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5 May 1983 Income Tax Severed Letter RCT 5-4911 Unedited CRA Tags 55(2), 55(3)(b), 84(2), 85(1), 88(2) Dear XXX: This is in reply to your letter of February 23, 1983 in which you requested our comments on certain questions which have arisen in your consideration of "butterfly" transactions and paragraph 55(3)(b) of the Income Tax Act (the Act). 1. ... For the purposes of those subsections the wind-up is considered to have commenced after the rollover of assets, pursuant to the provision of subsection 85(1) of the Act, to the transferees or their intermediary companies and the redemption of the shares taken back in consideration on those rollovers. 2. ...

While we agree with the comments in the draft bulletin, we have noted the following points for your consideration: 1. ... Furthermore, designations under subsections 104(13.1) and 104(13.2) of the Act will result in a reduction in the adjusted cost base to the beneficiaries of their capital interest in the trust under paragraph 53(2)(h) of the Act, unless that interest was acquired for no consideration where the trust is a personal trust. ...

Lalonde as soon as possible so that consideration can be given to an appropriate amendment to the Act. ... Assuming that one of the main purposes of the loan may reasonably be considered to be to reduce the income of the individual and to benefit a "designated person" (as defined in subsection 74.5(5) of the Act), in respect of the individual (after consideration of the provisions of subsection 74.4(4) of the Act) then a calculation pursuant to subsection 74.4(2) of the Act will be required for any taxation year in which the loan was outstanding to determine the amount that is deemed to have been received as interest in the year by the individual. ...

Consideration of this matter is not yet complete, however. As indicated during the Round Table discussion, the Department currently considers that the Income tax treatment of original-issue discount is ultimately a question of fact. ... The comments in this letter are of a general nature only and do not take into account considerations that might arise in connection with a specific transaction or event. ...

For example, where shares of the Canadian holding company were issued to the German corporation as consideration for the transfer to the Canadian holding company of shares of the second tier Canadian company and the capital of the shares of the Canadian holding company so issued exceeded the paid-up capital of the shares of the second tier Canadian company, the paid-up capital of the shares of the Canadian holding company so issued would be equal to the paid-up capital of the shares of the second tier Canadian company. Or, for example, where shares of the Canadian holding company were issued to the German corporation as consideration for the transfer to the Canadian holding company of other property (having a tax cost that was less than the fair market value of the property) without recognizing, on such transfer, any gain on such property for Canadian tax purposes and the capital of the shares of the Canadian holding company so issued exceeded the tax cost of the property, the paid-up capital of the shares of the Canadian holding company so issued would be equal to the tax cost of the property. ...

28 August 1989 Income Tax Severed Letter 5-7480- Rollover provisions Unedited CRA Tags 85(1), 86(1) Dear Sirs: This is in response to your request for a technical Interpretation contained in your letter of January 26, 1989, wherein you requested our views as to whether the provisions of subsection 85(1) of the Act would apply where a taxpayer disposes of shares of a taxable Canadian corporation to that corporation for consideration which includes shares of the capital stock of the corporation and the taxpayer and the corporation jointly elect in prescribed form to have the provisions of subsection 85(1) of the Act apply thereto. ... Opinions In our view, the provisions of subsection 85(1) of the Act apply in the case where a taxpayer transfers shares of a taxable Canadian corporation to that corporation and receives newly issued shares of the corporation as consideration there for provided that the transferor and transferee file the prescribed form within the time limits specified in subsection Whether a share is disposed of in the course of a reorganization of capital of a corporation is a question of fact which is dependent upon all of the relevant circumstances. in general, one would expect that where the exchanged shares were authorized in anticipation of and shortly before the exchange, the shares disposed of on the exchange would be disposed of in the course of a reorganization of capital of the corporation. ...

A gift, for purposes of sections 110.1 and 118.1 of the Income Tax Act (the Act) is a voluntary transfer of property without valuable consideration. ... It would be a question of fact whether a XXX presented to a donor sometime after the donation to the Crown of the donor's interest in the additional XXX was a gift unrelated to the initial donation or delayed consideration for the initial payment in respect of the purchase from you of the interest in the additional XXX We trust our comments will be of assistance to you. ...

Corporations B and C wish to amalgamate but are unable to do so because of various financial, legal and other considerations. 4. ... As consideration for corporation A issuing its common shares to the public on the above amalgamation, corporation B issues additional common shares to corporation A. 8. ...

As consideration, Opco receives shares of Bco having an aggregate redemption value equal to the fair market value (“FMV”) of the transferred assets. ... Immediately after the transfer, Bco sells the transferred assets to Aco for cash consideration equal to their FMV, which exceeds their ACB. ...

In this regard, we have addressed this matter with the International Taxation Office and consideration will be given to the issuance of a registration number under the TEDS system. XXX As in the case of XXX we see no reason not to issue a registration number under the TEDS system and in this regard we have sent a copy of the additional information provided to the International Taxation Office for consideration. ...