1993 External T.I. 9332045 F - Prescribed Shares

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.

5-933204 XXXXXXXXXX

Resource Industries

Attention:  XXXXXXXXXX

December 8, 1993

Dear Sirs:

RE:  Flow-through Shares

This is in reply to your letter of November 4, 1993 and will confirm our view that the common shares issued to employees by

XXXXXXXXXX

Our position is being confirmed following consideration of submissions made by yourself and XXXXXXXXXX on your behalf and our discussions with the same parties, the Department of Finance and the Department of Justice.

Where a word has not been defined in respect of its use in a particular provision of the Income Tax Act (the "Act") or the Regulations, subsection 33(3) of the Interpretation Act would not be applicable. As a result, subsection 33(3) of the Interpretation Act is not relevant to the meaning of the word "assisting" for the purpose of paragraph 6202.1(2)(b) of the Regulations. In addition, subsection 15(2) of the Interpretation Act provides that an interpretation section only applies when it is apparent that a different interpretation is not intended.

Thus, because the word "assisting" is intended to be interpreted as meaning "helping", the definition of "assistance" in paragraph 66(15)(a.1) of the Act is not relevant.

The interpretation of "assisting" whereby the word means "helping" is supported in R. v. Giguere, 8 C.C.C. (3d)1 at 8-9, and 13, and the reference therein to Dore v. A.G. Can and also Duchess of Westminster v. Royal Trust Co., D.L.R. (3d) 631. In addition the "man-in-the- street" interpretation of "assisting", whereby a loan advanced so that the purchaser may acquire shares is assisting the purchaser, is supported in the following decisions:

1.      Tenneco Canada Inc. (formerly Speedy Muffler King Corp.) v. R. 91 DTC 5207 at 5209,

2.      Evans v. M.N.R., (S.C.C.) 60 DTC 1047 at 1050, and

3.      Dunkelman v. M.N.R., 59 DTC 1242 at 1245.

We also understand that the phrase "otherwise conferred a benefit" found in subparagraph 6202.1(2)(b)(iv) of the Regulations is included because some, but not all of, the events or transactions referred to in subparagraphs 6202.1(2)(b)(i) to (iii) thereof may constitute benefits to the purchaser of shares.

In addition, in British Columbia Telephone Company v. R., 92 DTC 6129 at page 6133, where there is no ambiguity in the words, their meaning is not determined by reference to the other words or phrases that may be associated with them.

Finally, paragraph 6202.1(2)(b) of the Regulations does not include a requirement that the Minister evaluate loans for the purpose of determining whether or not the loan is a fair market value loan or a loan that confers a benefit. Thus, any loan made to a subscriber by the corporation or a specified person will cause the shares to be prescribed shares.

As a result of the above, it is our view that the shares issued by XXXXXXXXXX pursuant to the XXXXXXXXXX Flow-through Share Subscription Agreements are prescribed shares under paragraph 6202.1(2)(b) of the Regulations.

Yours truly,

for Director

Manufacturing Industries, Partnerships

and Trusts DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch