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:
RE: Transfer of Property to a Sister Corporation
This is in response to your letter of September 6, 1985 wherein you requested clarification of our position with respect to the application of paragraph 85(1)(e.2) of the Act where a property is transferred between corporations owned by the same shareholder for consideration less than the fair market value of the property transferred.
Transfers for consideration less than fair value can, inadvertantly or intentionally, create opportunities for the inappropriate reduction of capital gains in the event of a future disposition of shares of the corporations involved. Despite the fact that the provisions of paragraph 85(1)(e.2) of the Act are applicable in such situations we have adopted an administrative position not to apply them to transfers between sister corporations where, in our view, the consideration taken back ensures that the accrued gain in the shares of the transferor is not reduced, as a result of the transfer, by more than the accrued gain in the property transferred.
We hope this will be of assistance.
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© Her Majesty the Queen in Right of Canada, 1985
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© Sa Majesté la Reine du Chef du Canada, 1985
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