Search - consideration

In determining whether an individual expense is reasonable "in the circumstances" one would look to the amount sought to be deducted, the purpose of the expenditure, the nature of the expenditure, the similarity to and amount of other such expenses claimed, expenses of other employees or officers employed in a similar capacity, and so on, including consideration of any tax free allowances which may have been received where the allowance has been received for the purpose of defraying the type of expenditure which is being deducted. ... (Tax Appeal Board) 58 DTC 307, the Board considered as unreasonable a claim of $22,500 for advertising expenses incurred by a lumber company in sponsoring local sports events and reduced the deduction to $5,000, having given consideration to the size of the taxpayer's business, the patronage to be expected, the form of the advertising, the locality and the size of the population reached by the advertising. ... Having said that, however, where a member sought to deduct an expense for which a tax free allowance had been received and the purpose of the allowance was to defray that type of expense for which the member sought a deduction, the fact that a tax free allowance had been received would be taken into consideration in determining the "reasonableness" of the deduction. ...

As part of the consideration for the transfer, the corporation assumed the builder's holdbacks. ... You requested our opinion as to whether the builder's holdbacks (that were assumed by the corporation) would constitute non-share consideration given by the corporation to the builder with respect to the transfer under subsection 85(1). ... In our view, the fair market value of the builder's holdbacks at the time they were assumed should form part of the agreed amount with respect to the transfer, as such assumption by the corporation would constitute non-share consideration given by the corporation to the builder for the purposes of subsection 85(1). ...

Husband and Wife purchased 51 and 49 common shares, respectively, for nominal consideration, representing 100% of the issued share capital stock of Opco;- On January 1, 2003 the partnership transferred all of its assets to, and had all of its liabilities assumed by Opco. ... Husband and Wife purchase 51 and 49 common shares respectively for nominal consideration, representing 100% of the issued share capital of Newco;- On January 1, 2005, Husband sells his partnership interest to Newco. ... As consideration therefor, Husband takes back a note with a principal amount equal to the elected amount and receives redeemable, retractable preferred shares in Newco with a redemption amount equal to the excess of the fair market value of the partnership interest over the elected amount. ...

The term "pension" means periodic payments made in consideration of past services. ... Article XI(3) of the treaty defines the term "pension" as "periodic payments made in consideration of past services" as opposed to referring only to "periodic payments". We could not simply ignore the words "made in consideration of past services". ...

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. ...

Clauses 6202.1(1)(a)(iii)(A) and (B) provide that the new share will not be a prescribed share under subparagraph 6202.1(1) (a) (iii) of the Regulations if, inter alia, the new share is convertible or exchangeable only into another share of the corporation that, if issued, would not be a prescribed share ("non-prescribed share") and, if all the consideration receivable by the holder on the conversion or exchange of the new share is limited to such a non-prescribed share receivable on the conversion or exchange.       ... There must be some sort of benefit or payment etc. conveyed to the shareholder on the conversion that may reasonably be  considered to be a repayment or return by the corporation (or a specified person) of all or part  of the consideration for which the share was issued. 2.      ... Where a person agrees to acquire flow-through shares and non flow-through shares from a corporation for fair market value consideration and the consideration for which flow-through shares are to be issued is determined within 60 days of entering into the flow-through share agreement, and the terms of the flow-through shares provide for their conversion into additional non flow-through shares of the corporation on a fair market value basis, it is our view that paragraph 6202.1(2)(a) of the Regulations will not apply to cause the flow-through shares to be prescribed shares. ...

Accordingly, while it may be argued that, in the circumstances described above, the consideration paid by the corporate investor should be deducted in computing its safe income on the basis that such amounts were paid to obtain a reduction (through a tax credit) in an income tax liability of the corporate investor, you suggest that safe income need not be so reduced because the amounts expended were paid to acquire the property. ... EXHIBIT Calculation of Safe Income Where SRTC property acquired Example Corporate taxpayer that has operating income of $10,000,00,0 acquires an SRTC property described in subsection 127.3(2)(a)(iii) to (v) of the Act for consideration equal to $4,000.000 and becomes entitled to a tax credit, within the meaning of paragraph 127.3(2)(a) of the Act, equal to $2,000,000. ... Operating Income $10,000,000 less- Tax@ 485 $4,800,000- Tax Credit 2,000,000- Net Tax $2,800,000 (2,800,000) less Net Outlay for SRTC property not deducted in computing operating income- Consideration Paid $4,000,000- Cost (ss. 127.3(6)) 2,000,000- Net Outl ay $2,000,000 (2,000,000) Safe Income on Hand immediately after acquisition of SRTC property $5,200,000 Gain on Disposition of SRTC property- Non Taxable Gain (1/3) $100,000- Taxable Cap. ...

Opco issues 300 Class B Common Shares to the shareholder for consideration of $1. 3. ... As consideration for the shares, the shareholder will receive one additional common share of Newco which will have an adjusted cost base and paid-up capital identical to that of the shares being transferred. ... In step 3 above, one additional common share is issued as consideration for the Class A Common Shares. ...

The revised IT's may not contain the administrative practice regarding the receipt of non-share consideration of less than $200 instead of a fraction of a share as described in section 1.2 of the course material. ... Under section 2.2 of the course material and lesson plan, we feel that the statement "unlike sections 51 and 85.1 non-share consideration, or boot, can also be received" is not totally correct in that subsection 85.1(3) permits the receipt of non-share consideration. ... On page 7.2, paragraph 4, please refer to our comment 1 with respect to the administrative practice concerning the receipt of non-share consideration of less than $200 instead of a fraction of a share. 9. ...

It is our view that the following considerations, which are referred to in your memorandum, would not appear to be relevant to the determination of whether the Main Purpose Test has been met: (a) the use of section 85 by the shareholder; (b) the fact that the shareholder has achieved significant benefits from other tax planning in the years under review; and (c) the fact that the shareholder is willing to take additional steps to ensure that his spouse does not benefit from the growth in the investment corporation. 4. The following considerations may be relevant to the determination of whether the Main Purpose Test has been met: (a) value of the consideration received by the shareholder on the transfer to the investment corporation; (b) the rights to future income or future growth in respect of the transferred property or property substituted therefor (i.e. whether future income or future growth can reasonably be expected to accrue to someone else as a result of the transfer); and (c) amount of the potential benefit to the spouse of the taxpayer (which assists in the determination of whether it is one of the "main" purposes, or an "incidental" purpose). Paragraph 85(1)(e.2) In determining whether the fair market value of the preferred shares of the investment company that were received by the taxpayer as consideration is equal to the fair market value of the shares of the operating company transferred to the investment company, the department normally considers retractable shares with a redemption amount equal to the fair market value of the transferred property to have full fair market value where there can be no erosion of this value (by payment of dividends on other classes of shares, for instance). ...