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.
March 3, 1997
Ottawa Tax Services Office Trusts Section
Client Assistance Division L. Holloway
(613) 957-2104
Attention: Gino Muto
964088
Exempt Capital Gains Balance - Disposition of Related Asset
This is in reply to your memorandum dated December 11, 1996, concerning the disposition of a positive exempt capital gains balance ("ecgb") when the assets which gave rise to the ecgb are disposed of. We agree with your reply to the taxpayer as dictated by the legislation.
Subsection 39.1(7) provides the following:
"...where at any time an individual ceases to be a member or shareholder of, or a beneficiary under, a flow-through entity, the exempt capital gains balance of the individual in respect of the entity for each taxation year that begins after that time is deemed to be nil."
Where an individual disposes of an asset that gave rise to the ecgb and reacquires the same asset "within a reasonable time frame" as suggested by XXXXXXXXXX, the ecgb is deemed to be to nil "for each taxation year that begins after that time". Although the individual will once again become a beneficiary of the flow-through entity, the fact that he ceased to be a beneficiary at any point in time would deem the ecgb to be nil for taxation years beginning after the disposal.
We have attached a copy of the explanatory notes issued by the Department of Finance upon introduction of this subsection which you may wish to provide to the client.
T. Murphy
A/Section Chief
Trusts Section
Resources, Partnerships and
Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
Attachment
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