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.
Principal Issues: Should the capital contribution be subject to 12(1)(x)?
Position: NO
Reasons: No expense realized and no acb adjustment acted on.
August 16, 2010
Toronto Centre Tax Services Office HEADQUARTERS
Large Files Claude Tremblay
(819) 281-6906
Attention: Sandra Mallory
2010-035551
XXXXXXXXXX
This is in reply to your request for our comments on a submission made by XXXXXXXXXX , on behalf of XXXXXXXXXX , with respect to a transaction that involved a capital contribution that represented a minority compensation payment for the utilization of losses. The submission was made in response to our April 6, 2009 memorandum, 2008-028928, addressed to you wherein we concluded that the provisions of paragraph 12(1)(x) of the Income Tax Act (the "Act") would apply.
We are not providing detailed comments on the views expressed in the submission. However, upon further reflection, we are now recommending that the TSO not reassess XXXXXXXXXX under the provisions of paragraph 12(1)(x) of the Act. Our revised views result from the particular facts of this situation wherein no income tax advantage was taken from an adjusted cost base adjustment that arose from the transaction.
R. Albert, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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