corporation ("XXXXXXXXXX") under the CBCA. XXXXXXXXXX will be a taxable Canadian corporation and a private corporation.
The authorized share capital of XXXXXXXXXX will consist of XXXXXXXXXX non-voting Class A preferred shares and an unlimited number of voting participating common shares.
Each Class A preferred share will be redeemable and retractable at an amount equal to the fair market value of the properties of XXXXXXXXXX transferred to XXXXXXXXXX less any liabilities assumed divided by XXXXXXXXXX entitled to a XXXXXXXXXX% non-cumulative dividend and will have preference over the common shares in the event of any liquidation, dissolution or winding-up of XXXXXXXXXX
XXXXXXXXXX will subscribe for XXXXXXXXXX common share of XXXXXXXXXX on incorporation for $XXXXXXXXXX
15.XXXXXXXXXX will incorporate a new corporation ("XXXXXXXXXX") under the CBCA. XXXXXXXXXX will be a taxable Canadian corporation and a private corporation.
The authorized share capital of XXXXXXXXXX will consist of XXXXXXXXXX non-voting Class A preferred shares and an unlimited number of voting participating common shares.
Each Class A preferred share will be redeemable and retractable at an amount equal to the fair market value of the properties of XXXXXXXXXX transferred to XXXXXXXXXX less any liabilities assumed divided by XXXXXXXXXX entitled to a XXXXXXXXXX% non-cumulative dividend and will have preference over the common shares in the event of any liquidation, dissolution or winding-up of XXXXXXXXXX
XXXXXXXXXX will subscribe for XXXXXXXXXX common share of XXXXXXXXXX on incorporation for $XXXXXXXXXX
16.XXXXXXXXXX will sell, at fair market value, all the shares that he holds in XXXXXXXXXX to XXXXXXXXXX As sole consideration for such transfer, XXXXXXXXXX will issue to XXXXXXXXXX
(a)XXXXXXXXXX Class C preferred shares that are redeemable and retractable in the aggregate at an amount equal to the fair market value of the common shares of XXXXXXXXXX transferred to XXXXXXXXXX
(b)XXXXXXXXXX Class A preferred share that is redeemable and retractable at an amount equal to the fair market value of the Class A preferred share of XXXXXXXXXX transferred to XXXXXXXXXX; and
(c)XXXXXXXXXX Class B preferred shares that are redeemable and retractable in the aggregate at an amount equal to the fair market value of the Class B preferred shares and Class C preferred shares of XXXXXXXXXX transferred to XXXXXXXXXX
XXXXXXXXXX will add to the stated capital accounts maintained for its
(a)Class A preferred shares an amount not to exceed the paid-up capital of the Class A preferred share of XXXXXXXXXX
(b)Class B preferred shares an amount not to exceed the aggregate paid-up capital of the Class B and Class C preferred shares of XXXXXXXXXX and
(c)Class C preferred shares an amount not to exceed the paid-up capital of the common shares of XXXXXXXXXX
The paid-up capital of each share of XXXXXXXXXX transferred to XXXXXXXXXX will not exceed the cost amount of such share to XXXXXXXXXX
17. XXXXXXXXXX will jointly elect in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer. The agreed amount in respect of the shares so transferred will be equal to the cost amount to XXXXXXXXXX immediately before the transfer, which amount will be equal to or less than the fair market value of such shares.
18.XXXXXXXXXX will sell, at fair market value, all the shares that XXXXXXXXXX to XXXXXXXXXX As sole consideration for such transfer, XXXXXXXXXX will issue to XXXXXXXXXX
(a)XXXXXXXXXX Class C preferred shares that are redeemable and retractable in the aggregate at an amount equal to the fair market value of the common shares of XXXXXXXXXX transferred to XXXXXXXXXX
(b)XXXXXXXXXX Class A preferred share that is redeemable and retractable at an amount equal to the fair market value of the Class A preferred share of XXXXXXXXXX transferred to XXXXXXXXXX; and
(c)XXXXXXXXXX Class B preferred shares that are redeemable and retractable in the aggregate at an amount equal to the fair market value of the Class B preferred shares and Class C preferred shares of XXXXXXXXXX transferred to XXXXXXXXXX
XXXXXXXXXX will add to the stated capital accounts maintained for its
(a)Class A preferred shares an amount not to exceed the paid-up capital of the Class A preferred share of XXXXXXXXXX
(b)Class B preferred shares an amount not to exceed the aggregate paid-up capital of the Class B and Class C preferred shares of XXXXXXXXXX and
(c)Class C preferred shares an amount not to exceed the paid-up capital of the common shares of XXXXXXXXXX
The paid-up capital of each share of XXXXXXXXXX transferred to XXXXXXXXXX will not exceed the cost amount of such share to XXXXXXXXXX
19. XXXXXXXXXX will jointly elect in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer. The agreed amount in respect of the shares so transferred will be equal to the cost amount to XXXXXXXXXX immediately before the transfer, which amount will be equal to or less than the fair market value of such shares.
