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30 May 1991 External T.I. 9013245 F- Interpretation of the Definition of "Taxable Preferred Share" Unedited CRA Tags 248(1) taxable preferred share 5-901324 Dear Sirs: Re:  Interpretation of the Definition of "Taxable Preferred Share" in Subsection 248(1) of the Income Tax Act (the "Act") This is in reply to your letter dated June 13, 1990, whereby you requested our opinion concerning our interpretation of paragraph (b) of the definition of "taxable preferred share" in subsection 248(1) of the Act, in a situation which you described as follows: 24(1) You requested our opinion as to whether a 24(1) could be considered to be a "taxable preferred share" by virtue of clauses (b)(i)(A) or (C) of the definition of that expression in subsection 248(1), and whether the phrase "it may reasonably be considered having regard to all the circumstances" in that definition provides any latitude in the applicability of the dividend entitlement clauses under consideration. ...

You point out that the issue of the shares would not arise as a result of a transfer of assets, and that in the hypothetical situation you have in mind, the shares would not only be issued for nominal consideration, but would also be redeemable for a nominal value. ...

It should be noted that where a shareholder has guaranteed the debts of his corporation for no consideration, the guarantee will generally be considered not to have been given for the purpose of gaining or producing income. ...

Furthermore, in the court cases cited below, the word remuneration has consistently been defined as consideration received for services rendered. 24(1) 21(1)(b) 24(1) We recognize that based on Jurisprudence (see Ransom v. ...

We would however accept a clause in a contract that permits the subscriber to assign, for valuable consideration, his obligations under the contract to another person.  ...

Each shareholder of Opco received a one common share and one special share of Holdco as consideration for each common share of Opco disposed of. 3.      ...

Our Comments As stated in paragraph 3 of Interpretation Bulletin IT-110R2 (Special Release), "A gift, for purposes of sections 110.1 and 118.1 of the Act, is a voluntary transfer of property without valuable consideration". ...

Its application extends to provisions such as the definition of a "Private Corporation" at paragraph 89(1)(f), the inadequate consideration rules at subsections 69(6) and (7) and other law where de facto control tests are not considered appropriate. ...

Paragraph 4 of IT-491 sets out some factors that may be taken into consideration when determining the main or chief use of a property.  ...

The level of reserves required by provincial legislation would also be an important consideration. ...