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 fact that investor in LSVCC was retired at time of purchase result in clawback of credit?
Position:
No.
Reasons:
As long as they were qualified at time of purchase. Law has now been amended to avoid these typpes of flips.
XXXXXXXXXX 980472
S. Tevlin
May 7, 1998
Dear XXXXXXXXXX:
Re: Labour Sponsored Venture Capital Corporation (“LSVCC”)
We are writing in response to your letter dated February 21, 1998 wherein you requested our comments concerning the redemption of shares that you hold in a particular LSVCC. You have advised us that the shares were acquired in February 1996 and at that time both you and your husband had retired from the workforce.
In this regard we offer the following general comments.
Section 211.8 of the Income Tax Act imposes a tax on certain redemptions of approved shares of the capital stock of registered LSVCCs. This tax is commonly referred to as the “clawback” or repayment of the LSVCC tax credit.
For LSVCC shares originally acquired before March 6, 1996, the tax imposed pursuant to section 211.8 of the Income Tax Act will be nil where
(a) the redemption is more than 2 years after the day on which the shares were issued and where the redemption is permitted under the articles of the corporation because an individual retires from the workforce, or
(b) the redemption is more than 5 years after the day on which the shares were issued.
Based on the information provided by you, it is our opinion that your situation would meet the criteria described in paragraph (a) above and as such there would be no repayment of the LSVCC tax credit amount on redemption of those shares.
We trust our comments will be of asistance to you.
Yours truly,
for Director
Resources, Partnerships and
Trusts Division
Income Tax Rulings and Interpretations
Policy and Legislation Branch
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