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.
Section 85Elections
As discussed with you recently, enclosed herewith are the memorandum and related documentation received from the Saskatoon District Office in connection with the above-noted taxpayer.
The quary raised by the District Office is whether or not the Department's position provides for the revocation or amendment of elections filed pursuant to section 85 of the Income Tax Act. You have indicated that the position in this regard is currently being reviewed.
As you will note, the T2057 election forms forwarded by the District Office in this case detail in the box for "consideration received the assets transferred by the taxpayer. What the taxpayer, in fact, received for the assets transferred to XXX was consideration in the form of an assumption of liabilities, a note receivable, and shares. In this sufficient to render the election invalid?
If the election is considered valid, it appears that the appropriate course of action would be the first alternative suggested by the District Office - an adjustment of the agreed amounts to the amounts determined by the Revenue Canada appraiser (i.e., the fair market value at the date of disposition). While the agreement of purchase and sale does not specifically include a price adjustment clause it does contemplate an adjustment to the purchase price if Revenue Canada does not agree with the values contained in the agreement.
It should also be recognized that the amount of the hard consideration does not exceed the fair market value of the assets transferred as determined by the Revenue Canada appraiser.
We await your comments in this matter and shall be pleased to provide any further assistance you may require in this connection.
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© Her Majesty the Queen in Right of Canada, 1981
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© Sa Majesté la Reine du Chef du Canada, 1981
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