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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Applicability of subsection 74.4(2) where the statute of a corporation (small business corporation) change from time to time.
Position TAKEN:
The applicability of subsection 74.4(2) could change from time to time if the corporation moved from being a small business corporation to a non-small business corporation and back to a small business corporation.
Reasons FOR POSITION TAKEN:
File 9229190, E5C6163, E32727A
XXXXXXXXXX 5-941148
Attention: XXXXXXXXXX
October 12, 1994
Dear Sirs:
Re: Section 74.4 of the Income Tax Act
This is in reply to your letter dated April 28, 1994 wherein you requested a technical interpretation with respect to the applicability of subsection 74.4(2) where a corporation moved from being a small business corporation to a non-small business corporation and back to small business corporation. We apologize for the delay in responding to your request.
As explained in Information Circular 70-6R2, it is not the Department's practice to comment on proposed transactions other than in the form of advance income tax rulings. Taxpayers seriously contemplating proposed transactions are best advised to seek a formal ruling, submitting a complete statement of facts and issues as well as copies of all relevant documents. Should your situation involve completed transactions, you should submit all relevant facts and documentation to the appropriate taxation district office for their views. We are therefore not in a position to give you a definite response as to the application of the provisions of the Act. However, we can offer you the following general comments which may be of assistance although, in certain circumstances, they may not be appropriate to your specific situation.
We concur your view that subsection 74.4(2) of the Income Tax Act (the "Act") is inapplicable for any period of time in a taxation year throughout which a corporation is a small business corporation. Conversely, where a corporation ceased at any point of time to be a small business corporation, subsection 74.4(2) of the Act would be operative if the purpose test is met and the other two conditions are satisfied.
Also, we confirm your opinion that technically the applicability of subsection 74.4(2) of the Act could change from time to time if a corporation moved from being a small business corporation to a non-small business corporation and back to a small business corporation.
Furthermore, we confirm your opinion that subsection 74.4(2) of the Act does not apply to attribute to the transferor any interest that relates to a period following the death of the transferor.
We trust that these comments will be of assistance to you.
Yours truly,
for Acting Director
Manufacturing Industries,
Partnerships and Trusts Division
Rulings Directorate
Policy and Legislation Branch
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