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.
XXXXXXXXXX
XXXXXXXXXX 3-981819
XXXXXXXXXX
XXXXXXXXXX, 1999
Dear XXXXXXXXXX:
Re: Advance income tax ruling
XXXXXXXXXX
XXXXXXXXXX
We are writing in response to your letter of XXXXXXXXXX wherein you requested an advance income tax ruling for the above taxpayer. We also acknowledge your letters of XXXXXXXXXX.
To the best of your knowledge, and that of the parties to this ruling, none of the issues contained in this advance income tax ruling:
1. is in an earlier return of the taxpayer or a related person,
2. is being considered by a tax services office or a taxation centre in connection with a previously filed tax return of the taxpayer or a related person,
3. is under objection by the taxpayer or a related person,
4. is before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired, or
5. is the subject of a ruling previously issued by the Directorate.
All statutory references contained in this letter are to the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, as amended hereof (the “Act”), except as otherwise indicated.
FACTS
1. XXXXXXXXXX was incorporated pursuant to the laws of the Province XXXXXXXXXX is a taxable Canadian corporation and a Canadian-controlled private corporation. The terms “taxable Canadian corporation” and “Canadian-controlled private corporation”, as used here and subsequently, have the meanings assigned by subsections 89(1) and 125(7), respectively.
2.
XXXXXXXXXX
3. XXXXXXXXXX has not had any taxable income for the past number of years and the amount of its non-capital loss available for carryforward is $XXXXXXXXXX. Prior to that time, its taxable income was reported as income from an active business within the meaning of subsection 125(7). XXXXXXXXXX has no refundable dividend tax on hand (“RDTOH”) and has a balance of $XXXXXXXXXX in its capital dividend account, (“CDA”). The terms “RDTOH” and “CDA”, as used here and subsequently, and “non-capital loss” have the meanings assigned by subsections 129(3), 89(1), and 111(8), respectively.
4. Each of XXXXXXXXXX is resident in Canada and they are related to one other within the meaning of subsection 251(2). XXXXXXXXXX.
5. XXXXXXXXXX owns 4, XXXXXXXXXX common shares of XXXXXXXXXX; XXXXXXXXXX owns XXXXXXXXXX common shares of XXXXXXXXXX; and XXXXXXXXXX owns 3, XXXXXXXXXX common shares of XXXXXXXXXX. There are no other issued and outstanding shares of XXXXXXXXXX all hold their shares of XXXXXXXXXX as capital property which, as used here and subsequently, has the meaning assigned by section 54. Each of the common shares of XXXXXXXXXX is not a taxable preferred share which, as used here and subsequently, has the meaning assigned by subsection 248(1). The shareholdings arose in the following manner:
(a) XXXXXXXXXX each acquired XXXXXXXXXX common shares in XXXXXXXXXX (the “Pre V-Day Shares);
(b) in XXXXXXXXXX acquired XXXXXXXXXX common shares from XXXXXXXXXX acquired XXXXXXXXXX common shares from her mother (which XXXXXXXXXX common shares are hereinafter called the “Third Group Shares”), and XXXXXXXXXX acquired XXXXXXXXXX common shares from his mother (all of which shares had been issued prior to 1972 , were owned by their holder on XXXXXXXXXX and were held as capital property by their holder; mother was thus left holding XXXXXXXXXX pre-1972 shares);
(c) in XXXXXXXXXX, additional common shares (the “Post V-Day Shares”) were issued on the basis of XXXXXXXXXX shares for each issued share (with the result that XXXXXXXXXX new shares were issued for each outstanding share) and no amount was added to the stated capital upon the issuance of such shares;
(d) subsequent to the above share issue, XXXXXXXXXX son purchased XXXXXXXXXX common shares from treasury; and
(e) in XXXXXXXXXX acquired XXXXXXXXXX common shares from her son (which shares are included as part of the “Post V-Day Shares”) and XXXXXXXXXX common shares from her mother (XXXXXXXXXX Third Group Shares and XXXXXXXXXX Post-V-Day Shares).
Neither of XXXXXXXXXX mother and father made an election pursuant to subsection 26(7) of the Income Tax Application Rules (the “ITAR”) in respect of the transfer of shares referred to herein.
