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:
how is conversion feature on securities allocated
Position:
where conversion feature which is not severable no part of issue price can be allocated
Reasons:
confirmation of response to 1992 round table at question 9
962114
XXXXXXXXXX C. Tremblay
Attention: XXXXXXXXXX
July 2, 1996
Dear Sirs:
Re: Securities - Allocation of Cost
This is in reply to your letter of June 11, 1996, in which you ask for confirmation of the Department's position that, in the case of a security with a conversion feature which is not separable from the security and which cannot be separately traded, no part of the issue price can be allocated to the conversion feature, and when the security is converted, no allocation of the proceeds of disposition between the conversion feature and the security can be made.
We confirm that the above treatment would apply where the debenture is convertible into a security of the issuing corporation or a security of another entity and that there has been no change in the Department's position.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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