Search - consideration

In relation to this transaction you have pointed out that paragraph 85.1(2)(d) limits the application of section 85.1 by providing that the section will not apply where "consideration other than shares of the particular class of the capital stock of the purchaser was received by the vendor". You have asked whether we would consider the promise to issue additional shares in your particular situation to constitute "consideration other than shares" for purposes of paragraph 85.1(2)(d). In our opinion the promise to issue additional shares, as described above, would constitute "consideration other than shares of the particular class of the capital stock of the purchaser" received by the vendor for the purposes of paragraph 85.1(2)(d) with the result that subsection 85.1(1) would not apply in this situation. ...

Newco purchases the shares of Company A from Company B, electing at adjusted cost base under subsection 85(1) of the Act, and issuing preferred shares as consideration. The fair market value of the preferred share consideration is less than the fair market value of the shares of Company A which are transferred. ... The discrepancy between the fair market value of the property transferred and the consideration (including shares) has resulted in value being transferred to another taxpayer. ...

As you will note, the T2057 election forms forwarded by the District Office in this case detail in the box for "consideration received the assets transferred by the taxpayer. What the taxpayer, in fact, received for the assets transferred to XXX was consideration in the form of an assumption of liabilities, a note receivable, and shares. ... It should also be recognized that the amount of the hard consideration does not exceed the fair market value of the assets transferred as determined by the Revenue Canada appraiser. ...

10 January 1986 Income Tax Severed Letter RCT 5-0227 Unedited CRA Tags 85.1(1), 85.1(2) Dear Sirs: In your letter of December 6, 1985 you requested confirmation of our views on the application of paragraph 85.1(2)(d) of the Act in a takeover bid situation where the purchaser corporation offers to the holders of shares (the "exchanged shares") of the target company consideration such as: $10 each for 50% of a share of the target company owned and 1/3 of a share of the purchaser's capital stock for the remaining 50% of the same single share of the target company held by the vendor. Provided that the vendor can clearly demonstrate which target company shares or portions thereof were sold for cash or other non-share consideration, and which target company shares or portions thereof were sold for consideration that was shares or portions of shares of the purchaser, subsection 85.1(1) may be utilized in respect of the portions of the exchanged shares for which portions of shares were received. ...

This right technically makes the transfer ineligible for section 85.1 treatment since it is additional consideration within the meaning of paragraph 85.1(2)(d). We are asked to rule that this additional consideration does not disqualify the arrangement. ... On due consideration, I see no reason to adopt an incorrect interpretation designed to facilitate the takeover of Canadian companies by foreign interests. ...

Savage (613) 993-6201 November 1, 1985 Dear Sirs: Re: Transfer of Property to a Sister Corporation-------------------------------------------- This is in response to your letter of September 6, 1985 wherein you requested clarification of our position with respect to the application of paragraph 85(1)(e.2) of the Act where a property is transferred between corporations owned by the same shareholder for consideration less than the fair market value of the property transferred. Transfers for consideration less than fair value can, inadvertently or intentionally, create opportunities for the inappropriate reduction of capital gains in the event of a future disposition of shares of the corporations involved. Despite the fact that the provisions of paragraph 85(l)(e.2) of the Act are applicable in such situations we have adopted an administrative position not to apply them to transfers between sister corporations where, in our view, the consideration taken back ensures that the accrued gain in the shares of the transferor is not reduced, as a result of the transfer, by more than the accrued gain in the property transferred. ...

Employment income received by an employee is a valuable consideration for the services he renders under a written or verbal employment contract. Dividend income received by a shareholder is in consideration for the capital he has invested by buying shares of the corporation. ... Accordingly, where all the facts of a particular situation point to the conclusion that the dividend an employee-shareholder receives is in consideration for the services he renders as an employee, this income, in our opinion, would be taxable as employment income pursuant to subsection 6(3) of the Income Tax Act. ...

Cudjoe Telephone: 983-3959 RE: Section 85 Query Relevant provisions involved: 85(l)(a)- Where the agreed amount = deemed proceeds of disposition. 85(l)(b)- Agreed amount cannot be less than the non share consideration. 40(1)(a)(iii)- Rules for calculating the capital gain reserves. ... F.M.V. of property transferred $500,000 Agreed amount indicated 250,000 Consideration received Promissory note (payable on demand) = 250,000 Share consideration 250,000 $500,000 An audit review determined that a non-clerical error was made by the taxpayer and that the A.C.B. of the property transferred was $150,000. ...

"Newco Redemption Amount" means the FMV of the property that DC will assign to Newco in consideration for XXXXXXXXXX class A preferred shares in Newco less the consideration other than shares, if any, to be issued to DC as further described in Paragraph 25 divided by the number of class A preferred shares issued as consideration for the transferred property. ... Immediately thereafter, DC will proceed with the XXXXXXXXXX Sale in consideration for cash. 13. ... On XXXXXXXXXX, Newco will redeem the XXXXXXXXXX class A preferred shares that DC will hold in Newco in consideration for Promissory Note 2. ...

TargetSub XXXXXXXXXX transferred its net assets to CarveOut XXXXXXXXXX, on a taxable basis, in consideration for cash. ... CarveOut XXXXXXXXXX acquired inter-company debt owing by CarveOut XXXXXXXXXX in consideration for the issuance by CarveOut XXXXXXXXXX of four demand promissory notes as follows: 65.1 CarveOut XXXXXXXXXX Note 2 issued to TargetSub XXXXXXXXXX as consideration for debt owing to TargetSub XXXXXXXXXX; 65.2 CarveOut XXXXXXXXXX Note 3 issued to TargetSub USA as consideration for debt owing to TargetSub USA; 65.3 CarveOut XXXXXXXXXX Note 4 issued to TargetSub USA as consideration for debt owing to TargetSub USA; 65.4 CarveOut XXXXXXXXXX Note 5 issued to TargetSub XXXXXXXXXX as consideration for debt owing to TargetSub XXXXXXXXXX. 66. ... Buyerco subscribed for XXXXXXXXXX common shares of the capital stock of Bidco in consideration for $XXXXXXXXXX. 130. ...