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. Does "capital" in 149(1)(d.5) include indebtedness?
2. Is the votes test in 149(1.3) definitive or is it in addition to the ownership test?
Position: 1. No
2. The votes test is definitive .
Reasons: 1. Not capital under GAAP, 9822895, 9822815
XXXXXXXXXX 991389
C. Savage
Attention: XXXXXXXXXX
December 2, 1999
Dear Sirs:
Re: Meaning of Capital in Paragraph 149(1)(d.5) of the Income Tax Act ("the Act")
This is in your reply to your letter of May 11, 1999 wherein you requested our views with respect to the following:
1. Does it remain the department's view that the term "capital" within the meaning of paragraph 149(1.5) of the Act does not include indebtedness of a corporation described therein?
Yes, this remains our view.
2. In subsection 149(1.3) of the Act, is the "90% or more of the votes" requirement imposed in addition to the requirement of paragraph 149(1)(d.5), such that one or more municipalities in Canada must own both not less than 90% of the capital attributable to all of the outstanding shares of a corporation with share capital and not less than 90% of the voting rights exercisable at an annual shareholders' meeting of such corporation?
In our view, the voting requirement in subsection 149(1.3) is definitive. A corporation would not be precluded from qualifying under the ownership test in paragraph 149(1)(d.5) where, for example, shares representing more than 10% of the stated capital of the corporation are owned by a taxable corporation as long as one or more Canadian municipalities own shares that give them 90% or more of the votes that can be cast under all circumstances at an annual meeting of shareholders of the corporation.
We apologize for the delay in responding and trust this will be of assistance.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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