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 Mr. Braman:
This is in reply to your letter of May 26, 1980 concerning the interpretation of the meaning of the words "property transferred" for the purposes of section 85(1) of the Income Tax Act (the Act).
You provided us with the following hypothetical situation:
A taxpayer after 1971 purchased shares in an operating company from his spouse at their fair market value and the transaction was subject to the spousal roll over provisions of the Act. To date he has paid only part of the purchase price. He proposes to transfer these shares under the provisions of section 85(1) of the Act to his holding company for shares in the holding company having a fair market value equal to his equity in the transferred shares. The agreed amount would be the adjusted cost base of the transferred shares. After the transfer the holding company will pay the balance owing on the original purchase price. This amount is greater than the adjusted cost base of the transferred shares and less than their fair market value at the time of transfer.
We do not concur with your view that the property transferred consists only of the transferor's equity in the property and the payment of the balance of the purchase price by the holding company does not constitute a consideration of the sale.
It is our opinion that the property transferred is the shares and the assumption of the debt by the holding company constitutes part of the consideration of the sale. In addition it is our opinion that the agreed amount for the purposes of section 85(1) of the Act can not be less than the amount of the debt assumed by the holding company.
We trust that this information will be of assistance to you.
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1980
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1980
Email this Content