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: whether share is a common share
Position: question of construction of document
Reasons: 248(1)
XXXXXXXXXX 2004-008852
Denise Dalphy, LL.B.
September 16, 2004 (613) 941-1722
Dear XXXXXXXXXX:
We are writing in reply to your letter dated July, 2004 wherein you requested our views on whether "Class A preferred shares" of the capital stock of a particular corporation would be common shares within the meaning of subsection 248(1) of the Income Tax Act (the "Act").
Written confirmation of the consequences inherent in particular transactions are given by this directorate only where the transactions are seriously proposed in the near future and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R5. Since your question seems to relate to shares that have already been issued, we are providing only the following general comments.
In Terminal Dock and Warehouse Co. Ltd. v MNR (1959), 23 Tax A.B.C. 40, the Tax Appeal Board considered whether certain shares were "common shares" as that term was defined in the Act. The Board held that whether shares fall in the ambit of the definition of "common shares" in the Act is a matter of construction of the relavant document. In particular, the Court focussed on the rights that the shareholders would have on a redemption or reduction of the capital stock. You may wish to refer to the text of this court case to assist you in making a determination.
The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R5, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Revenue Agency. In addition, our comments do not address whether the aforementioned shares would be common shares for the purposes of section 44.1 of the Act or whether the shares may be characterized in another fashion for various purposes of the Act, such as, for example, "term preferred shares" within the meaning of subsection 248(1) of the Act. Our practice is to make this specific disclaimer in all instances in which we provide an opinion.
Yours truly,
Steve Tevlin
Manager
Corporate Financing Section
Financial Industries Division
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