Search - consideration

GAAR considerations re avoidance of CCPC status so as to reduce taxability of aggregate investment income (pp. 11:18-19) First, CCPCs alone are entitled to numerous favourable rules under the Act. ...

. … General considerations (p. 880) It is likely that there will be less risk of challenge under the PPT if there are demonstrable reasons for having a presence in a particular jurisdiction (such as key decision makers located in the jurisdiction, commercial or other regulatory reasons, proximity to jurisdictions into which investments are made, etc.), beyond accessing tax benefits under a treaty between the particular jurisdiction and Canada. ...

Under common law, a contract is not valid unless consideration is given, even where the amount of consideration is nominal (for example, many commercial agreements refer to consideration of $1 paid between the parties, "the receipt and sufficiency of which is hereby acknowledged"). As such, where consideration of any amount is paid, it is uncertain if a vendor will ever be able to utilize subsection 56.4(5) to prevent the application of paragraph 68(c) unless the contract relating to the RC is executed under seal (i.e., a contract without consideration). ...

Application of the requirement – that the proceeds be received by the grantor of the non-compete covenant or an eligible corporation thereof – to a trust or partnership (pp.12-13) [Under s. 56.4(7)(b)] generally, consideration must be received by either the "taxpayer" or an "eligible corporation" of the taxpayer. ... …With respect to a trust, it would seem that a Restrictive Covenant granted by a beneficiary or trustee of a trust would not meet the receipt of consideration requirements as neither the trustee or beneficiary would receive either a goodwill amount or consideration for the disposal of property. ... The reference to " the amount" rather than " an amount" suggests that it may be necessary to allocate to each partner that portion of the goodwill amount that directly represents consideration for the Non-Competition Covenant granted by that party…. ...

., standby charges) payable by a borrower as consideration for the lender agreeing to lend money or make money available (arguably, under the definition of “restrictive covenant” such an agreement “affects … the … provision of property … by the taxpayer” (i.e., of funds by the lender) or “affects … the acquisition of property … by the taxpayer” (i.e., the lender’s acquisition of the debt obligation) consent payments, i.e., payments made to creditors in consideration for consenting to an amendment to the debt terms, e.g., to permit a particular transaction or loosen a financial covenant (such “agreement could be viewed as affecting the (ongoing) provision of property by the taxpayer, being the loaned funds, especially if the consent relates to an amendment of a covenant that could otherwise have been breached and allowed the taxpayer to demand repayment under an acceleration clause (or, more generally, to the extent the amendments affect the ongoing terms under which the loan will continue to be provided).”) in the context of a distress restructuring, an additional payment made to a debt holder who agrees to exchange for the securities of the restructured debtor by a specified date, e.g., where the debtor proposal is that holders exchange each $100 of debt for shares with a fair market value of $40, an “early consenting” debenture holder might receive shares having a fair market value of $50 (“The additional $10 of value may properly be viewed as consideration for the debenture holder having agreed to consent to the restructuring plan by the specified date, rather than as consideration for the exchange itself, having regard to paragraph 68(c).”) ...

Tina Korovilas, Drew Morier, "Non-Corporate Vehicles in the Foreign Affiliate Context", 2018 Conference Report (Canadian Tax Foundation), 20:1 – 114-- summary under Clause (h)(ii)(C) Summary Under Tax Topics- Income Tax Act- Section 94- Subsection 94(1)- Exempt Foreign Trust- Paragraph (h)- Subparagraph (h)(ii)- Clause (h)(ii)(C) Difficult application of (h) exception to security trust (pp. 20:90-92) The following is an example of a transfer of property by an FA to an NRT, which illustrates both (1) the analysis that should apply to determine whether the arrangement constitutes a trust, and (2) if it does apply, the difficulty in satisfying the consideration requirement of a paragraph (h) EFT. ... On the termination of the collateral trust, all of the trust property is distributed to the only named beneficiary (the collateral agent), who is obligated to transfer it to CFA 1 for no consideration. ... However, the consideration requirement may be problematic. The collateral agent’s interest may not be considered to be issued by the collateral trust in exchange for consideration that was not less than 90 percent of the interest’s proportionate share of the net asset value of the collateral trust’s property at the time of its issuance, nor acquired in exchange for consideration equal to the FMV of the interest at the time of its acquisition. ...

As consideration, he receives from Holdco $15 million of class A preferred shares. ... [T]he purpose test is not met for the second transfer;… Inability to reduce the outstanding amount for the FMV decline (p.7) [T]he outstanding amount is reduced—but only from $15 million to $12 million—upon the redemption of the class B preferred shares, because the cash consideration received by Mr. X does not represent excluded consideration. This phantom outstanding amount of $12 million will be subject to corporate attribution...forever… ...

Kenneth Keung, Balaji Katlai, "CRA Essentially Approves Surplus Stripping by Amalgamation", Canadian Tax Focus, Vol. 11, No. 3, August 2021, p. 1-- summary under Subsection 84(2) Summary Under Tax Topics- Income Tax Act- Section 84- Subsection 84(2) Surplus stripping suggested by CRA position on extracting cash on an amalgamation (p.1) 2018-0785921E5 and 2017-0696821E5 indicate that where there is a distribution of cash and shares to shareholders of predecessor corporations pursuant to an amalgamation, the conditions of s. 87(1)(c) will be met, while the receipt of the non-share consideration will preclude s. 87(4) form applying, so that such shareholders will realize a capital gain or loss based on the value of the shares and cash received from Amalco. This suggests that surplus of a corporation can be extracted on its amalgamation as cash or other non-share consideration. ... S. 84(2) risk can be minimized by continuing to operate the businesses of the predecessors and taking the non-share consideration as a note that is drawn down over time. ...

Joint Committee, "Avoidance of Tax Debts", 5 April 2022 Joint Committee Submission-- summary under Paragraph 160(5)(c) Summary Under Tax Topics- Income Tax Act- Section 160- Subsection 160(5)- Paragraph 160(5)(c) S. 160(5)(c) rule should reflect all value-for value exchanges (pp. 6-9) The rule under s. 160(5)(c) (deeming there to be a net property transfer to the current or future tax debtor under s. 160(1)(e)(i)) is deficient in that it should: include the benefit of substituted property for the consideration received, and any property received by the transferor by virtue of the ownership of such property (otherwise than as proceeds of disposition), refer to valuation at end of the series rather than throughout the series, not be adversely engaged due to FMV fluctuations from external factors such as stock market trading or FX fluctuations, and not be engaged where there is a cancellation of the debt or other securities received that represents a payment for value. For example, there should not be considered to be a deemed depletion of value if: Shares of a corporation (Holdco) purchased for FMV consideration by the future tax debtor from the non-arm’s length (NAL) seller become worthless as part of the series due to a dividend-in-kind by Holdco to such future tax debtor of all its assets (i.e., shares of Opco); or The tax debtor assigns a note, equaling the FMV of assets sold by it to the NAL purchaser, to that purchaser’s parent, for FMV consideration, followed by a cancellation of that debt on a s. 88(1) wind-up. ...

If the plan of arrangement provides that the shares held by dissenting shareholders are to be acquired by the acquiror in exchange for payment, such indebtedness will constitute specified property since it will be issued by the parent as consideration for the acquisition of the shares of the subsidiary. ... Convertible debt as specified/determinable property (p. 293) Proposed clause 88(1)(c.4)(ii)(B) provides that indebtedness that was issued for consideration that consists solely of money will be specified property. ... However, consideration should be given to whether such debt may constitute determinable property. ...