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:
Application of proposed amendments in Bill C-69
(1) Whether disposition of property to be exempted under 55(3)(a)(i) has to meet description of both clauses (A) and (B) of 55(3)(a)(i).
(2) Whether redemption of shares for fmv would meet the description of one of clauses (A) or (B) of 55(3)(a)(i).
Position:
(1) No. (2) Yes.
Reasons:
(1) Clause (A) is in respect to the payment of a dividend or reduction in the PUC and Clause (B) is in respect to the disposition of property for proceeds that are not less than fmv.
(2) Provided shares are redeemed for proceeds that are not less than their fmv.
5-971115
XXXXXXXXXX J. Teixeira
Attention: XXXXXXXXXX
April 29, 1997
Dear Sirs:
We are writing in response to your letter of April 28, 1997 wherein you requested our opinion on the application of the proposed amendments to paragraph 55(3)(a) set out in Bill C-69, which was given first reading in the House of Commons on December 2, 1996.
As stated in paragraphs 22 and 23 of Information Circular 70-6R3, the Rulings Directorate provides written opinions on interpretation of specific provisions of the law or proposed legislation. However, the Directorate does not provide any opinion that relates to a contemplated transaction. For such transactions, an advance income tax ruling should be requested. However, we will provide the following general comments.
We agree that, in order for a disposition of property to be excluded from proposed subparagraph 55(3)(a)(i), it need only be described in one of clause (A) or clause (B) of the subparagraph; it need not be described in both clauses.
Where a share whose fair market value exceeds its paid-up capital is redeemed for an amount of cash equal to its fair market value, the disposition of the cash to the shareholder on the redemption will ordinarily be described in one or both of clauses 55(3)(a)(i)(A) and (B). Whether the disposition of the shares on the redemption or any other disposition of property or increase in interest as part of the same series of transactions would be described in subparagraphs 55(3)(a)(i) to (v) would depend on the circumstances.
These comments represent opinions based on our interpretation of the proposed law as tabled in Bill C-69 as it will apply generally, if enacted as proposed. They may, however, not always be appropriate in the circumstances of a particular case. As indicated in paragraph 22 of Information Circular 70-6R3, these opinions are not rulings and, accordingly, 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, 1997
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, 1997
Email this Content