6. XXXXXXXXXX (“Trusteeco”) was incorporated pursuant to the laws of the Province of XXXXXXXXXX at which time, one common share was issued to XXXXXXXXXX for XXXXXXXXXX. Trusteeco has never carried on any activity, nor owned any assets, except for the share subscription proceeds. Trusteeco is a taxable Canadian corporation and a Canadian-controlled private corporation.
7. XXXXXXXXXX has a fiscal year end of XXXXXXXXXX assets include cash on hand, marketable securities, rights arising from the prepayment of certain expenses (the “prepaid expenses”), and a loan receivable from each of XXXXXXXXXX. Its main assets consist of the following properties:
(a)
XXXXXXXXXX
(b)
XXXXXXXXXX
8. The liabilities of XXXXXXXXXX consist of some accounts payable, together with a mortgage on the XXXXXXXXXX in the approximate amount of $XXXXXXXXXX and a mortgage on the XXXXXXXXXX in the approximate amount of $XXXXXXXXXX. Neither mortgage was acquired in contemplation of the proposed transactions described below.
9. Each of the XXXXXXXXXX constitutes capital property to XXXXXXXXXX. Although separate classes for claiming capital cost allowance for each building have been maintained for bookkeeping purposes, there is only one class for the purposes of the Act.
10. (a) Independent valuations have been obtained for each of the properties which indicate the following values: XXXXXXXXXX. As a result, ignoring the liabilities of XXXXXXXXXX, the aggregate fair market value of the XXXXXXXXXX and a XXXXXXXXXX% undivided interest in the XXXXXXXXXX (the “Adjusted Interest”) is equal to the aggregate fair market value of the remaining XXXXXXXXXX% undivided interest in the XXXXXXXXXX. The Adjusted Interest has a fair market value which is, and will be, less than 10% of the aggregate fair market value of all the assets (excluding cash and debt) to be transferred in the course of the distribution described below.
(b) On XXXXXXXXXX declared a dividend equal to the aggregate of the loans receivable from XXXXXXXXXX. At the time of the transfer described in paragraph 16 below, there will be no loan receivable by XXXXXXXXXX from XXXXXXXXXX.
(c) XXXXXXXXXX has never disposed of any capital property owned on December 31, 1971, except for her principal residence.
PURPOSE OF THE PROPOSED TRANSACTIONS
11. The purpose of the proposed transactions is to divide the assets of XXXXXXXXXX in a “single-wing butterfly” so that a new corporation to be incorporated by XXXXXXXXXX and XXXXXXXXXX will become the owner of the XXXXXXXXXX and XXXXXXXXXX will cease to own shares of XXXXXXXXXX. This will enable each of the XXXXXXXXXX family and the XXXXXXXXXX family to operate XXXXXXXXXX independently of each other.
PROPOSED TRANSACTIONS
12. Registered title to the XXXXXXXXXX will be transferred by XXXXXXXXXX to Trusteeco at which time Trusteeco will sign a trust declaration indicating that it is holding the property in trust for XXXXXXXXXX as bare trustee. Trusteeco’s only function will be to hold legal title to the property. Trusteeco will not be able to take any action with respect to the property without instructions from XXXXXXXXXX will be the sole beneficiary and will be able to cause the property to revert to it at any time.
13. Following the transfer of title, a new corporation (“XXXXXXXXXX”) will be incorporated by XXXXXXXXXX under the laws of the Province of XXXXXXXXXX will be a taxable Canadian corporation and a Canadian-controlled private corporation.
14. The capital stock of XXXXXXXXXX will consist of an unlimited number of the following classes of shares:
(a) Class A shares which will be entitled to one vote per share; entitled to a variable dividend; and redeemable and retractable for “an amount which is equal to the fair market value of the net consideration received for the first issuance of the Class A shares divided by the number of Class A shares first issued.” The share provisions will permit the redemption price to be paid by the issuance of a promissory note.
(b) Class B shares which will be entitled to one vote per share; entitled to a variable dividend; and redeemable and retractable for $XXXXXXXXXX per share.
(c) common shares which will be entitled to one vote per share and entitled to the remaining dividends and property upon dissolution.
Upon incorporation, XXXXXXXXXX will receive XXXXXXXXXX Class B shares at a subscription price of $XXXXXXXXXX.
