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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Where a taxpayer disposes of or exchanges securities in circumstances in which the rollover provisions of subsection 7(1.5) are otherwise meant to apply, will the receipt of non-share, non-cash consideration by the taxpayer deny the application of subsection 7(1.5)?
Position:
Yes. However, the very limited exceptions in paragraphs 6 and 7 of IT-450R (section 85.1) may be extended to circumstances in which subsection 7(1.5) applies.
Reasons: The wording of subsection 7(1.5) is clear.
XXXXXXXXXX 2003-000364
G. Kauppinen
April 1, 2003
Dear XXXXXXXXXX:
Re: Subsection 7(1.5) of the Income Tax Act ("Act")
This is in reply to your letter dated February 12, 2003 regarding the application of subsection 7(1.5) of the Act in situations where non-share, non-cash consideration is received for the disposition of the "exchanged securities" (as defined in subsection 7(1.5) of the Act).
Opinions concerning proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. For more information concerning advance income tax rulings, please refer to Information Circular 70-6R5 dated May 17, 2002, issued by the Canada Customs and Revenue Agency. Consequently, we can only provide you with the following general comments.
Paragraph 7(1.5)(b) of the Act clearly states that the taxpayer must receive no consideration for the disposition or exchange of the exchanged securities other than "new securities"(as defined in paragraph 7(1.5)).
We have previously stated that we may be prepared to extend the very limited exceptions in paragraphs 6 and 7 of Interpretation Bulletin IT-450R entitled Share for Share Exchange (section 85.1 of the Act) to rollovers under subsection 7(1.5) of the Act where the specific proposed transaction is submitted in the form of a request for an advance income tax ruling. This would give us the opportunity to review the pertinent facts and proposed transactions to determine whether the limited exceptions should apply to the particular situation.
We trust our comments will be of assistance to you.
Yours truly,
Mickey Sarazin, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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