Search - consideration

Paragraph 74.5(1)(b) of the Act sets additional requirements necessary to avoid attribution if the consideration includes debt. If a taxpayer gifts property or transfers property to his child for consideration that is less than FMV, the transferor (parent) is deemed to have received proceeds of disposition equal to the FMV of the property transferred. ... If the transfer is for consideration that is not less than the FMV of the property transferred and that consideration meets the requirements of subsection 74.5(1) of the Act, the attribution rule would not be applicable. ...

Pursuant to the terms of the agreement, ResourceCo agreed for cash consideration to incur CEE during the period from August 1 to December 31, 1994 in an amount not less than the cash consideration for which shares of ResourceCo were issued to the Investor. ResourceCo also agreed to renounce with an effective date of December 31, 1994 an amount of CEE incurred by it during that period not exceeding the cash consideration. ... Our Comments In the above-noted hypothetical situation, provided that other requirements in subsection 66(12.6) and in the definition of flow-through share under subsection 66(15) of the Act have been met and that the agreement is enforceable and legally binding, it is our view that the shares of ResourceCo issued to the Investor would not be disqualified as flow-through shares for the purposes of subsections 66(15) and 66(12.6) of the Act solely because: (a) the cash consideration for the shares were paid to ResourceCo by the Investor after the agreement was entered into; (b) the CEE was incurred before the cash consideration for the shares were given to ResourceCo by the Investor; or (c) the direct use of the cash proceeds from issuance of the shares was to repay the loan (the proceeds from such loan were previously used to incur the CEE). ...

Unedited CRA Tags 85(1)(b) 97(2) Principal Issues: Whether the assumption of the excess mortgages by a general partnership represents consideration for the properties transferred under an election pursuant to subsection 97(2). ... Reasons: Consistent with court decisions and with paragraph 17 of Interpretation Bulletin IT-291R3, it is our view that the assumption by the Partnership of the excess mortgages represents consideration for the purposes of paragraph 85(1)(b) and subsection 97(2). ... In our view, the assumption by the Partnership of the Excess Mortgages represents consideration for the Properties for the purposes of paragraph 85(1)(b) and subsection 97(2). ...

Position: Where the consideration received for eligible capital property is dependent upon the use or production from that property and no amount can be quantified at the time of sale, such consideration is not an eligible capital amount but is taxable as income under paragraph 12(1)(g). ... You enquired whether this contingent consideration should be treated as proceeds of disposition pursuant to item E of the definition of "cumulative eligible capital" in subsection 14(5) of the Income Tax Act (the Act). ... In a situation where the consideration received for eligible capital property is dependent upon the use or production from that property and no amount can be quantified at the time of sale, such consideration is not an eligible capital amount but is taxable as income under paragraph 12(1)(g). ...

Reasons: In this situation, the exception in clause 18(9)(a)(iii)(B) does not apply since the employer's pre-funding of its required contributions to the Trust cannot be deemed consideration for life insurance in respect of a period that ends more than 13 months after the consideration is paid. ... In general terms, this exception applies where an employer has incurred an expense or made an outlay as consideration for group term life insurance in respect of a period that ends more than 13 months after the consideration is made. ... In this situation, the exception in clause 18(9)(a)(iii)(B) does not apply since the employer's pre-funding of its required contributions to the Trust cannot reasonably be regarded as consideration for life insurance in respect of a period that ends more than 13 months after the consideration is paid. ...

Reasons: The payment fits into the description of an amount under 6(3)(e) as an amount paid as consideration for a covenant with reference to what the employee is not to do after termination of employment, making the payment deemed to be salary, wages or other remuneration under section 5. ... Subsection 6(3) of the Income Tax Act (the "Act") states: An amount received by one person from another (a) during a period while the payee was an officer of, or in the employment of, the payer, or (b) on account, in lieu of payment or in satisfaction of an obligation arising out of an agreement made by the payer with the payee immediately prior to, during or immediately after a period that the payee was an officer of, or in the employment of, the payer, shall be deemed, for the purposes of section 5, to be remuneration for the payee's services rendered as an officer or during the period of employment, unless it is established that, irrespective of when the agreement, if any, under which the amount was received was made or the form or legal effect thereof, it cannot reasonably be regarded as having been received, (c) as consideration or partial consideration for accepting the office or entering into the contract of employment, (d) as remuneration or partial remuneration for services as an officer or under the contract of employment, or (e) in consideration or partial consideration for a covenant with reference to what the officer or employee is, or is not, to do before or after the termination of the employment. In the absence of any evidence to the contrary, it appears that the $XXXXXXXXXX paid for the confidentiality provision fits squarely within the scope of paragraph 6(3)(e) of the Act, as an amount that can reasonably be regarded as being in consideration for a covenant with reference to what the officer or employee, is or is not, to do before or after the termination of the employment. ...

Your client will receive consideration for entering into such agreement. 3. ... You requested our opinion as to whether the consideration received with respect to the non-competition agreement would also be considered U.S. source income for purposes of that subsection. ... We agree with your interpretation of section 42 of the Act with respect to the tax treatment of the consideration to be received with respect to the non-competition agreement. ...

You have queried whether a farmer may utilize a portion of his or her unused capital gains deduction, when transferring the farm land, without requiring the child to pay any consideration or only requiring the child to pay an amount which is less than the adjusted cost base of the land. ... If the property to be transferred is land and the actual proceeds of disposition (i.e. consideration) is any amount between the fair market value of the property and its adjusted cost base, then that amount is deemed to be the parent's proceeds of disposition and the cost of acquisition of that property to the child. While it is acceptable for the transfer to take place for no consideration (a gift), this means that the farmer cannot utilize any unused portion of the captial gains deduction. ...

In brief, a testamentary trust proposes to transfer land that it holds as capital property to a taxable Canadian controlled private corporation for nil consideration. ... You are concerned that subsection 110.6(7) of the Act will deny the beneficiaries such capital gains deductions because no consideration is to be paid for the property in question. ... Even though paragraph 69(1)(b) of the Act deems a taxpayer to have received proceeds of disposition equal to fair market value where the taxpayer disposes of property for no proceeds in a non-arm's length situation, property that was factually acquired for no consideration, that is, consideration significantly less than the fair market value of the property at the time of the transaction, will trigger the consequences of subsection 110.6(7) of the Act under which the capital gains deduction will be denied. ...

Your client will receive consideration for entering into such agreement. 3.      ... You requested our opinion as to whether or not the consideration received with respect to the non-competition agreement would also be considered U.S. source income for purposes of that subsection. ... We agree with your interpretation of section 42 of the act with respect to the tax treatment of the consideration to be received with respect to the non-competition agreement.  ...