15. (a) XXXXXXXXXX will then transfer, at fair market value, to XXXXXXXXXX all of his common shares of XXXXXXXXXX. In consideration for such transfer of shares, XXXXXXXXXX will receive XXXXXXXXXX common shares of XXXXXXXXXX will jointly elect with XXXXXXXXXX, in prescribed form and within the time referred to in subsection 85(6), to transfer the shares of XXXXXXXXXX at an agreed amount equal to the adjusted cost base of his shares immediately before the transfer. The fair market value of the common shares of XXXXXXXXXX so transferred will be greater than their adjusted cost base to XXXXXXXXXX. The term “adjusted cost base” (“ACB”), as used here and subsequently, has the meaning assigned by section 54.
(b) At the same time as the transaction described above, XXXXXXXXXX will transfer, at fair market value, to XXXXXXXXXX all of her common shares of XXXXXXXXXX and, in consideration therefor, XXXXXXXXXX will receive XXXXXXXXXX common shares of XXXXXXXXXX. The ACB to XXXXXXXXXX of the XXXXXXXXXX Pre V-Day Shares exceeds their fair market value and, accordingly, no election pursuant to subsection 85(1) will be filed in respect of these shares; rather, an election will be made by XXXXXXXXXX pursuant to subsection 26(7) of the ITAR in respect of those shares. XXXXXXXXXX will jointly elect with XXXXXXXXXX, in prescribed form and within the time referred to in subsection 85(6), to transfer her Post V-Day Shares and Third Group Shares at an agreed amount equal to the ACB of those shares to her immediately before the transfer. The fair market value of the Post V-Day Shares and the Third Group Shares so transferred will be greater than their adjusted cost base to XXXXXXXXXX.
(c) The aggregate paid-up capital of the common shares of XXXXXXXXXX issued to XXXXXXXXXX and XXXXXXXXXX will be equal to the aggregate paid-up capital of the shares of XXXXXXXXXX so transferred by them. The shares issued by XXXXXXXXXX to XXXXXXXXXX and XXXXXXXXXX will be the only issued and outstanding common shares. Upon the issuance of such common shares, the XXXXXXXXXX Class B shares of XXXXXXXXXX held by XXXXXXXXXX will be redeemed for $XXXXXXXXXX. The term “paid-up capital” (“PUC”), as used here and subsequently, has the meaning assigned by subsection 89(1).
16.XXXXXXXXXX will transfer, at fair market value, the following assets (the “Transferred Assets”) to XXXXXXXXXX:
(a) its beneficial interest in the XXXXXXXXXX;
(b) its equipment relating to the XXXXXXXXXX;
(c) its beneficial interest in the Adjusted Interest; and
(d) XXXXXXXXXX% of the remaining current assets of XXXXXXXXXX, comprising cash on hand, marketable securities and prepaid expenses.
At the time of the transfer, Trusteeco will acknowledge that it would be then holding the XXXXXXXXXX in trust for XXXXXXXXXX and XXXXXXXXXX will acknowledge that it would be then holding the Adjusted Interest in trust for XXXXXXXXXX.
The fair market value of the Transferred Assets received by XXXXXXXXXX from XXXXXXXXXX will be equal to XXXXXXXXXX% of the fair market value of the all the assets of XXXXXXXXXX immediately before the transfer.
17. In consideration of the transfer of assets described in paragraphs 16(a) and (b) above, XXXXXXXXXX will issue XXXXXXXXXX Class A shares and XXXXXXXXXX will indemnify XXXXXXXXXX in respect of any liability which XXXXXXXXXX may incur by reason of its not assuming the mortgage in respect of the XXXXXXXXXX. In consideration of the transfer of assets described in paragraphs 16(c) and (d) above, XXXXXXXXXX will issue to XXXXXXXXXX a promissory note (the “Current Asset Note”) which will be payable on demand by the holder thereof; be non-interest-bearing; have a face value equal to the fair market value of the assets described in paragraphs 16(c) and (d) above; and be assignable by the holder thereof.
Upon the issuance of the Class A shares, an amount equal to the fair market value of the property so received will be added to the stated capital account in respect of such shares.
18. In respect of the transfer of property described in paragraphs 16(a) and (b) above, XXXXXXXXXX and XXXXXXXXXX will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to transfer the property at the following agreed amounts:
(a) in the case of depreciable property of a prescribed class, the least of the amounts referred to in subparagraphs 85(1)(e)(i) to (iii); and
(b) in the case of land comprising the XXXXXXXXXX, the cost amount to XXXXXXXXXX of such land.
The agreed amount in respect of each of the properties so transferred will be less than or equal to its fair market value at the time of the transfer. The terms “depreciable property” and “cost amount” have the meanings assigned by subsection 13(21) and 248(1), respectively.
