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:
1. Will the proposed transfer of XXXXXXXXXX meet the XXXXXXXXXX requirements set forth in subsection XXXXXXXXXX of the Act?
2. Will subsections XXXXXXXXXX of the Act apply to the transfer after the proposed transfer of XXXXXXXXXX?
3. Will subsection 256(8) of the Act apply to the share purchase options provided as part of the proposed transfer?
Position:
1. Question of fact to be determined at the time of the transfer.
2. Question of fact to be determined on an ongoing basis.
3. No.
Reasons:
1. Based on a review of the corporation’s balance sheet and operations at XXXXXXXXXX it was concluded that in this case the determination would be made on the basis of XXXXXXXXXX of the relevant XXXXXXXXXX.
2. Provided the transferor carries on XXXXXXXXXX business in Canada, even though on a significantly reduced scale, subsections XXXXXXXXXX will apply.
3. In this case we not only agreed that there were valid business reasons for the use of the share purchase options, the income tax consequences arising as a result of the acquisition of control rules applying immediately as opposed to later were virtually identical. Therefore, subsection 256(8) will not apply.
XXXXXXXXXX
XXXXXXXXXX 980184
XXXXXXXXXX
Attention : XXXXXXXXXX
XXXXXXXXXX, 1998
Dear Sirs:
Re: Proposed Transactions Involving XXXXXXXXXX
XXXXXXXXXX
This is in reply to your letter dated XXXXXXXXXX, and your subsequent correspondence requesting an advance income tax ruling on behalf of the above noted taxpayers. You have advised that to the best of your knowledge, and that of all the taxpayers involved, none of the issues raised in this letter are being considered by any Tax Service Office ("TSO") and/or Taxation Centre in connection with any tax return already filed by the taxpayers, or any person related to the taxpayers, nor are any of these issues under objection, appeal, or before the courts, or if a judgment has been issued, the time limit for appeal to a higher court has not expired.
Unless otherwise indicated, all statutory references herein are to provisions of the Income Tax Act (Canada), R.S.C. 1985 (5th Suppl.) c.1, as amended from time to time and consolidated to the date of this letter (herein referred to as the "Act") and unless otherwise expressly stated:
(a) “taxable Canadian corporation” has the meaning assigned by subsection 89(1);
(b) XXXXXXXXXX has the meaning assigned by subsection 248(1);
(c) XXXXXXXXXX has the meaning assigned by subsection 248(1);
(d) XXXXXXXXXX has the meaning assigned by subsection 248(1);
(e) XXXXXXXXXX has the meaning assigned by subsection 248(1);
(f) XXXXXXXXXX has the meaning assigned by subsection 248(1);
(g) XXXXXXXXXX;
(h) XXXXXXXXXX has the meaning assigned by subsection 248(1);
(i) “arm’s length” has the meaning assigned by section 251;
(j) any reference to an amount of money is expressed in Canadian dollars and all references to the amount or value of an XXXXXXXXXX is to its XXXXXXXXXX.
Our understanding of the facts, proposed transactions and purpose of the proposed transactions is set out as follows:
FACTS
1.
XXXXXXXXXX
2.
XXXXXXXXXX
3.
XXXXXXXXXX
4.
XXXXXXXXXX
5.
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
6.
XXXXXXXXXX
7.
XXXXXXXXXX
8.
XXXXXXXXXX
9.
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
10.
XXXXXXXXXX
11.
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
12.
XXXXXXXXXX
13.
XXXXXXXXXX
14.
XXXXXXXXXX
15.
XXXXXXXXXX
Overview of Proposed Transactions
16. In light of the foregoing concerns, in the proposed transactions:
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
17.
XXXXXXXXXX
18.
XXXXXXXXXX
PROPOSED TRANSACTIONS
XXXXXXXXXX
19.
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
20.
XXXXXXXXXX
21.
XXXXXXXXXX
22.
XXXXXXXXXX
23.
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX
24. XXXXXXXXXX
25. XXXXXXXXXX
26. XXXXXXXXXX
27. XXXXXXXXXX
28. XXXXXXXXXX
29. XXXXXXXXXX
30. XXXXXXXXXX
31. XXXXXXXXXX
32. XXXXXXXXXX
XXXXXXXXXX
33. XXXXXXXXXX
34. XXXXXXXXXX
XXXXXXXXXX
35. XXXXXXXXXX
XXXXXXXXXX
36. XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
37. XXXXXXXXXX
38. XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
39. XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
40. XXXXXXXXXX
41. XXXXXXXXXX
42. You confirm that except as described in this letter, no property has or will be acquired by or disposed of by XXXXXXXXXX before the XXXXXXXXXX Closing Date other than in the ordinary course of its business.
