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.
The Honourable Herb Gray, P.C., M.P.
Deputy Prime Minister
Ottawa, Ontario
K1A 0A6 January 12, 1999
Dear Colleague:
Thank you for your letter of November 24, 1998, concerning the tax consequences to Canadian shareholders of the 1998 spin-off or distribution by XXXXXXXXXX of its subsidiary XXXXXXXXXX.
You enclosed letters from XXXXXXXXXX. The Income Tax Rulings and Interpretations Directorate of the Policy and Legislation Branch replied to these correspondents. As requested, I am enclosing copies of the responses.
The situation for Canadian shareholders of XXXXXXXXXX is not unique to that corporation. The Canadian tax consequences of such spin-offs were first highlighted by the AT&T reorganization in 1984. Since that time, several other spin-offs have come to the attention of the Department. The number of such spin-offs has increased dramatically in recent years. Senior officials have reviewed 17 different foreign spin-offs from 1996 to date in response to queries from Canadian shareholders, including spin-offs done by XXXXXXXXXX. In each case, it was determined that a Canadian shareholder of the particular foreign corporation at the time of the spin-off had received a taxable dividend.
This interpretation of the tax consequences of a spin-off to Canadian shareholders is consistent with the view of the Department of Finance and has been confirmed by the Department’s Legal Services. In order to make Canadians more aware of the Canadian tax consequences, the Department published them in an Income Tax Technical Newsletter dated September 30, 1997, a copy of which is attached.
I trust this is satisfactory.
Yours sincerely,
Herb Dhaliwal, P.C., M.P.
Enclosures
C.C. Minister’s Office
Political Assistant
J. Stalker
957-2118
December 15, 1998
983191
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© Her Majesty the Queen in Right of Canada, 1999
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© Sa Majesté la Reine du Chef du Canada, 1999
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