19. All of the Class A shares of XXXXXXXXXX owned by XXXXXXXXXX will be redeemed at their aggregate redemption amount in consideration for the issuance by XXXXXXXXXX of a promissory note (the “Redemption Note”) which will be payable on demand by the holder thereof; be non-interest-bearing; have a face value equal to the aggregate Redemption Amount of such redeemed shares; and be assignable by the holder thereof.
XXXXXXXXXX will accept the Redemption Note as full payment of the aggregate Redemption Amount for the Class A shares.
20. XXXXXXXXXX will then assume one-half of the liabilities then on hand in XXXXXXXXXX (including all of the mortgage on the XXXXXXXXXX) which assumption will offset the Current Asset Note and partially offset the Redemption Note.
21. XXXXXXXXXX will then purchase for cancellation all of its XXXXXXXXXX common shares owned by XXXXXXXXXX, at their fair market value, which fair market value will be equal to the balance then payable on the Redemption Note. The purchase price for the purchase for cancellation will be paid by the delivery and cancellation of the Redemption Note. The purchase for cancellation will take place within thirty (30) days following the transfer of shares described in paragraph 15 above.
22. XXXXXXXXXX will sell the Adjusted Interest to XXXXXXXXXX at its fair market value in consideration for which XXXXXXXXXX will issue a non-interest-bearing promissory note payable at the rate of $XXXXXXXXXX per month to XXXXXXXXXX.
23. Neither XXXXXXXXXX nor XXXXXXXXXX is, or will be, at the time the proposed transactions described herein are implemented, a specified financial institution within the meaning assigned by subsection 248(1).
24. No property has or will become property of XXXXXXXXXX in contemplation of the proposed transactions described herein.
25. There will not be, as part of the series of transactions or events that includes the proposed transactions described herein, any
(a) disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i),
(b) acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii),
(c) acquisition of property in the circumstances described in subparagraph 55(3.1)(c), or
(d) acquisition of property in the circumstances described in subparagraph 55(3.1)(d)
which has not been described herein.
26. None of the shares of any of the corporations referred to herein has been, or will be, subject to a guarantee agreement within the meaning of subsection 112(2.2) that is given by a specified financial institution or a specified person in relation to a specified financial institution (all within the meaning of subsection 248(1)) for any purpose referred to in subsection 112(2.2).
27. None of the shares of any corporations referred to herein has been, or will be, issued as part of a transaction or event or series of transactions or events of the type described in subsection 112(2.5).
28. None of the shares described herein has been, or will be, the subject of a dividend rental arrangement as that term is defined in subsection 248(1).
29. The Class A shares to be issued to XXXXXXXXXX will be redeemed at an amount not greater than the value of the consideration for which the shares will be issued.
30. Neither XXXXXXXXXX nor XXXXXXXXXX will acquire any property or incur any debts outside of the ordinary course of its business in contemplation of the proposed transactions herein described.
RULINGS PROVIDED
Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts and proposed transactions and the purposes of the proposed transactions, we confirm the following:
A. The transfer of title by XXXXXXXXXX to Trusteeco described in paragraph 12 above will not be considered a disposition for purposes of the Act.
B. (1) For the purposes of section 47, the Pre V-Day Shares, the Third Group Shares and the Post V-Day Shares will not be viewed as being identical properties.
(2) Any loss arising upon the transfer of the Pre V-Day Shares by XXXXXXXXXX to XXXXXXXXXX will not be denied under section 40.
C. Provided the relevant parties jointly elect under subsection 85(1), in prescribed form and within the time referred to in subsection 85(6), in respect of the transfer of property described in paragraph 15 above, a vendor’s proceeds of disposition of, and a purchaser’s cost of, a particular property transferred will, by virtue of paragraph 85(1)(a), be deemed to be equal to the amount agreed upon in respect of that property, as described in paragraph 15 above. For greater certainty, paragraph 85(1)(e.2) will not be applicable in respect of the transfers.
D. Provided the relevant parties jointly elect under subsection 85(1), in prescribed form and within the time referred to in subsection 85(6), in respect of the transfer of property described in paragraph 16 above, a vendor’s proceeds of disposition of, and a purchaser’s cost of, a particular property transferred will, by virtue of paragraph 85(1)(a), be deemed to be equal to the amount agreed upon in respect of that property, as described in paragraph 18 above. For greater certainty, paragraph 85(1)(e.2) will not be applicable in respect of the transfers.
