Search - consideration

21 January 2002 External T.I. 2001-0078735 F- Droit de recevoir une somme-- summary under Paragraph 12(1)(g) Summary Under Tax Topics- Income Tax Act- Section 12- Subsection 12(1)- Paragraph 12(1)(g) s. 12(1)(g) inapplicable to contingent right to receive deferred cash sales proceeds to the extent the share consideration declined in value The shareholders of a CCPC (Xco) agreed to sell their Xco shares to a public corporation (Yco) in consideration for an upfront cash payment, and for shares of Yco received on an s. 85(1) rollover basis – but with a clause (the “Clause”) in the sale agreement providing that in one year’s time they would receive a further cash payment for each of their Yco shares equal to the deficiency in its trading price at that time as compared to the portion of the sale price allocated to such shares. ... Instead, the right to receive an amount pursuant to the Clause was a capital property, forming part of the non-share consideration that the vendors received on the disposition of their shares in Xco, the cost of which was determined pursuant to paragraph 85(1)(f). ...

21 January 2002 External T.I. 2001-0078735 F- Droit de recevoir une somme-- summary under Paragraph 85(1)(f) Summary Under Tax Topics- Income Tax Act- Section 85- Subsection 85(1)- Paragraph 85(1)(f) s. 85(1)(f) applicable to contingent right to receive deferred cash sales proceeds to the extent the share consideration received under s. 85(1) declined in value The shareholders of a CCPC (Xco) agreed to sell their Xco shares to a public corporation (Yco) in consideration for an upfront cash payment, and for shares of Yco received on an s. 85(1) rollover basis – but with a clause (the “Clause”) in the sale agreement providing that in one year’s time they would receive a further cash payment for each of their Yco shares equal to the deficiency in its trading price at that time as compared to the portion of the sale price allocated to such shares. CCRA indicated that the right to receive an amount pursuant to the Clause was a capital property, forming part of the non-share consideration that the vendors received on the disposition of their shares in Xco, the cost of which was determined pursuant to paragraph 85(1)(f). ...

2003 Ruling 2003-000498C- Qualifying disposition from trust to Sub-- summary under Paragraph 107.4(2)(a) Summary Under Tax Topics- Income Tax Act- 101-110- Section 107.4- Subsection 107.4(2)- Paragraph 107.4(2)(a) s. 107.4(2)(a) applies where drop-down by MFT of corporate sub to sub trust for no consideration Current structure The Fund, which is an exchange-listed mutual fund trust, holds shares and debt (the Corporation Shares and the Corporation Notes) of an operating subsidiary, and holds a general partnership interest through a sub trust (the trust). Proposed transactions The Fund will transfer the Corporation Shares and the Corporation Notes to the Trust for no consideration. ... There will be no transfer of property to the Trust as consideration for the acquisition of a capital interest in the Trust where the particular property can reasonably be considered to have been received by the Trust in order to fund a distribution. ...

Canco provided services for no consideration to LLC1. In concluding that because NRTrust thereby will have a resident contributor (Canco), so that NRTrust will be resident under s. 94(3), the Directorate stated: If Canco provided services to LLC1, other than exempt services defined in section 94(1), paragraph 94(2)(f) would apply to deem Canco to have transferred property to LLC1. ... It would seem reasonable to be of the view that services provided to LLC1 for no consideration would result in an increase in fair market value of the shares of LLC1. …[P]aragraph 94(2)(a) applies at the time the services are rendered for no consideration resulting in an increase in the fair market value of the shares of LLC1 at that time. ...

If the Trust has a non-resident beneficiary, such non-resident beneficiary would be deemed to receive a certain proportion of any non-share consideration (the Note) received by the Trust on the disposition of the Canco low paid-up capital shares, resulting in a dividend deemed to be received by the non-resident beneficiary. ... Under s. 212.1(6)(b)(ii), each non-resident beneficiary will be deemed to have received consideration other than the shares of the purchaser corporation, and that consideration received will, again, be equal to the proportion of their interest in the trust. ...

Confirming the first point, CRA indicated that if an estate freeze is subject to s. 74.4(2), the deemed interest benefit is computed based on the outstanding amount determined under s. 74.4(3), and the shares received on the refreeze constitute excluded consideration as defined in s. 74.4(1) – so that such consideration does not reduce the outstanding amount under 74.4(3). Confirming the second point, CRA agreed that the redemption of refrozen shares for cash consideration would reduce the outstanding amount, but only to the extent of the FMV of those shares. ...

23 January 2022 TEI Roundtable, 2021-0913421C6- CEWS- Foreign exchange as qualifying revenue-- summary under Qualifying Revenue Summary Under Tax Topics- Income Tax Act- Section 125.7- Subsection 125.7(1)- Qualifying Revenue annual balance sheet translation adjustments to FX-denominated balances are not included in qualifying revenue for CEWS purposes An eligible entity whose normal accounting practice is to convert the inflow of cash, receivables, and other consideration into Canadian currency from a foreign currency, also adjusts various FX-denominated balances on its balance sheet date to reflect their value in Canadian currency on that date. ... In responding “no” to the first question, CRA stated: [Q]ualifying revenue requires, among other things, an inflow of cash, receivables or other consideration. Where an entity re-evaluates or translates certain balance sheet accounts to reflect their value in Canadian currency at a certain time, no inflow of cash, receivables or other consideration has occurred. ...

The consideration paid by the shareholders would be a proportionate fraction of the property’s nominal appraised value. CRA gave what, in form, was a ruling, that there would be no s. 15(1) (or 246(1)) benefit to the extent that the FMV of the share of the real property so transferred to each shareholder was equal to or less than the FMV of the consideration paid therefor and, on a similar assumption that the aggregate consideration and the property’s FMV did not exceed its ACB, the corporation would not realize a gain. ...

Regarding the allocation under the licence agreement of X% of the payments to copyright and the balance to trademarks, the Directorate stated: Whether a particular apportionment of the consideration paid is reflective of the actual payments described in the exemption under subparagraph 212(1)(d)(vi) depends namely on the legal nature of what is being provided under the mixed contract, the legal relationships between the parties and the facts of the particular situation including the commercial reality of the parties and the consideration paid in these circumstances. In determining if the apportionment provided under the License Agreement is prima facie reflective of the obligation of the parties under subsection 212(1), consideration could be given, namely, to whether the parties had divergent interests in respect of the apportionment. ...

"Transfer of Farm Property to Child")-- summary under Subsection 73(3) Summary Under Tax Topics- Income Tax Act- Section 73- Subsection 73(3) Where a transfer of farm property described in s. 73(3) occurs for no consideration, or for consideration less than the land's adjusted cost base, the transferring farmer cannot utilize any unused portion of the capital gains deduction. ...