20.XXXXXXXXXX will sell, at fair market value, to each of XXXXXXXXXX a portion of its cash and near-cash property and investment property. As a result of such transfers, the fair market value of the cash and near-cash property and investment property received by XXXXXXXXXX as the case may be, will be equal to the proportion of the fair market value of all of the cash and near-cash property and investment property, respectively, owned by XXXXXXXXXX immediately before the transfer, that:
(a)the fair market value, immediately before the transfer, of all the shares of the capital stock of XXXXXXXXXX as the case may be, at that time
is of
(b)the fair market value, immediately before the transfer, of all the issued shares of the capital stock of XXXXXXXXXX at that time.
In consideration for such transfers, each of XXXXXXXXXX will assume a proportion of the liabilities of XXXXXXXXXX and each will issue XXXXXXXXXX of its Class A preferred shares to XXXXXXXXXX
Each of XXXXXXXXXX will add to the respective stated capital maintained for its Class A preferred shares an amount equal to the redemption amount of such shares.
21. XXXXXXXXXX will jointly elect in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of each property of XXXXXXXXXX that is an eligible property transferred to XXXXXXXXXX as the case may be. The agreed amount in respect of such property so transferred will be:
(a)where the particular property is inventory or capital property (other than an interest in a limited partnership), an amount equal to or less than the fair market value of the property at the time of the transfer; and
(b)where the particular property is an interest in a limited partnership, an amount equal to the least of the amounts described in subparagraphs 85(1)(c.1), or, where the least of such amounts is XXXXXXXXXX
The fair market value of certain properties are less than its cost amount at the time of the transfer and it is the intention of XXXXXXXXXX to transfer certain other properties electing an amount, not to exceed the fair market value of the properties at the time of the transfer, sufficient to offset such losses.
As a result of the transfer of the interests in the limited partnerships described in paragraph 3 above, pursuant to subsections 40(3) and 40(1), XXXXXXXXXX will realize a capital gain that will be equal to the negative adjusted cost base of such partnership interests plus the agreed amounts in respect of the transfer of these properties.
22.Immediately after the transfer of the assets to XXXXXXXXXX each of XXXXXXXXXX will redeem its XXXXXXXXXX Class A preferred shares owned by XXXXXXXXXX and will each issue to XXXXXXXXXX a non-interest-bearing demand promissory note (the " XXXXXXXXXX ") each having a principal amount and fair market value equal to the redemption price of XXXXXXXXXX Class A preferred shares of XXXXXXXXXX as the case may be.
23. XXXXXXXXXX will then be wound up, each into its respective parent, XXXXXXXXXX As a result of the wind-ups, the XXXXXXXXXX Note will become a liability of XXXXXXXXXX and the XXXXXXXXXX Note will become a liability of XXXXXXXXXX
24.Following the wind-up of XXXXXXXXXX as described in paragraph 23 above, XXXXXXXXXX will purchase for cancellation, at fair market value, its common shares, Class A preferred shares, Class B preferred shares and Class C preferred shares held by XXXXXXXXXX in two stages:
(a)in the first stage, XXXXXXXXXX will purchase a sufficient number of common shares or part thereof which will result in a deemed dividend, pursuant to the provisions of subsection 84(3), equal to one half of XXXXXXXXXX capital dividend account immediately before that time, which XXXXXXXXXX will elect, pursuant to subsection 83(2), to have been paid from its capital dividend account; and
(b)in the second stage, XXXXXXXXXX will purchase the balance of its common shares, Class A preferred shares, Class B preferred shares and Class C preferred shares held by XXXXXXXXXX
XXXXXXXXXX will issue to XXXXXXXXXX as consideration for the purchase of its common shares, Class A preferred shares, Class B preferred shares and Class C preferred shares a non-interest-bearing demand promissory note having a principal amount equal to the fair market value of the shares purchased ("XXXXXXXXXX").
