17 November 1997 External T.I. 9727485 - VENTURE CAPITAL CORPORATIONS

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:

Venture Capital corporations Criteria

Position:

Case by case review

Reasons:

39(4) election

972748
XXXXXXXXXX C. Tremblay

Attention: XXXXXXXXXX

November 17, 1997

Dear Sirs:

Re: Venture Capital Corporations ("VCC")

This is in reply to your letter of October 15, 1997, and is further to our letter of August , 1997, which was in reply to your June 19, 1997 letter.

It is important to remember that our file no 963480 gives only general guidelines permitting a VCC to make a 39(4) election, and, as we stated in our last letter to you, each election would be considered on its own merits.

However, we would expect that a VCC would acquire all or substantially all of its securities directly from the treasury of the corporation that the VCC is investing in. Further, it is a question of fact whether or not an acquisition of securities has been made on income or capital basis and depending on the circumstances of a particular fact situation, an acquisition of certain securities by a VCC on a private placement basis would not, in and of itself, disqualify the venture capital corporation from the 39(4) election.

We trust our comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate