Search - consideration

By virtue of the First Merger, each common and preferred share of Target was converted into the right to receive the applicable “Merger Consideration,” being the “Share Consideration” (being common shares to be issued by XXXXXXXXXX being the direct (apparently Canadian-resident) parent of Opco – referred to herein as Parent) and the “Cash Consideration.” ... Upon the First Merger occurring, and pursuant to the “Funding Agreement” between Parent, Opco, Merger Sub1 and Merger Sub2: Merger Sub1 issued a number of additional common shares (the “Additional Merger Sub1 Shares”) having an agreed FMV equal to the FMV of the aggregate Share Consideration; and Parent added to the stated capital account maintained for its common shares an amount equal to the aggregate FMV of the Share Consideration. ... The Opco Capital Contribution resulted in an increase in the ACB to Parent of its shares in Opco, pursuant to s. 53(1)(c), in an amount equal to the FMV of the aggregate Share Consideration. ...

2 December 2014 CTF Roundtable Q. 3, 2014-0547251C6- Q.3- Restrictive Covenants-- summary under Paragraph 56.4(6)(e) Summary Under Tax Topics- Income Tax Act- Section 56.4- Subsection 56.4(6)- Paragraph 56.4(6)(e) recital of nominal consideration Would CRA reconsider 2014-0522961C6, so that the allocation in an agreement of $1 of consideration to a restrictive covenant does not constitute proceeds for the purpose of paragraphs 56.4(6)(e) and (7)(d)? CRA responded that it: is now prepared to accept that where a contract relating to granting a restrictive covenant uses words such as "$1 and other good and valuable consideration" simply to ensure that the contract is legally binding…such consideration will not, in and of itself, constitute proceeds received or receivable by the particular party for granting the RC for purposes of paragraph 56.4(6)(e) and paragraph 56.4(7)(d). ... If more than nominal consideration of $1 is paid…the amount of proceeds (or any additional amount deemed to be proceeds by paragraph 68(c)) received or receivable by the taxpayer for the RC would be taxable as ordinary income under subsection 56.4(2) unless one of the three exceptions in subsection 56.4(3) otherwise applies. ...

24 January 2011 Internal T.I. 2010-0389251I7 F- Farm-out agreement and warrants-- summary under Options Summary Under Tax Topics- General Concepts- Fair Market Value- Options amount allocated out of consideration to “free” warrants based on the greater of their trading and in-the-money value A mining exploration corporation (the "Purchaser") agreed with another mining exploration corporation (the "Vendor") to acquire an interest in the Vendor's unproven resource properties (the "Properties") in consideration for incurring specified exploration expenses. As part of this agreement, the Vendor also agreed to issue, for no significant consideration, warrants to the Purchaser to acquire treasury common shares. After indicating that the amount of the Canadian exploration expense otherwise considered to be incurred by the Purchaser was to be reduced by the value of the warrants, the Directorate commented on their valuation as follows: In determining the portion of the total consideration for the warrants, we would consider the amount that would have been the benefit under subsection 15(1) if no consideration had been paid for the warrants. ...

18 December 2003 Internal T.I. 2003-0044007 F- OPTION D'ACHAT D'ACTIONS RACHETEES-- summary under Paragraph 7(1)(b) Summary Under Tax Topics- Income Tax Act- Section 7- Subsection 7(1)- Paragraph 7(1)(b) full option surrender consideration included under s. 7(1)(b) even though a portion thereof never paid The taxpayer surrendered his stock options to his arm’s-length employer for consideration that was payable partly up front and partly in instalments that were conditional on the employee’s continued employment for a specified period (a condition which he satisfied) and came due in years subsequent to that of the surrender. In finding that the taxpayer was required to include the full consideration paid or payable for the surrender in his income under s. 7(1)(b) notwithstanding that a portion of that consideration was not paid, the Directorate stated: The Act does not provide any qualification if the consideration for the disposition of the options is accompanied by a balance of sale, nor does it provide any relief in the event that the purchaser of the options fails to meet the purchaser’s obligations with respect to the payment of the option purchase price. ...

The dividend-in-kind of the life insurance policy by a corporation (Aco) to its shareholder is made for no consideration for purposes of s. 148(7)(a)(ii)(B), so that on the dividend-in-kind, the policy is deemed to be disposed of for the greatest of its ACB, CSV and the (nil) consideration received- or $150. However, where a trust transfers the policy to its beneficiary, the beneficiary (Xco) is regarded as giving consideration for the transfer that is all or any part of the beneficiary's income or capital interest in the trust, as applicable. Here, it would be reasonable to consider that such consideration had an FMV of $250. ...

