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:
Does paragraph 84(6)(b) apply to preclude the application of subsections 84(2) and (3) on the purchase of shares by a public corporation pursuant to a "normal course issuer bid".
Position: Yes.
Reasons:
Confirms existing position that shares purchased pursuant to a normal course issuer bid are acquired by the corporation in the manner in which shares would normally be purchased by any member of the public in the open market. See, for example, Issue Sheet for file 933269, July 6, 1994 where this position was confirmed.
971265
XXXXXXXXXX D.A. Palamar
Attention: XXXXXXXXXX
January 7, 1998
Dear Sirs:
Re: Paragraph 84(6)(b) of the Income Tax Act (the "Act")
This is in reply to your letter regarding the application of paragraph 84(6)(b) to the purchase by a public corporation of its shares, which are listed on the Toronto Stock Exchange ("TSE"), pursuant to a "normal course issuer bid".
You have advised that a normal course issuer bid is defined under the By-Laws of the TSE. In essence, under a normal course issuer bid in respect of the shares of a corporation which are listed for trading on the TSE, the issuer makes an offer to all of its shareholders generally to repurchase such shares under the terms and conditions specified in the offer and enters an open bid to this effect which reflects the terms of the bid. Notice of the offer is required to be delivered by the issuer to the TSE, and all share purchases would be made through the TSE. A seller of shares of the issuer would not know whether the buyer was the issuer or some other purchaser. In effect, the normal course issuer bid does not constitute a direct agreement of purchase and sale between a buyer and a seller, but rather constitutes an open offer by the issuer to acquire its own shares.
Our Views
In our view, paragraph 84(6)(b) would apply to preclude the application of subsections 84(2) and (3) where shares are purchased by an issuer pursuant to a normal course issuer bid under the By-Laws of the TSE.
These comments should only be construed as a general statement of our opinion and are not binding on Revenue Canada. Moreover, we make no comment regarding the application of any other provision of the Act, including Part II.1, to the purchase and sale of shares pursuant to a normal course issuer bid.
Yours truly,
for Director
Reorganization and International Division
Income Tax Rulings & Interpretations Directorate
Policy and Legislation Branch
- 2-
- 2 -
.../cont'd
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
Email this Content