Search - consideration

A share issued under an agreement which provided for (1) the possible termination of the agreement prior to the company actually incurring and renouncing the promised amounts, (2) a cancellation of the issued share, and (3) a return of the shareholder's consideration in respect of the issued share would appear to fall within the ambit of paragraph 6202.I(1)(c) because these provisions impose a contingent obligation to effect an undertaking, i.e. the return of the shareholder's consideration, in order to limit a loss that the shareholder may sustain. In the absence of information that indicates otherwise, our view is that the return of the shareholder's consideration could reasonably be considered to have been given to limit the shareholder's "loss" of the amount of consideration paid for the issued share. ... An economic loss would be sustained in an amount of the consideration paid for the issued share to which is attached an entitlement to certain income tax deductions that would not otherwise exist but for the payment of consideration. ...

The term “consideration” as used in paragraph 110.6(7)(b) of the Act does not mean the agreed amount referred to in subsection 85(1). ... No other consideration was received by the individual in respect of the transfer, and the individual is the sole shareholder of the new corporation. ... In our view, the term “consideration” as used in paragraph 110.6(7)(b) of the Act does not mean the agreed amount referred to in subsection 85(1) of the Act. ...

1 December 1981 Income Tax Severed Letter RCT 85-076 Unedited CRA Tags 85(1) In response to your memo of October 21, 1981, it is our opinion that the reference, in section 18 of Regulation 135 of the Ontario Corporations Act, to "amount paid" is a reference to the value of the consideration given in exchange for the share. ... " In the situation you described, preference shares with a par value of $1 and a redemption amount of $100 were taken back as partial consideration on a transfer of shares to a corporation. The balance of the consideration taken back was cash. The transfer was subject to a late-filed subsection 85(1) election. ...

As noted in subparagraph 3(iii) of Interpretation Bulletin IT-339R, before a plan will be regarded as being in the nature of insurance it must specify an agreed consideration. The consideration must be set (i.e. fixed) and agreed to prior to the occurrence of the event(s) against which the employer has agreed to indemnify the employee with no provision for a rebate to be paid to the employee at the end of the plan year effectively returning the excess of the consideration over the claims amount. Where the agreed consideration is other than services rendered, its quantum should be based on an actuarial or similar computation. ...

Subsection 25(1) of the CBCA provides that shares may be issued at such times and to such persons and for such consideration as the directors may determine. ... There is no provision in the CBCA that would require a corporation to reduce the full amount of any consideration it receives. Section 41 of the CBCA allows the directors to authorize the corporation to pay a reasonable commission as consideration on the issuance of its shares. ...

Accordingly, to the extent that the excess consideration exceeds the paid-up capital of the shares received by the taxpayer on the transfer, such amount will no longer be taxed as a deemed dividend but will be taxed as a shareholder's benefit pursuant to subsection 15(1) of the Act. In our view, the proposed amendments to subsection 85(2.1) of the Act are correctly founded on the assumption that property will be transferred to a corporation by its shareholders for consideration that does not exceed the fair market value of the transferred property. In the case where the consideration received exceeds the fair market value of the property, we do not believe that it is inappropriate that such excess consideration be included in the shareholders income under subsection 15(1) of the Act as an appropriation of corporate property. ...

An investment that you wish to take out of your RRSP (including a mortgage) because it has little or no value, can be sold from the RRSP to anyone (including yourself) for fair market consideration. However, subsection 146(9) of the Income Tax Act states that if an asset is transferred (sold) from an RRSP for consideration that is less than the fair market value of the property at the time of the transfer, or for no consideration, the difference between the fair market value of the property and the consideration, if any, shall be included in computing the income of the annuitant of the RRSP. Therefore, if a property is transferred from your RRSP into your name personally for no consideration, there will be no income tax consequence as long as the fair market value of the property was nil at the time of the transfer. ...

Principal Issues: 1.A shareholder will transfer a life insurance policy to a corporation it controls for consideration equal to the fair market value of the policy. ... The policyholder is a shareholder who controls a corporation and the shareholder wants to transfer the policy to the corporation for consideration equal to the fair market value of the policy. ... Where the shareholder is receiving consideration equal to the fair market value of the policy there would not be a shareholder benefit pursuant to subsection 15(1). ...

The Department does not require that the consideration received on such transfers be less than the fair market value of the property transferred nor do we require a reduction of the paid-up capital of any shares. Where the consideration includes shares of the Purchaser, we are often unable to rule that the provisions of subsection 55(2) of the Income Tax Act will not apply on the redemption of those shares. ... There may also be situations in which we are unable to give a favourable ruling with respect to the application of subsection 181(5) where fair market value consideration is received on a transfer. ...

Woolley (613) 957-2139 XXX Attention: XXX February 17, 1992 Dear Sirs: Re: Gift of Real Property This is in reply to your letter of January 9, 1992 wherein you requested our views on whether a taxpayer who donates real property with a substantial fair market value to a Canadian municipality, and receives consideration of $1, would be considered to have gifted the real property to the municipality if payment of such consideration was merely a legal formality to avoid adverse consequences with respect to land transfer tax. Our Comments It is our opinion as outlined in paragraph 29 of Information Circular IC 80-10R, dated December 17, 1985, that a gift is "a voluntary transfer of property without consideration. ... " Whether receiving nominal consideration disqualifies a transfer from being gratuitous, and accordingly "taints" the gift, is unclear from existing jurisprudence. ...