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 251(5)(b) and 256(1.4)(a) apply to an enduring power of attorney?
Position:
It depends on the relevant provisions of the EPA.
Reasons:
5-962367
XXXXXXXXXX R. Gagnon
Attention: XXXXXXXXXX
October 17, 1996
Dear Sirs:
Re: Enduring Power of Attorney
This is in reply to your letter of June 27, 1996 wherein you requested our opinion concerning paragraphs 251(5)(b) and 256(1.4)(a) of the Income Tax Act ("ITA") in the following situation.
Mr. A and Mr. B own all the issued shares of corporations ACo and BCo respectively. Mr. B is Mr. A's son. Mr. A executes an enduring power of attorney pursuant to the Power of Attorney Act of Alberta. The enduring power of attorney would provide that it is to take effect on the permanent disability of Mr. A or that it is exercisable at any time.
We are unable to offer specific comments on how the execution of an enduring power of attorney ("EPA") would affect the application of paragraphs 251(5)(b) and 256(1.4)(a) of the Act without knowing all the relevant provisions of the enduring power of attorney. Where a situation involves an actual proposed transaction with identifiable taxpayers, we do not express opinions otherwise than by way of an advance income tax ruling. We can, however, provide the following general comments which we hope will be of assistance to you.
Where an EPA becomes effective solely on the permanent disability of the person ("donor") who gives the EPA, it is our view that paragraphs 251(5)(b) and 256(1.4)(a) of the Act cannot apply, as a result of the EPA in and by itself, prior to the time where the donor becomes permanently disabled.
Where an EPA comes into effect on the permanent disability of the donor and gives the attorney the power to control the voting rights on any shares of a corporation owned by the donor, it is our view that subparagraph 251(5)(b)(i) and paragraph 256(1.4)(a) of the Act deems the attorney to own the shares owned by the donor (for the purposes mentioned in the preamble of subsections 251(5) and 256(1.4) of the Act), from the time the donor become permanently disabled.
Where the powers of the attorney under an EPA include the right to control the voting rights of the shares of a corporation owned by the donor and the powers under the EPA can be exercised at any time by the attorney, the attorney under the EPA is deemed, pursuant to subparagraph 251(5)(b)(i) and paragraph 256(1.4)(a) of the Act, to own the shares of a corporation owned by the donor (for the purposes mentioned in the preamble of subsections 251(5) and 256(1.4) of the Act), from the time the EPA is executed by the donor.
Where a corporation is controlled by a taxpayer and another corporation is controlled by the taxpayer's son, the two corporations are related pursuant to subparagraph 251(2)(c)(ii) of the Act, even though paragraph 251(5)(b) does not apply.
The foregoing opinion is not a ruling and, in accordance with the guidelines set out in Information Circular 70-6R2 dated September 28, 1990, is not binding on the Department.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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