For the purposes of this ruling, the reference in subparagraph 85(1)(e)(i) to “...the undepreciated capital cost to the taxpayer of all property of that class immediately before the disposition...” shall be interpreted to mean the portion of the undepreciated capital cost to the taxpayer of all property of that class immediately before the transfer that the capital cost to the taxpayer of the property of that class transferred is of the capital cost to the taxpayer of all property of that class.
E. The application of the provisions of subsection 85(2.1) will result in a reduction of the PUC of the Class A shares of XXXXXXXXXX issued to XXXXXXXXXX as described in paragraph 18 above to an amount equal to the agreed amount in the election filed by XXXXXXXXXX and XXXXXXXXXX, as described in paragraph 18 above.
F. By virtue of subsection 186(2) and paragraph 186(4)(a), XXXXXXXXXX and XXXXXXXXXX will be connected with each other.
G. The application of the provisions of subsection 84.1(1) to the transfers of shares of XXXXXXXXXX to XXXXXXXXXX, as described in paragraph 15 above, will not result in a reduction, pursuant to paragraph 84.1(1)(a), in the PUC of the shares of XXXXXXXXXX issued on the transfers or in a dividend being deemed paid by XXXXXXXXXX to XXXXXXXXXX or XXXXXXXXXX pursuant to paragraph 84.1(1)(b).
H. No acquisition of control of XXXXXXXXXX will arise upon the transfers of the shares of XXXXXXXXXX by XXXXXXXXXX and XXXXXXXXXX to XXXXXXXXXX, as described in paragraph 15 above, or by XXXXXXXXXX to XXXXXXXXXX, as described in paragraph 21 above, by virtue of subsection 256(7).
I. Provided that no elections are made pursuant to the provisions of subsection 83(2), upon the redemption of the Class A shares of XXXXXXXXXX, as described in paragraph 19 above, and upon the purchase for cancellation of the XXXXXXXXXX common shares, as described in paragraph 21 above, the amount by which the amount paid on the redemption or purchase for cancellation, as the case may be, exceeds the PUC of the particular shares so redeemed or purchased will be deemed to be a dividend paid by the particular payor and received by the particular recipient, by virtue of paragraph 84(3)(a) or 84(3)(b), as applicable. Each such dividend will be deductible by the particular recipient under subsection 112(1) in computing its taxable income for the taxation year in which it is deemed to have received such dividend and such deduction will not be precluded by any of subsections 112(2.1) to (2.4). The provisions of subsection 112(3) will apply to any loss which may otherwise arise to the recipient as a result of the redemption or purchase for cancellation. The amount of such dividends will be excluded from the recipient’s proceeds of disposition otherwise determined by virtue of paragraph (j) of the definition of “proceeds of disposition” contained in section 54.
J. The dividends described in ruling (I) above will not be subject to tax under Part IV except as provided in paragraph 186(1)(b).
K. The provisions of subsection 55(2) will not apply to the dividends described in ruling (I) above by virtue of the application of paragraph 55(3)(b) provided that, as part of the series of transactions or events that includes the proposed transactions described herein, there is no
a) disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);
b) acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii); or
c) acquisition of property in the circumstances described in subparagraphs 55(3.1)(c) or (d)
which has not been described herein and, for greater certainty, subsection 55(3.1) will not apply to deny the application of paragraph 55(3)(b).
L. The dividend described in ruling (I) above that is deemed to be received by XXXXXXXXXX from XXXXXXXXXX will be deemed to be an “excluded dividend” by virtue of paragraph (a) of the definition of “excepted dividend” contained in subsection 191(1), and an “excepted dividend” by virtue of paragraph (b) of the definition of “excepted dividend” contained in section 187.1 and, therefore will not be subject to tax under Parts IV.1 and VI.1.
M. Each of the common shares of XXXXXXXXXX that are purchased for cancellation, as described in paragraph 21 above, will not be considered to become a taxable preferred share as a result of the proposed transactions described above, in and by themselves.
N. The cancellation of the Current Asset Note and the Redemption Note as a result of the assumption of liabilities by XXXXXXXXXX as described in paragraph 20 above and the purchase for cancellation of the XXXXXXXXXX shares as described in paragraph 21 above will not give rise to a “forgiven amount” within the meaning of subsections 80(1) or 80.08(1).