43. You confirm that the XXXXXXXXXX of the XXXXXXXXXX and the fair market value of such XXXXXXXXXX, as was set out in the information provided in support of the ruling all determined as of XXXXXXXXXX, are a reasonable representation of the relationship between the XXXXXXXXXX of the XXXXXXXXXX, as set out in paragraphs 9 and 19 and 23(a) respectively, and the XXXXXXXXXX, as set out in paragraphs 5 and 23(b) respectively, to the fair market value of such XXXXXXXXXX all determined as of XXXXXXXXXX.
44.
XXXXXXXXXX
45.
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
PURPOSE OF PROPOSED TRANSACTIONS
46.
XXXXXXXXXX
RULINGS GIVEN
Provided the foregoing statements constitute a complete and accurate disclosure of all the relevant facts and proposed transactions we confirm the following:
A. Provided that:
(i) immediately after the XXXXXXXXXX Closing Date
XXXXXXXXXX
in the year which includes the XXXXXXXXXX Closing Date;
(ii)
XXXXXXXXXX
(iii)
XXXXXXXXXX
(iv) XXXXXXXXXX
XXXXXXXXXX
B. For the purposes of Ruling A on the assumption that XXXXXXXXXX referred to in paragraph 4 constitutes all of the XXXXXXXXXX business carried on in Canada by XXXXXXXXXX:
(i) for purposes of determining XXXXXXXXXX such XXXXXXXXXX will be determined, as at the XXXXXXXXXX Closing Date, on a basis that is consistent with that employed in determining the XXXXXXXXXX as described in paragraph 9;
(ii) for purposes of determining XXXXXXXXXX such XXXXXXXXXX will be determined, as at the XXXXXXXXXX Closing Date, on a basis that is consistent with that employed in determining the XXXXXXXXXX as described in paragraph 5;
(iii) provided that XXXXXXXXXX referred to in (i) and (ii) respectively are XXXXXXXXXX, respectively, the requirements of Ruling A(i) and (ii) will be satisfied.
C. Provided that in a taxation year XXXXXXXXXX carries on the XXXXXXXXXX business as described in paragraphs 22 and 23(b) and the XXXXXXXXXX as described in paragraph 35, XXXXXXXXXX will apply to XXXXXXXXXX in such year.
D. Provided and to the extent that the amount is reasonable, interest paid or payable by XXXXXXXXXX on the XXXXXXXXXX, and by XXXXXXXXXX on the XXXXXXXXXX and the XXXXXXXXXX, as such obligations are described in paragraph 19, will be deductible by XXXXXXXXXX or XXXXXXXXXX, as the case may be, under paragraph 20(1)(c), as applicable.
E. Provided and to the extent that the amount is reasonable, interest paid or payable by XXXXXXXXXX, as such obligations are described in paragraph 23, will be deductible by XXXXXXXXXX under paragraph 20(1)(c), as applicable.
F. The transactions described in paragraph 23 will not result in XXXXXXXXXX.
G. Subsection 256(8) of the Act will not apply to the options in respect of the shares of XXXXXXXXXX that are provided for in the XXXXXXXXXX, as described in paragraphs 38, 39, 40 and 41.
H. As a result of the proposed transactions, in and by themselves, subsection 245(2) will not be applied to redetermine the tax consequences confirmed in the rulings given.
The above Rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 dated December 31, 1996 and are binding on Revenue Canada provided that the proposed transactions (XXXXXXXXXX) are completed by XXXXXXXXXX.
The above rulings are based on the law as it presently reads and do not take into account any proposed amendments to the Act and the Regulations which, if enacted into law, could have an effect on the rulings provided herein.
Nothing in this ruling should be construed as implying that we have agreed to or reviewed that:
(a) except as expressly provided in Ruling B herein, that XXXXXXXXXX;
(b) except as expressly provided in Ruling B herein, that XXXXXXXXXX on the date hereof is, or on the XXXXXXXXXX Closing Date in the relevant year will be, an XXXXXXXXXX;
(c) the description of XXXXXXXXXX business carried on XXXXXXXXXX in paragraph 4 is complete or that XXXXXXXXXX will be considered to be carrying on a XXXXXXXXXX business XXXXXXXXXX for any taxation year after the transaction described in paragraph 23 has been completed;
(d) the determination of the XXXXXXXXXX of any XXXXXXXXXX on the XXXXXXXXXX Closing Date or on any other date; or
(e) the tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the rulings given above.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
15
.../cont’d
.../cont’d
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