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 paragraph 55(3)(a) applies to a particular series of transactions
Position:yes
Reasons: Mr. A would ordinarily control Holdco and therefore be related to Holdco by virtue of being its incorporator.
XXXXXXXXXX 962631
F. Francis
Attention: XXXXXXXXXX
July 7, 1998
Dear Sirs:
Re: Amendments to paragraph 55(3)(a) of the Income Tax Act (the "Act")
contained in Bill C-28 which received Royal Assent on June 18, 1998
This is in reply to your letters of August 1, 1996, and September 5, 1996, wherein you requested a technical interpretation as to the application of amended paragraph 55(3)(a) to the following situation:
- Mr. A, an individual resident in Canada owns all the issued and outstanding shares of Opco.
- Mr. A incorporates a new corporation ("Holdco").
- Mr. A transfers some of his Opco shares to Holdco under section 85 of the Act and receives shares of Holdco.
- Opco purchases back for cancellation the Opco shares owned by Holdco and pays Holdco cash.
In our view, the acquisition of shares of Holdco by Mr. A would not ordinarily result in a significant increase in interest in Holdco of an unrelated person for purposes of amended paragraph 55(3)(a) of the Act.
We trust our comments will be of assistance to you.
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, 1998
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, 1998