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. … Thus, Child A's subscription for shares of the capital stock of Opco with the proceeds of the capital dividend received from Opco (through the Trust) would not be considered an arm’s length capital contribution …. Depending on the circumstances, however, Child A may be able to benefit from the specified individual's safe harbour capital return exclusion in subparagraph (f)(i) of the definition of "excluded amount" in subsection 120.4(1). … [T]hat safe harbour capital return would be calculated by reference to the amount of the subscription to the shares of the capital stock of Opco and the appropriate prescribed rate. ...

7 October 2022 APFF Roundtable Q. 8, 2022-0942151C6 F- Surplus stripping-- summary under Subsection 84.1(1) Summary Under Tax Topics- Income Tax Act- Section 84.1- Subsection 84.1(1) incorporating a sub through which a share sale will occur so as to avoid s. 84.1 is not per se GAARable In order for Brother to avoid the application of s. 84.1 to a sale of his shareholding of Opco (representing ½ of its common shares) to a corporation (“Sister-Holdco”) owned by his Sister, he sells such shares through a newly-incorporated corporation wholly-owned by him (“Brother-Portfolioco”). ... Brother-Portfolioco sells those shares to Sister-Holdco for $1 million, so that the resulting capital gain increases its capital dividend account – but with a capital gains reserve being claimed because most of the sales proceeds are deferred. ... CRA responded: The CRA remains concerned about any form of corporate surplus stripping arrangement and tax planning that is contrary to the integration principle. … However, in a situation such as the one described, the CRA would not rely on the application of the GAAR solely because of the specific formation of Brother-Portfolioco to proceed with the Sale. ...

Paragraph 304(3)(a) … would deem the child to be the holder of the contract and, as such, would meet the requirements of clause 304(1)(c)(iii)(A) …. In our view, the expression "in trust" in paragraph 304(3)(a) … is more akin to a nominee and is not meant to include a trust not specifically referenced in clause 304(1)(c)(iii)(A), namely those identified in (ii) to (iv) above. ...

What is CRA's position on whether GAAR will apply if the above planning is carried out: Pre-acquisition – i.e. NRCo injects equity into CanHoldco, and CanHoldco acquires Forco from an arm's length vendor (assume CanHoldco can't acquire CanOpco directly because NRCO also wishes to acquire Forco's other assets); Post-acquisition – i.e. NRCo acquires Forco from an arm's length vendor, then after a number of months transfers Forco to CanHoldco in exchange for shares of CanHoldco; and Non-acquisition – i.e. the NRCo, Forco, CanOpco structure has been in place since the inception of CanOpco's business activities, and NRCo transfers the shares of Forco to CanHoldco in exchange for shares of CanHoldco? ...

CRA responded (TaxInterpretations translation): … (a) Aco, Bco and Cco are a "related group" as per ITA subsection 251(4) taking into account that these corporations are related with each other by virtue of ITA subsection 251(3). Consistently with ITA paragraph 251(5)(a), since the related group comprising Aco, Bco and Cco is in a position to control Dco, this related group is deemed to be a related group that controls Dco for purposes of the application of ITA subsection 251(2). … (b) In light of the above, Dco would also be related to Aco by virtue of ITA subparagraph 251(2)(b)(ii) given that Aco is a member of a related group controlling Dco. ... A) who inter alia is related with a person (Aco) which is a member of the related group controlling Dco. … (c) In light of the above, Dco and Eco would be related with each other by virtue of ITA subparagraph 251(2)(c)(iii) by reason of the fact that Eco is controlled by a person (Aco) who is related inter alia with a person (Bco) which is a member of the related group controlling Dco. ...

CRA responded: (a) … [T]his amendment to the trust indenture results in a partial disposition of the capital and income interests in the trust held by the original beneficiaries. Since … paragraph 69(1)(b) is applicable in this case, the original beneficiaries will be deemed to have received, as a result of the partial disposition of their interests, consideration equal to the fair market value of those interests. … (b) In the event that the courts approve the addition of a beneficiary that is a corporation in which a majority of the voting and participating shares are held by persons other than the original beneficiaries of the trust, it would first have to be determined whether the change is significant enough to give rise to a new trust and, consequently, to a disposition of all the property of the old trust to the new trust. ...

The definition of "exempt contribution" provides that the exempt contribution amount will be nil if there were two "survivors" receiving a TFSA payment – but s. ... In the event that the aggregate amount that both survivors attempt to designate as an exempt contribution exceeds the maximum amount allowed, additional information may be required from either or both of the survivors in order for a reasonable designation to be allowed … [including] the conditions specified in the will …. ...

CRA responded: IT-339R2 [para. 4) … states that coverage under a plan must be in respect of hospital care or expense or medical care or expense which normally would otherwise have qualified as a medical expense under the provisions of subsection 118.2(2) …. ... Finally … where the policy includes both coverages, it is our view that the policy would not be a private health services plan and therefore the premiums would not qualify as medical expenses giving rise to a non-refundable tax credit. ...

CRA responded: …IT-529[, para. 16 notes] … “[I]n order for a health care spending account to qualify as a plan of insurance, there must be a reasonable element of risk. ... …[R]egardless of whether a HCSA qualifies as a PHSP, a sole employee-shareholder who receives benefits out of the HCSA in his or her capacity as a shareholder is required to include such benefits in his or her income under subsection 15(1) …. [The] general presumption that a sole employee-shareholder receives a benefit or an allowance in his or her capacity as a shareholder … may not apply if the benefit or allowance is comparable (in nature and amount) to benefits and allowances generally offered to non-shareholder employees of similar-sized businesses, who perform similar services and have similar responsibilities. ...

CRA stated: The entity was to be created as a French SLP – which is a “Fonds Professionnel Spécialisé” – established as a “société en commandite simple” (“SECS”). ... CRA noted the following salient characteristics of an SLP established as a SECS [usually translated as "limited partnership"]: the existence of a separate legal personality that is recognized under the law of the relevant foreign jurisdiction – meaning the entity’s full legal capacity to acquire and own property, to sue and be sued, to carry on its own activities and to incur liabilities of its own; the limitation of liability afforded to all of its “limited members”; the unlimited liability of the “general member”; and the computation of earnings at the entity level, with a distribution mechanism akin to the declaration and payment of a dividend. ...