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:
This is in reply to your letter dated November 13, 1984 wherein you requested our interpretation of the provisions of section 4800 of the Income Tax Regulations (the "Regulations") in the following hypothetical situation.
Opco was a public corporation after June 18, 1971. Opco is now a wholly-owned subsidiary of Holding Company #2 which in turn is a wholly-owned subsidiary of Holding Company #1. All the shares of Holding Company #1 are held by one individual and a trust for the benefit of the children of this individual. The trustees of the trust are related to the individual.
It is your opinion that, because Opco is ultimately controlled by a single related group and the members of the group would be considered to be insiders of the corporation as defined in subsection 4802(1) of the Regulations, Opco is eligible to make an election not to be a public corporation.
Our comments:
A corporation that has been a public corporation at any time after June 18, 1971 may cease to become one if it elects in prescribed manner pursuant to subparagraph 89(1)(g)(iii) of the Income Tax Act (the "Act") and if at the time it so elects it complies with the prescribed conditions of subsection 4800(2) of the Regulations. One of the prescribed conditions is that insiders of the corporation shall hold more than 90 percent of the issued and outstanding shares of each class of the capital stock of the corporation. In the situation you submitted, since all the shares of Opco are beneficially owned by Holding Company #2, this latter is an insider of Opco within the meaning of the definition of subsection 4802(1) of the Regulations. Therefore, it is our opinion that the condition referred above is met and that provided that the other conditions of subsection 4800(2) are also met, Opco will be eligible to make an election not to be a public corporation.
We trust this information will be of assistance to you.
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