.-- summary under Subsection 5907(2.01) Summary Under Tax Topics- Income Tax Regulations- Regulation 5907- Subsection 5907(2.01) "consideration received" includes assumed liabilities Does "consideration received" in Reg. 5907(2.01)(a) include any liabilities assumed by a foreign affiliate (the "Receiving Affiliate") on a transfer of property to it by another foreign affiliate (the "Disposing Affiliate") of the taxpayer? After citing Daishowa-Marubeni International Ltd. v The Queen, 2013 SCC 29, for the proposition that "'consideration received' by a taxpayer in respect of a particular disposition of assets includes the amount of any liabilities of the taxpayer that are assumed by a purchaser as part of the purchase of the disposed assets," CRA concluded: [T]he assumption by the Receiving FA of liabilities of the Disposing FA on a transfer of property to it, is "consideration received" by the Disposing FA for the property transferred…. ...

23 March 2011 Internal T.I. 2010-0389081I7 F- Disposition of a resource property-- summary under Element F Summary Under Tax Topics- Income Tax Act- Section 66.2- Subsection 66.2(5)- cumulative Canadian development expense- Element F proceeds from mineral claims sale included undiscounted deferred cash proceeds, but might exclude share consideration until issued; purchaser’s CEE obligation excluded The Vendor sold a percentage of its interest in unproven resource properties (the “Mining Properties”) in consideration for cash paid on signing and for stipulated cash sums and shares of the Purchaser (also a public corporation) which, in each case, were to be paid over a four-year period on the four anniversaries of the effective date of the agreement. ... After noting that the Mining Properties appeared to be property described in (f) of the Canadian resource property definition, that their disposition date was “the effective date and the date on which the conditions … were satisfied,” that the sale agreement did not specify a sale price, and that in F of the CCDE definition the “the expression ‘became receivable’ should have the same meaning as for the purposes of paragraph 12(1)(b),” the Directorate first turned to the cash component of the deferred consideration and stated that, having regard to jurisprudence indicating that where proceeds included note receivable, the value of such notes was not to be discounted: this is even more the case when it comes to monetary consideration. ... Turning to the deferred share issuance consideration portion of the sale consideration, the Directorate noted that over the four-year deferred payment period, the shares’ market price could “fluctuate greatly,” and stated that the TSO accordingly might: conclude that such portion of the proceeds of disposition for the Mining Properties by the Vendor is not determinable prior to the date of issuance of the shares by the Purchaser and that such portion of the proceeds of disposition would be recognized for tax purposes at the times of their issuance …. ...

Regarding s. 148(7), CRA indicated that, although it considered that a dividend-in-kind of a life insurance policy by a corporation to its shareholder is made for no consideration for purposes of s. 148(7)(a)(ii)(B), where a trust transfers the policy to its beneficiary, the beneficiary is regarded as giving consideration for the transfer that is all or any part of the beneficiary's income or capital interest, as applicable. Here, it would be reasonable to consider that such consideration had an FMV of $250. ... Instead, s. 148(7) would deem the proceeds of disposition of the policy to the trust to be the FMV of the consideration received by the trust for the disposition, namely, the $250 note repayment. ...

A of his common shares of Opco by way of purchase for cancellation for Class A preferred shares with a redemption value of $1 million, followed by a common share subscription by his two adult children for nominal consideration. ... A as consideration, Mr. A and Opco would agree to exchange the those Class A preferred shares for an equal number of Class B preferred shares. After noting that the price adjustment clause was not one described in IT-169 as it addressed adjusting the consideration received rather than the purchase price, and that the clause as described “would not be acceptable because … it did not provide for the necessary measures to settle any difference between the FMV of the consideration in relation to the transferred assets, should the preferred shares be redeemed before the CRA contests the FMV of the preferred shares,” CRA stated: The CRA would generally agree to recognize a clause for adjustment to the consideration and not apply subsection 51(2), where the facts (including the contract) evinced that the parties actually intended to deal in the shares at their FMV and established the FMV of the preferred shares for the purposes of the arrangement, by a fair and reasonable method, and the relevant adjustments provided for in the adjustment clause were effected by the parties where the FMV of the preferred shares was less than the FMV of the common shares. … Where there is a significant discrepancy between the FMV determined by the taxpayer for freeze preferred shares and the actual FMV, it usually demonstrates that the taxpayer had not made a genuine effort to determine the FMV of the shares [citing Guilder News and Wagner, 2001 DTC 5674 (FCA)]. ...

Aco will transfer on a s. 85(1) rollover basis to a newly-incorporated subsidiary (“Newco”) all of its Bco Reorganization Shares in consideration for Newco Common Shares. Bco will transfer the Trademarks to Newco in consideration for non-voting redeemable preferred shares (the “Newco Preferred Shares”), electing under s. 85(1), but so as to generate a gain. ... Bco will redeem all of the Bco Reorganization Shares in consideration held by Newco in consideration for a demand non-interest bearing promissory note (the “Bco Note”), and make an eligible dividend designation under s. 89(14) respecting the resulting deemed dividend.. ...