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.
Dear Sirs:
RE: Subsection 55(2) of the Income Tax Act (the "Act") and "Safe Income"
This is in reply to your letter of January 20, 1984 in which you asked that we confirm your understanding of our Department's position regarding the calculation of safe income for the purposes of subsection 55(2).
Your understanding of our position is that where corporate shareholders which hold common shares in another corporation agree that one of them is to have its common shares purchased for cancellation, safe income for the purposes of this transaction is to be calculated at the time this agreement to purchase is entered into. Consequently, if the last shares are repurchased two or three years after the initial repurchase, the level of safe income at such later time would not be relevant for the purposes of subsection 55(2).
Provided that the agreement to purchase is the first event in the series of events leading to the purchase of the common shares we confirm that your understanding of our position on this matter is correct.
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© Her Majesty the Queen in Right of Canada, 1984
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© Sa Majesté la Reine du Chef du Canada, 1984
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