Search - consideration

The proposed transactions will be implemented before a potential acquisition of control of the foreign parent (which would "grind" the adjusted cost base of Loans under s. 111(4)): GP and Holdco will transfer Loan 1 and 2 to a newly-incorporated subsidiary (Subco) of Opco in consideration for Subco Preferred Shares Opco will transfer its partnership interest in GP to Canco 2, so that GP will cease to exist and Canco 2 will receive Subco Preferred Shares Canco 2 (which does not have significant tax attributes) will distribute such Subco Preferred Shares to Holdco in settlement of Loan 3 (thereby giving rise to a forgiven amount to it) Holdco will transfer its Subco Preferred Shares to Opco in consideration for Opco Preferred Shares Subco will be wound up into Opco under s. 88(1) (following a reduction of the stated capital of the Subco Preferred Shares)so that Loans 1 and 2 (previously owing to Subco by Opco) will be extinguished Rulings (following ATR-66): Ss. 40(2)(e.1) and 53(1)(f.11) will apply to the dispositions of Loans 1 and 2 to Subco The settlement of Loans 1 and 2 on the Subco winding-up will not give rise to a forgiven amount per s. 80.01(4) Neither s. 40(2)(e.1) nor s. 40(3.4) will apply to deny the capital loss to Holdco on the settlement of Loan 3 S. 61.3(3) will not apply to deny the application of s. 61.3(1) to Canco 2 (re inter alia the forgiven amount arising to it on the settlement of Loan 3) S. 245(2) will not be applicable ...

However…the taxpayer should be prepared to establish that the brief delay could not practically have been avoided and was not attributable to financial considerations like a desire to earn a return from a non-qualifying investment, to avoid temporary cash flow issues or because of exchange rate considerations. ...

A, for nominal consideration, 1 non-voting Class B preferred share, which is redeemable and retractable “for the fair market value for which it is issued” and entitled to discretionary dividends as and when declared. ... A as consideration for the share does not represent the fair market value of such share at the time of subscription.” ...

Its issued share capital consists of 1,000 Class A common shares and 1,000 Class B common shares held by two unrelated holdcos (Holdco1 and Holdco 2), who had subscribed for their shares on incorporation for nominal consideration. Opco repurchases all the Class B shares for $1M (Alternative 1) or Opco pays a discretionary dividend of $1M to Holdco 2 and the repurchases the Class B shares for nominal consideration, with the FMV of the Class A shares remaining at $1M, and the FMV of the Class B shares reduced by the dividend amount (Alternative 2). ...

CRA responded: The relevant exclusions are: …Paragraph (m) – if the interest in the non-resident trust was not acquired for consideration by the taxpayer, or certain other persons. The employee’s interest in the Super Fund does not meet this exception because the employee’s contributions to the Super Fund constitute “consideration” for the acquisition of the interest in the trust. ...

8 October 2010 Roundtable, 2010-0373221C6 F- Paid-up capital-- summary under Subsection 245(4) Summary Under Tax Topics- Income Tax Act- Section 245- Subsection 245(4) CRA has concluded in some cases that using PUC averaging to shift PUC to individual shareholders engages GAAR Opco, a Canadian-controlled private corporation owning and operating a seniors' residence, and whose shares (which are qualified small business corporation shares) are held equally by X, Y and Z (the "Taxpayers") carries out the following transactions in order to shield assets from commercial risks relating to its business, the Taxpayers cause the following transactions: they transfer their shares of Opco to a newly-incorporated corporation (Propertyco) in consideration for Class F Shares; Opco redeems its shares held by Propertyco; Opco transfers its real estate and other investments to Propertyco in consideration for Class F shares; the repurchase of the shares of the capital stock of Propertyco held by Opco. ...

23 April 2009 External T.I. 2008-0301241E5 F- Fiducie d'invest. à participation unitaire-75(2)-- summary under Subsection 75(2) Summary Under Tax Topics- Income Tax Act- Section 75- Subsection 75(2) s. 75(2) generally not applied to commercial unit trust where single class of units subscribed for on FMV terms Units of a unit trust (“UT”) that does not qualify as a mutual fund trust (“MFT”) are issued for monetary consideration to subscribing unitholders (three arm’s length CCPCs) as a subscription price corresponding to the units’ fair market value. ... After noting that s. 75(2) “would lend itself to application” here unless the trust generated business income, CRA went on to state: [T]he CRA would not systematically consider subsection 75(2) applicable with respect to situations involving the issuance of units of a trust that qualifies as a UT without qualifying as an MFT, particularly in situations where the following conditions are satisfied: the issue of units by a UT to a taxpayer is made in the context of an investment by the taxpayer in exchange for monetary consideration corresponding to the fair market value of the units issued, the tax elections that may be made by the trust, such as those provided for in subsections 104(13.1) and 104(13.2), must be capable of being made only in such a way as to result in uniform tax implications for all beneficiaries owning units with the same rights, privileges, conditions and restrictions; and there are no terms and conditions linking the units to any asset or class of assets of the trust. ...

-dollar purchase price, of which a specified portion was paid in Corporation C shares (the parent of Corporation B) as stated consideration for a specific number of Corporation A shares determined in accordance with the sale Agreement, and the balance was paid in cash. ... Thus, for the purposes of section 116, all shares disposed of must be considered, not just those disposed of for cash consideration. ...

Sub1 will assume all indebtedness of Partnership, including the Partnership-Parent Note and Partnership’s obligation to pay "Employee Accruals" under various compensation and retirement plans in consideration for additional Partnership Units. ... Sub2 will transfer its interest in Partnership to Sub1 in consideration for Sub1 Preferred Shares and a non-interest bearing promissory note (the “Sub1 Note”), jointly electing under s. 85(1). ...

Sub1 will assume all indebtedness of Partnership, including the Partnership-Parent Note and Partnership’s obligation to pay “Employee Accruals” under various compensation and retirement plans in consideration for additional Partnership Units. Sub2 will transfer its interest in Partnership to Sub1 in consideration for Sub1 Preferred Shares and a non-interest bearing promissory note (the “Sub1 Note”), jointly electing under s. 85(1). ...