25.Following the wind-up of XXXXXXXXXX as described in paragraph 23 above, XXXXXXXXXX will then purchase for cancellation, at fair market value, its common shares, Class A preferred shares, Class B preferred shares and Class C preferred shares held by XXXXXXXXXX in two stages:
(a)in the first stage, XXXXXXXXXX will purchase a sufficient number of common shares or part thereof which will result in a deemed dividend, pursuant to the provisions of subsection 84(3), equal to one half of XXXXXXXXXX capital dividend account immediately before that time, which XXXXXXXXXX will elect, pursuant to subsection 83(2), to have been paid from its capital dividend account; and
(b)in the second stage, XXXXXXXXXX will purchase the balance of its common shares, Class A preferred shares, Class B preferred shares and Class C preferred shares held by XXXXXXXXXX
XXXXXXXXXX will issue to XXXXXXXXXX as consideration for the purchase of its common shares, Class A preferred shares, Class B preferred shares and Class C preferred shares a non-interest-bearing demand promissory note having a principal amount equal to the fair market value of the shares purchased ("XXXXXXXXXX").
26The XXXXXXXXXX Note will be set off against the XXXXXXXXXX Note 1 and they will be cancelled.
27.The XXXXXXXXXX Note will be set off against the XXXXXXXXXX Note 2 and they will be cancelled.
28.The formal dissolution of XXXXXXXXXX will be delayed pending the receipt of the dividend refund due to XXXXXXXXXX on the deemed dividends arising from the purchase for cancellation of the shares of XXXXXXXXXX described in paragraphs 24 and 25 above. The cash received by XXXXXXXXXX from the dividend refund will be paid immediately to XXXXXXXXXX in the same proportion as described in paragraph 20 above and XXXXXXXXXX will then be dissolved.
PURPOSE OF THE PROPOSED TRANSACTIONS
29.In XXXXXXXXXX The purpose of the proposed transactions is to allow XXXXXXXXXX to divide the assets of XXXXXXXXXX so that each may be able to pursue their separate and different investment and estate planning objectives independently of each other.
RULINGS
Provided that the above statements are accurate and constitute complete disclosure of all of the relevant facts, proposed transactions and the purposes of the proposed transactions, we confirm the following:
A.Provided that no amount is paid by XXXXXXXXXX on the reduction of the paid-up capital of its common shares as described in paragraph 11 above,
(i)XXXXXXXXXX will not be deemed to have paid, and XXXXXXXXXX will not be deemed to have received a dividend pursuant to subsection 84(4) on such reduction of paid-up capital; and
(ii)subparagraph 53(2)(a)(ii) will not apply to reduce the adjusted cost base to each of XXXXXXXXXX of their common shares of XXXXXXXXXX
B.The provisions of subsection 85(1) will apply to the transfer:
(i)by XXXXXXXXXX of the shares of XXXXXXXXXX described in paragraph 16 above;
(ii)by XXXXXXXXXX of the shares of XXXXXXXXXX described in paragraph 18 above; and
(iii)by XXXXXXXXXX of its properties that are eligible properties to XXXXXXXXXX described in paragraph 21 above
such that the agreed amount in respect of each transfer of eligible property will be deemed to be the transferor's proceeds of disposition and the transferee's cost thereof pursuant to paragraph 85(1)(a).
For greater certainty, paragraph 85(1)(e.2) will not apply to the transfers.
C.On the redemption of the XXXXXXXXXX Class A preferred shares of XXXXXXXXXX held by XXXXXXXXXX and XXXXXXXXXX Class A preferred shares of XXXXXXXXXX held by XXXXXXXXXX as described in paragraph 22 above, and the purchase for cancellation of the common shares, Class A preferred shares, Class B preferred shares and Class C preferred shares held by XXXXXXXXXX as described in paragraphs 24 and 25 above, the amount, if any, by which the amount paid to redeem or purchase the particular shares, as the case may be, exceeds the paid-up capital of the particular shares immediately before the redemption or the purchase for cancellation:
(i)will be deemed pursuant to paragraph 84(3)(a) to be a dividend paid by the issuer of such shares;
(ii)will be deemed pursuant to paragraph 84(3)(b) to be a dividend received by the holder of such shares;
(iii)to the extent that a dividend described in (ii) above is a taxable dividend, such dividend will, pursuant to subsection 112(1), be deductible in computing the taxable income of the recipient for the year in which the dividend is deemed to have been received; and
(iv)by virtue of the application of paragraph (j) of the definition "proceeds of disposition" in section 54, the amount of a deemed dividend described in (ii) above will be excluded from the proceeds of disposition of the share, and any loss arising from the disposition of the share will be reduced by the amount of such dividends pursuant to subsection 112(3).
