Search - consideration

The transfer will be done on a pure rollover basis in the following manner: Holdco 1 transfers 50% of the shares of Opco to Newco on a rollover basis in consideration for shares of Newco. Opco transfers Business 2 assets to Newco in consideration for an assumption of $100 of liabilities of Opco by Newco and an issuance of $1,100 of shares of Newco to Opco. ... Opco transfers Business 2 assets to Newco in consideration for an assumption of $100 of liabilities of Opco by Newco and an issuance of $1,100 of shares of Newco to Opco. ...

With respect to issuing refunds of Part XIII tax paid or withheld on payments made for the right to produce or reproduce computer software programs during the period July 1, 1983 to June 8, 1988, we offer the following comments for your consideration.       ... Convention (1980).      21(1)(b)      It should be noted that the time limit for requesting competent authority consideration in Canada's other income tax conventions is different than the limits of the U.S. ... This date approximates the two year time limit found in many of Canada's income tax conventions for requesting competent authority consideration. ...

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). ...

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. ... Yours truly, for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch EXHIBIT Calculation of Safe Income Where SRTC property acquired Example Corporate taxpayer that has operating income of $10,000,000 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 @ 48% $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 Outlay $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. ...

Secondly, on the assumption that subsection 89(3) would apply, and in the context of your arguments given above, you consider that the amount of consideration for those services that would have been reasonable in the circumstances in respect of the loan guarantee would be nominal, since the parent derives little or no benefit from the loan guarantee. ... Opinions Normally, we do not comment on any situation that is under active consideration by a District Office, unless the District Office has referred it to us for our opinion. ... In this regard, no person dealing at arm's length with another person would act as guarantor to a loan of that other person unless he received valuable consideration for the risk involved. ...

No assumptions were stated in your example as to the characteristics of the share consideration or the value of any non-share consideration to be received by the transferring shareholders. 2) A freeze of all the common shares of Opco would be implemented whereby all of the existing common shares would be exchanged for redeemable, retractable preferred shares of Opco of equivalent value. 3) New common shares of Opco would be issued such that the children of each shareholder would receive an equivalent equity percentage to that of their parents. ... You are of the opinion that the holding companies would generally be "connected corporations" within the meaning of subsection 186(4) of the Act. 3) In each case, the vendor would take back from the purchasing holding company a note and/or preferred shares as consideration on the sale. 4) The purchase price would be funded by intercorporate dividends paid by Opco to the Holdcos. ... Depending on the consideration for the transferred Opco shares received by an individual from Holdco in the Surplus Distribution example, subsection 84.1(1) of the Act might apply to that transfer. ...

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. ... Yours truly, for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch EXHIBIT Calculation of Safe Income Where SRTC property acquired Example Corporate taxpayer that has operating income of $10,000,000 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 @ 48% $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 Outlay $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. ...

No assumptions were stated in your example as to the characteristics of the share consideration or the value of any non-share consideration to be received by the transferring shareholders. 2) A freeze of all the common shares of Opco would be implemented whereby all of the existing common shares would be exchanged for redeemable, retractable preferred shares of Opco of equivalent value. 3) New common shares of Opco would be issued such that the children of each shareholder would receive an equivalent equity percentage to that of their parents. ... You are of the opinion that the holding companies would generally be "connected corporations" within the meaning of subsection 186(4) of the Act. 3) In each case, the vendor would take back from the purchasing holding company a note and/or preferred shares as consideration on the sale. 4) The purchase price would be funded by intercorporate dividends paid by Opco to the Holdcos. ... Depending on the consideration for the transferred Opco shares received by an individual from Holdco in the Surplus Distribution example, subsection 84.1(1) of the Act might apply to that transfer. ...

On XXXXXXXXXX, XXXXXXXXXXCo redeemed XXXXXXXXXX class A preferred shares that DC held in XXXXXXXXXXCo in exchange for cash consideration of $XXXXXXXXXX. 21. ... Upon New6XCo's incorporation, 6XCo will subscribe for common shares in New6XCo in exchange for nominal cash consideration. 42. ... Upon New5XCo's incorporation, 5XCo will subscribe for common shares in New5XCo in exchange for nominal cash consideration. ...

On incorporation, Class XXXXXXXXXX common shares of each of Control 5, Control 6 and Control 8, respectively, will be issued to the respective incorporators for nominal consideration. ... In consideration for such transfers, Subco will each issue XXXXXXXXXX Class XXXXXXXXXX preferred shares and assume a pro-rata share of the liabilities of XXXXXXXXXX. ... In consideration for such transfers, the Control Corporations will each issue Class XXXXXXXXXX preferred shares and assume a pro-rata share of the liabilities of XXXXXXXXXX. ...