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.
Mr. Thomas' memo describes a transfer of shares of one corporation XXX to another corporation XXX pursuant to subsection 85(1). The following facts relating to this transfer are relevant.
- 1. Mr. XXX Was the sole shareholder of XXX Ltd. and XXX Ltd. before the transfer and is the sole shareholder of XXX Ltd. after the transfer. XXX Ltd. is the sole shareholder of XXX Ltd. after the transfer.
- 2. The transfer was done for fair market value consideration subject to a standard price adjustment clause.
- 3. A valid subsection 85(1) election was filed.
- 4. The agreed amount under the election was the adjusted cost base of the shares which was their estimated V-day value.
- 5. The consideration received on the transfer consisted of XXX common shares of XXX Ltd. The transaction was reflected on the balance sheet of XXX Ltd. as follows:
Assets XXX
Investment at cost XXX.
XXX common shares XXX Ltd. XXX
Shareholder's Equity XXX
Contributed surplus XXX
Capital stock issued XXX
Mr. Thomas' memo expresses the opinion that, for the purposes of paragraph 85(1)(b), the contributed surplus recorded on the transfer represents consideration other than shares of XXX Ltd.
We cannot confirm that opinion. In our view, from the information provided to us, the only consideration received by Mr. XXX was shares of XXX Ltd. A credit to contributed surplus on the issuance of shares does not constitute consideration other than shares.
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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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