D.No taxes under Part IV of the Act will be payable in respect of a dividend described in Ruling C above except as provided in paragraph 186(1)(b).
E.Part IV.1 of the Act will not apply to the deemed dividends described in Ruling C above because the dividends will be excepted dividends pursuant to paragraph (b) of the definition of "excepted dividend" in section 187.1.
F.Part VI.1 of the Act will not apply to the deemed dividends described in Ruling E above because the dividends will be excluded dividends pursuant to paragraph (a) of the definition of "excluded dividend" in subsection 191(1).
G.By virtue of the provisions of paragraph 55(3)(b), the provisions of subsection 55(2) will not apply to the deemed dividends described in Ruling C above, provided that, as part of the series of transactions that includes the proposed transactions described herein, there is no:
(i)disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);
(ii)acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii);
(iii)acquisition of property in the circumstances described in paragraph 55(3.1)(c); or
(iv)acquisition of property in the circumstances described in paragraph 55(3.1)(d)
which has not been described herein.
H.Provided that XXXXXXXXXX elects pursuant to subsection 83(2), a dividend described in Ruling C above, arising as a result of the purchase for cancellation of the common shares of XXXXXXXXXX described in subparagraphs 24(b) and 25(b) above, will be deemed to be a capital dividend to the extent that the dividend does not exceed XXXXXXXXXX capital dividend account immediately before the time the dividend becomes payable.
For greater certainty, subsection 83(2.1) will not apply in respect of the capital dividends received by XXXXXXXXXX
I.The provisions of section 80 will not apply to the settlement by way of set off of:
(i)the XXXXXXXXXX described in paragraph 26 above; and
(ii)the XXXXXXXXXX described in paragraph 27 above.
J.The provisions of subsection 88(1) will apply to the winding-up of XXXXXXXXXX into XXXXXXXXXX into XXXXXXXXXX described in paragraph 23 above.
K.The application of section 84.1 to the transfers of the common shares, Class A preferred shares, Class B preferred shares and Class C preferred shares of XXXXXXXXXX as described in paragraphs 16 and 18 above, respectively, will not result in a dividend being deemed to have been paid by XXXXXXXXXX as the case may be, under paragraph 84.1(1)(b).
L.Subsection 85(2.1) will apply to reduce the paid-up capital of the XXXXXXXXXX Class A preferred shares of XXXXXXXXXX issued to XXXXXXXXXX described in paragraph 20 above, to an amount equal to the aggregate of the agreed amounts in the elections filed by XXXXXXXXXX as the case may be, less the amount of the liabilities assumed by XXXXXXXXXX as the case may be.
M.The provisions of subsections 15(1), 56(2) and 246(1), will not apply to the proposed transactions, in and of themselves.
N.Subsection 245(2) will not be applied to the proposed transactions, in and by themselves, to redetermine the tax consequences confirmed in the rulings given.
These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R2 dated September 28, 1990 issued by Revenue Canada and are binding provided that the proposed transactions are completed before XXXXXXXXXX.
These rulings are based on the Act as it currently reads and do not take into account any future amendments, whether currently proposed or not, to the Act.
OPINIONS
1.Provided that the proposed amendment to subsection 129(1) in the Notice of Ways and Means Motion to amend the Act announced on November 27, 1995 is enacted and provided that XXXXXXXXXX is a private corporation at the end of the taxation year in which the dividends referred to in Ruling C above are paid and that XXXXXXXXXX files its return of income for that year within the time limit referred to in subsection 129(1), it is our opinion that the lesser of one-third of the amount of such dividends and the amount of XXXXXXXXXX RDTOH at the end of that year will be XXXXXXXXXX dividend refund for that year.
2.Provided that proposed subsection 40(3.3) is enacted in substantially the same form as set out in the draft legislation to amend the Act issued by the Department of Finance on April 26, 1995, it is our opinion that any capital loss realized by XXXXXXXXXX on the disposition of its property as described in paragraph 18 above will not be denied by proposed subsection 40(3.3).
The foregoing opinions are not rulings and, in accordance with the practice referred to in Information Circular 70-6R2, are not binding on Revenue Canada.
Yours truly,
for Director
Reorganizations and International 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