Search - consideration

Release or surrender for no consideration 1.15 A taxpayer who, for no consideration, validly releases or surrenders, in accordance with the terms of the trust and the relevant provincial law, an income interest in a trust in respect of future payments (amounts not due and payable at the time of the release or surrender) and does not in any manner direct who is entitled to receive the benefits, will not be considered to have received any proceeds of disposition for the purposes of subsection 106(2). ...

S4-F5-C1- Share for Share Exchange-- summary under Subsection 85.1(1) Summary Under Tax Topics- Income Tax Act- Section 85.1- Subsection 85.1(1) Subsection 85.1(1) will not apply where: a. the vendor acquires shares of the purchaser in exchange for other shares of the purchaser; b. the vendor acquires shares of the purchaser from a shareholder of the purchaser in exchange for shares of the acquired corporation;... g. subject to ¶1.7, the consideration received by the vendor for the exchanged shares includes shares of more than one class of the capital stock of the purchaser (paragraph 85.1(2)(d)); or h. subject to ¶1.7, the consideration received by the vendor for the exchanged shares includes consideration other than shares of the purchaser (non-share consideration) (paragraph 85.1(2)(d)). ... The vendor must be able to clearly identify which exchanged shares were exchanged in consideration for the newly issued shares of that class of the purchaser and which were exchanged in consideration for shares of another class of the purchaser or for non-share consideration…. receives newly issued shares of the purchaser and non-share consideration for each exchanged share. The purchaser's offer must clearly indicate which fraction of each exchanged share is exchanged in consideration for the newly issued shares of the purchaser and which fraction of each exchanged share is exchanged for non-share consideration…. cannot receive a fractional share but is entitled under an exchange agreement to receive cash or other non-share consideration in lieu of a fraction of a newly issued share of the purchaser. ...

It is generally accepted that a transfer is made by gratuitous title when: the transfer impoverishes the donor to the benefit of the donee and is made without any corresponding consideration; and it is the donor's intention to enrich the donee without receiving any corresponding consideration. ... Therefore, a transfer of property for partial consideration may result in a gift under the civil law. ... Article 1810 of the C.C.Q. also formally recognizes the validity of gifts with partial consideration that are remunerative gifts or gifts with a charge. ...

In such situations, subsection 108(7) provides that the person will be deemed not to have acquired their interest in the trust for consideration provided that all other beneficial interests in the trust that were acquired by way of a transfer, assignment, or other disposition of property to the trust, were acquired by persons related to that person. For example, where a husband and wife contribute property to a trust of which the husband, wife and their children are beneficiaries, their interests are deemed not to have been acquired for consideration. However, if a trust is established by contributions from two or more unrelated persons and those unrelated persons are beneficiaries of the trust, their respective interests in the trust would be considered to have been acquired for consideration. ...

However, if such an option is exercised in a subsequent tax year, subsections 49(3), (3.1) and (4) generally permit the corporation to move the recognition of the consideration for granting the option from the year of the option grant to the year in which the option is exercised. Where a predecessor corporation has granted such an option and that option is exercised following an amalgamation, there is no provision in the Act which allows the consideration for granting the option to be moved from the year of grant (for the predecessor corporation) to the year of exercise (for the new corporation). … ...

S4-F7-C1- Amalgamations of Canadian Corporations-- summary under Subsection 87(4) Summary Under Tax Topics- Income Tax Act- Section 87- Subsection 87(4) fractional share cash/ACB or value shift/implied non-recognition for predecessor shares 1.69 For greater certainty, the rollover under subsection 87(4) is not available to shareholders whose shares of a predecessor corporation are converted into shares of the amalgamated corporation on a non-qualifying amalgamation…. 1.70 The rollover provided for in subsection 87(4) will not be denied solely because a shareholder of a predecessor corporation receives cash or other consideration in lieu of fractional shares of the new corporation. … However, this choice is not available if the total amount or value of any non-share consideration received exceeds $200. 1.72 The allocation of cost described in [s. 87(4)(b)] may cause a shift of adjusted cost base from one class of shares of a predecessor corporation to a different class of shares of the new corporation…. 1.73 However, the CRA will not apply paragraph 87(4)(b) to reallocate the adjusted cost base of the shares of the new corporation if: (a) the amalgamation agreement provides that the preferred and common shares of the predecessor corporation are to be converted into preferred and common shares, respectively, of the new corporation, or (b) for a short-form amalgamation, the issued shares of one of the predecessor corporations become shares of the new corporation under the relevant corporate legislation. … 1.75 In situations where an amalgamation is used to shift all or part of the value of a shareholder's predecessor corporation shares to a person related to the shareholder whose interest in the new corporation will be enhanced by the shift in value, the rollover provided in subsection 87(4) will be denied in respect of that shareholder. ...

Example 4 The following example illustrates a situation in which the CRA may give favourable consideration to a request that the 100% advantage tax be waived. ... Upon learning of the share redemption later that year, Martin immediately swaps the shares out of the TFSA for fair market value consideration. ...

S4-F3-C1- Price Adjustment Clauses-- summary under Subsection 84(1) Summary Under Tax Topics- Income Tax Act- Section 84- Subsection 84(1) additional payment following redemption Where the consideration received on the transfer of property to which a price adjustment clause that meets the conditions listed in ¶1.5 is in the form of shares and the shares are redeemed before the price is adjusted as a result of the application of a price adjustment clause and the corporation subsequently makes an additional payment as a consequence of that adjustment, the additional payment to the shareholders whose shares were redeemed will be included in the shareholder's income in the year of receipt under subsection 84(3) of the Act. ...

Example 8 (freeze common shares to employee) Where at the same time as an estate freeze an employee received common shares of the Freezeco (an arm’s length employer) for nominal consideration and immediately contributed the shares to her TFSA, there would be an advantage equalling the shares’ subsequent appreciation (as well as any dividends received thereon). ...

S3-F4-C1- General Discussion of Capital Cost Allowance-- summary under Section 68 Summary Under Tax Topics- Income Tax Act- Section 68 Categories covered 1.80 … As it pertains to depreciable property, the provisions of section 68 can apply to consideration for: both depreciable and non-depreciable property; depreciable properties included in two or more prescribed classes; or depreciable property and something other than property, such as services, or a restrictive covenant as defined in subsection 56.4(1). ...