Search - consideration

As noted in the definition in subsection 125.7(1) of the Act, qualifying 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. ... Whether a realized gain or loss results in an inflow of cash, receivables and other consideration is a question of fact. ...

A gift is a voluntary transfer of property without valuable consideration. ... If the consideration had been stated as a nominal amount of $1.00, one could conclude that the value of the property was more than the stated consideration and that, in fact, there was a gift or possibly other unspecified consideration. ... While the $1,000 paid may have been much less than the FMV at the time, it is, nevertheless, consideration which defeats the contention that the disposition was a gift. ...

A share issued under an agreement which provided for (1) the possible termination of the agreement prior to the company actually incurring and renouncing the promised amounts, (2) a cancellation of the issued share, and (3) a return of the shareholder's consideration in respect of the issued share would appear to fall within the ambit of paragraph 6202.I(1)(c) because these provisions impose a contingent obligation to effect an undertaking, i.e. the return of the shareholder's consideration, in order to limit a loss that the shareholder may sustain.  In the absence of information that indicates otherwise, our view is that the return of the shareholder's consideration could reasonably be considered to have been given to limit the shareholder's "loss" of the amount of consideration paid for the issued share. ... An economic loss would be sustained in an amount of the consideration paid for the issued share to which is attached an entitlement to certain income tax deductions that would not otherwise exist but for the payment of consideration.  ...

A share issued under an agreement which provided for (1) the possible termination of the agreement prior to the company actually incurring and renouncing the promised amounts, (2) a cancellation of the issued share, and (3) a return of the shareholder's consideration in respect of the issued share would appear to fall within the ambit of paragraph 6202.1(1)(c) because these provisions impose a contingent obligation to effect an undertaking, i.e. the return of the shareholder's consideration, in order to limit a loss that the shareholder may sustain. In the absence of information that indicates otherwise, our view is that the return of the shareholder's consideration could reasonably be considered to have been given to limit the shareholder's "loss" of the amount of consideration paid for the issued share. ... An economic loss would be sustained in an amount of the consideration paid for the issued share to which is attached an entitlement to certain income tax deductions that would not otherwise exist but for the payment of consideration. ...

A share issued under an agreement which provided for (1) the possible termination of the agreement prior to the company actually incurring and renouncing the promised amounts, (2) a cancellation of the issued share, and (3) a return of the shareholder's consideration in respect of the issued share would appear to fall within the ambit of paragraph 6202.I(1)(c) because these provisions impose a contingent obligation to effect an undertaking, i.e. the return of the shareholder's consideration, in order to limit a loss that the shareholder may sustain. In the absence of information that indicates otherwise, our view is that the return of the shareholder's consideration could reasonably be considered to have been given to limit the shareholder's "loss" of the amount of consideration paid for the issued share. ... An economic loss would be sustained in an amount of the consideration paid for the issued share to which is attached an entitlement to certain income tax deductions that would not otherwise exist but for the payment of consideration. ...

The term “consideration” as used in paragraph 110.6(7)(b) of the Act does not mean the agreed amount referred to in subsection 85(1). ... No other consideration was received by the individual in respect of the transfer, and the individual is the sole shareholder of the new corporation. ... In our view, the term “consideration” as used in paragraph 110.6(7)(b) of the Act does not mean the agreed amount referred to in subsection 85(1) of the Act. ...

1 December 1981 Income Tax Severed Letter RCT 85-076 Unedited CRA Tags 85(1) In response to your memo of October 21, 1981, it is our opinion that the reference, in section 18 of Regulation 135 of the Ontario Corporations Act, to "amount paid" is a reference to the value of the consideration given in exchange for the share. ... " In the situation you described, preference shares with a par value of $1 and a redemption amount of $100 were taken back as partial consideration on a transfer of shares to a corporation. The balance of the consideration taken back was cash. The transfer was subject to a late-filed subsection 85(1) election. ...

As noted in subparagraph 3(iii) of Interpretation Bulletin IT-339R, before a plan will be regarded as being in the nature of insurance it must specify an agreed consideration. The consideration must be set (i.e. fixed) and agreed to prior to the occurrence of the event(s) against which the employer has agreed to indemnify the employee with no provision for a rebate to be paid to the employee at the end of the plan year effectively returning the excess of the consideration over the claims amount. Where the agreed consideration is other than services rendered, its quantum should be based on an actuarial or similar computation. ...

Subsection 25(1) of the CBCA provides that shares may be issued at such times and to such persons and for such consideration as the directors may determine. ... There is no provision in the CBCA that would require a corporation to reduce the full amount of any consideration it receives. Section 41 of the CBCA allows the directors to authorize the corporation to pay a reasonable commission as consideration on the issuance of its shares. ...

Accordingly, to the extent that the excess consideration exceeds the paid-up capital of the shares received by the taxpayer on the transfer, such amount will no longer be taxed as a deemed dividend but will be taxed as a shareholder's benefit pursuant to subsection 15(1) of the Act. In our view, the proposed amendments to subsection 85(2.1) of the Act are correctly founded on the assumption that property will be transferred to a corporation by its shareholders for consideration that does not exceed the fair market value of the transferred property. In the case where the consideration received exceeds the fair market value of the property, we do not believe that it is inappropriate that such excess consideration be included in the shareholders income under subsection 15(1) of the Act as an appropriation of corporate property. ...