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.
Dear Sirs:
In your letter of December 6, 1985 you requested confirmation of our views on the application of paragraph 85.1(2)(d) of the Act in a takeover bid situation where the purchaser corporation offers to the holders of shares (the "exchanged shares") of the target company consideration such as:
$10 each for 50% of a share of the target company owned and 1/3 of a share of the purchaser's capital stock for the remaining 50% of the same single share of the target company held by the vendor.
Provided that the vendor can clearly demonstrate which target company shares or portions thereof were sold for cash or other non-share consideration, and which target company shares or portions thereof were sold for consideration that was shares or portions of shares of the purchaser, subsection 85.1(1) may be utilized in respect of the portions of the exchanged shares for which portions of shares were received.
The facts of situations such as the one described must be examined to determine whether subsection 247(1) of the Act is applicable. The proposed form of subsection 247(1) appears in Bill C-84, which received second reading in the House of Commons on December 9, 1985.
The opinions expressed here are not rulings and are not binding upon Revenue Canada, Taxation, as explained in paragraph 24 of Information Circular 70-6R, issued on December 18, 1978.
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© Her Majesty the Queen in Right of Canada, 1986
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© Sa Majesté la Reine du Chef du Canada, 1986
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