O. The provisions of subsection 69(11) will not apply to the transfers described in paragraph 16 above, unless, as part of a series of transactions or events which includes any of such transfers, it may reasonably be considered that one of the main purposes of the series was to obtain the benefit of any item described in paragraph 69(11)(a) which is available to a person (other than a person that would be affiliated with the vendors of the property immediately before the series began, if section 251.1 were read without reference to the definition of “controlled” in subsection 251.1(3)) or to obtain a benefit described in paragraph 69(11)(b).
P. Subsection 1102(14) of the Income Tax Regulations (the “Regulations”) will apply to the transfer of property by XXXXXXXXXX to XXXXXXXXXX, as described in paragraph 16 above, and by XXXXXXXXXX to XXXXXXXXXX, as described in paragraph 22 above so that any such property that is property of a prescribed class or a separate prescribed class immediately before the transfer will be deemed to be property of that same prescribed class or separate prescribed class, as the case may be, of XXXXXXXXXX and XXXXXXXXXX.
Q. Paragraph 1100(2.2)(a) of the Regulations will apply to the acquisition of property by XXXXXXXXXX from XXXXXXXXXX, as described in paragraph 16 above, and by XXXXXXXXXX from XXXXXXXXXX, as described in paragraph 22 above, such that, subject to paragraphs 1100(2.2)(f) and (g) of the Regulations, paragraphs 1100(2.2)(h), (i) and (j) of the Regulations will apply to such property.
R. The provisions of subsections 15(1), 56(2) and 246(1) will not apply to any of the proposed transactions described above, in and by themselves.
S. The provisions of subsection 245(2) will not be applied as a result of the proposed transactions, in and by themselves, to redetermine the tax consequences confirmed herein.
The above rulings are based on the Act in its present form and do not take into account any proposed amendments to the Act.
The above rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 dated December 30, 1996 issued by Revenue Canada (“IC 70-6R3”) and are binding provided the proposed transactions described herein are completed by XXXXXXXXXX.
OPINIONS
1. It is our opinion that, for purposes of determining XXXXXXXXXX gain or loss from the disposition of the Adjusted Interest to XXXXXXXXXX, the allocation of the ACB thereof, pursuant to section 43, will be that proportion of the ACB of the XXXXXXXXXX that the fair market value of the Adjusted Interest bears to the fair market value of the XXXXXXXXXX provided such an allocation results in a reasonable pro rata allocation of the ACB to the Adjusted Interest.
2. It is our opinion that the XXXXXXXXXX and the Adjusted Interest will not cease to be regarded as capital property to XXXXXXXXXX solely as a result of the proposed transactions described herein.
3. As a result of the sale described in paragraph 22 above, it is our opinion that, for the purposes of subsection 1101(1ac) of the Regulations, the Adjusted Interest and the building comprising the XXXXXXXXXX together constitute one property and will, therefore, be included in the same separate prescribed class.
4. You have asked (paragraph 33 of the ruling request) that we confirm that “So long as Trusteeco carries on no activity, other than holding the XXXXXXXXXX in trust for XXXXXXXXXX, it will be considered a bare trustee and any losses incurred in respect of the operation of such hotel in the future will belong to XXXXXXXXXX.” As indicated in paragraph 15(j) of IC 70-6R3, we are unable to rule when a matter on which a determination is requested is primarily one of fact and the circumstances are such that all the pertinent facts cannot be established at the time of the request for the ruling. Please refer to Technical News #7 which was issued on February 26, 1996 wherein the Department provided its views on bare trusts.
The foregoing comments are given in accordance with the practice referred to in paragraph 22 of IC 70-6R3 and are not binding on Revenue Canada.
1. Nothing in this ruling should be construed as implying that Revenue Canada has agreed to or reviewed the determination of the amount of the CDA or RDTOH; the PUC of any shares referred to herein; or the ACB or fair market value of any property referred to herein.
2. In the event of a subsequent disposition of any shares of XXXXXXXXXX or XXXXXXXXXX, nothing in this ruling should be construed as implying that the transactions described herein will not, for the purposes of subsection 55(3.1) or paragraph 110.6(7)(a), be considered to be part of a series of transactions or events which includes such subsequent disposition of shares. The phrase “series of transactions or events” has the meaning assigned by subsection 248(10).
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
13
Cont’d
.../cont’d
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