20 March 1990 Income Tax Severed Letter AC74742 - Interpretation Bulletin Project Number 1539 Version 11

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.

Mar 20, 1990

Publications Division Specialty Rulings
Roy C. Shultis, Director Directorate
S. Leung
T. Bryant 957-2116

• 7- 4742
• Interpretation Bulletin Project Number 1539 (version 11) Share for Share Exchange Revision to IT-450

We are writing in response to your memorandum dated February 19, 1990 in which you requested our comments on Project Number 1539 (the "Project").

Our comments on version 11 of the Project are as follows:

• 1. Under the section entitled "Summary", there is a reference that section 85.1 provides a tax-free rollover in the course of a takeover or attempted takeover. Section 85.1 can apply to transactions which involve neither a takeover nor an attempted takeover. We suggest the phrase "in the course of a takeover or attempted takeover" be deleted.
• 2. Under the same section and in paragraph 1, the phrase "newly issued shares" is misleading and can be interpreted to include shares that have been previously issued, repurchased and then transferred to the vendor. We suggest that the phrase be modified as marked on the enclosed edited Project.
• 3. Paragraph 1 of the Project mentions that the vendor may not receive stock options, bonds or income debentures of the purchaser. We would suggest that mention also be made that subsection 85.1(1) will not apply where the vendor exchanges stock options, bonds or income debentures for shares of the purchaser (paragraph 6 of IT-450).
• 4. We suggest that you continue to use the words "purchaser", "vendor" and "acquired corporation" in paragraph 2 as they are used in paragraph 1 and in the Act, instead of "taxpayer", "Corporation A" and "Corporation X".
• 5. We suggest that some details of paragraphs 85.1(2)(a) and (b) be mentioned under the section entitled "Where Section 85.1 Does Not Apply". In our view these exceptions warrant some mention.
• 6. We question why the subject matter contained in paragraph 8 of IT-450 has been left out of the Project.
• 7. 21(1)(b)
• 8. We have also suggested some amendments to paragraph 5(b) of the Project to reflect that the definition of a share includes a fractional share.

We have also suggested other minor editing changes to the Project for your consideration as noted thereon. The edited Project is enclosed herewith.

M.A. Hiltz
for Director General
Specialty Rulings Directorate
Legislative and Intergovernmental
Affairs Branch

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