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 245(2) of theIncome Tax Act(Canada) (the “Act”)
We are writing in response to your letter dated December 17, 1990 wherein you requested a technical interpretation regarding the application of the provisions of subsection 245(2) of the Act to the following situation.
Facts
XXX
It appears that the interpretation you seek relates to a proposed transaction to be undertaken by a specific taxpayer and, therefore, we bring to your attention Information Circular 70-6R2 dated September 28, 1990 issued by Revenue Canada, Taxation. Confirmation with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling for a particular taxpayer with respect to specific transactions which are contemplated, a written request for an advance income tax ruling can be submitted in accordance with the Information Circular. Nevertheless, we can offer, the following general comments.
Before considering the possible application of subsection 245(2) to a transaction or series of transactions it is first necessary to consider whether or not some other provision of the Act, such as section 74.1, may have application.
The Department's views on the attribution rules relating to transfers and loans of property to related minors are stated in Interpretation Bulletin IT-510. Where a person transfers or loans property to a trust in favour of related minors (“designated persons” under subsection 74.5(5) of the Act), the attribution rules present in subsection 74.1(2) of the Act would deem any income earned on such property to be income of the transferor and not income of the related minors.
Where a specific anti-avoidance provisions, such as section 74.1, applies to a particular transaction or series of transactions, the provisions of subsection 245(2) of the Act would not be applied to that transaction. In the case, however where a specific anti-avoidance provision does not apply to a particular transaction or series of transactions, then the transaction or series of transactions would be reviewed to determine whether or not the provisions of subsection 245(2) would apply thereto. Information Circular 88-2 and Supplement 1 thereto, provide guidance with respect to the application of the provisions of subsection 245(2) of the Act. Specifically, we refer you to paragraph 25 of Information Circular 88-2 which addresses the application of subsection 245(2) to surplus stripping arrangements.
The foregoing comments represent our general views with respect to the subject matter of your letter.
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© His Majesty the King in Right of Canada, 1991
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© Sa Majesté le Roi du Chef du Canada, 1991
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