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.
In response to your memo of October 21, 1981, it is our opinion that the reference, in section 18 of Regulation 135 of the Ontario Corporations Act, to "amount paid" is a reference to the value of the consideration given in exchange for the share. The section referred to above states that:
"Where the preferences, rights, conditions, restrictions, limitations, or prohibitions attaching to preference shares of a Class provide for the payment of a premium in the case of repayment of capital, redemption, or purchase for cancellation, then, in any of those cases, the premium shall not exceed 20 per cent of the amount paid on the shares of that class."
In the situation you described, preference shares with a par value of $1 and a redemption amount of $100 were taken back as partial consideration on a transfer of shares to a corporation. The balance of the consideration taken back was cash. The transfer was subject to a late-filed subsection 85(1) election. The preference shares were later redeemed for $100 each.
Assuming that the value of the shares transferred to the corporation is equal to the value of the consideration taken back, it is our opinion that the subsection 85(1) election is not invalidated by virtue of the fact that the redemption amount of the preference shares exceeds the par value of those shares by more than 20 per cent.
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, 1981
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, 1981
Email this Content