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Conference- September 1991 Question 48- Dividends and Section 160 Question Under subparagraph 160(1)(e)(i) of the Act, a non-arm's length transferee of property may be liable jointly with the transferor and is limited to the amount by which the value of the transferred property exceeds the value of any consideration given for the property. ... Does Revenue Canada agree that for the purposes of subparagraph 160(1)(e)(i) of the Act (a) the declaration of the dividend does not constitute a transfer of property, and (b) the extinguishment of the corporate debt on payment of the dividend constitutes valuable consideration given for the dividend? ... The purpose of this paragraph to prevent a person with substantial income tax liability from defeating the claims made on him by transferring his property to any non-arm's length party at less than fair market value consideration. ...

Ce même jour, votre client et son épouse ont signé une convention aux termes de laquelle votre client stipule qu'il reconnaît devoir à son épouse la somme de XXXXXXXXXX en considération de la renonciation de cette dernière au partage du patrimoine familial et en guise également de paiement de la prestation compensatoire due, vu la collaboration de l'épouse de votre client à l'exploitation de la ferme. Votre question Vous vous demandez si le Ministère entend appliquer les dispositions du paragraphe 74.1(1) de la Loi de l'impôtsur le revenu (la "Loi") aux paiements faits en acquittement d'une prestation compensatoire ou au paiement fait en considération de la renonciation du conjoint au partage du patrimoine familial. Votre position Vous êtes d'avis qu'un paiement versé en considération de la renonciation au patrimoine familial est sujet aux règles d'attribution et qu'ainsi le revenu découlant d'un tel paiement serait considéré comme un revenu du payeur. ...

Thus, ACo sells the property to BCo at its fair market value of $1,000,000 and the consideration received is: a mortgage of $200,000 assumed, preferred shares $800,000, total: $1,000,000. In addition, on the sale, BCo agrees to assume a $500,000 mortgage in consideration for the issue of a demand note by ACo to BCo for $500,000. ... Can BCo continue to deduct interest on the portion of the $500,000 mortgage which corresponds to the debt assumed in consideration of the demand note by ACo to BCo? ...

In most purchase and sale transactions, the consideration exchanged accurately reflects the sale price. ... Canadian courts have, on several occasions, considered the determination of POD where differences existed between the reported sales price and the value of consideration exchanged. ... MNR, [63 DTC 347] (TAB), aff'd. [66 DTC 5100] (SCC), the appellant sold a hotel to a corporation for consideration consisting of shares and a mortgage. ...

If Parent provides indemnities to the Target shareholders for any representations, warranties, etc. in the form of cash payment to Target shareholders, would this be consideration other than shares of Parent for purposes of subsection 87(4)? ... It looks like the share consideration to be received by a shareholder of a predecessor corporation may be reduced by a repurchase by Parent of shares issued as consideration for shares of a predecessor corporation for $1 and the value of the shares repurchase would correspond to the indemnity claim made by the Parent. ... In this situation, the reduction in value of the shares held by the Target shareholders is made as consideration for the settlement of the indemnity claim. ...

Employment income received by an employee is a valuable consideration for the services he renders under a written or verbal employment contract. Dividend income received by a shareholder is in consideration for the capital he has invested by buying shares of the corporation. ... Accordingly, where all the facts of a particular situation point to the conclusion that the dividend an employee-shareholder receives is in consideration for the services he renders as an employee, this income, in our opinion, would be taxable as employment income pursuant to subsection 6(3) of the Income Tax Act. ...

In relation to this transaction you have pointed out that paragraph 85.1(2)(d) limits the application of section 85.1 by providing that the section will not apply where "consideration other than shares of the particular class of the capital stock of the purchaser was received by the vendor". You have asked whether we would consider the promise to issue additional shares in your particular situation to constitute "consideration other than shares" for purposes of paragraph 85.1(2)(d). In our opinion the promise to issue additional shares, as described above, would constitute "consideration other than shares of the particular class of the capital stock of the purchaser" received by the vendor for the purposes of paragraph 85.1(2)(d) with the result that subsection 85.1(1) would not apply in this situation. ...

Newco purchases the shares of Company A from Company B, electing at adjusted cost base under subsection 85(1) of the Act, and issuing preferred shares as consideration. The fair market value of the preferred share consideration is less than the fair market value of the shares of Company A which are transferred. ... The discrepancy between the fair market value of the property transferred and the consideration (including shares) has resulted in value being transferred to another taxpayer. ...

As you will note, the T2057 election forms forwarded by the District Office in this case detail in the box for "consideration received the assets transferred by the taxpayer. What the taxpayer, in fact, received for the assets transferred to XXX was consideration in the form of an assumption of liabilities, a note receivable, and shares. ... It should also be recognized that the amount of the hard consideration does not exceed the fair market value of the assets transferred as determined by the Revenue Canada appraiser. ...

10 January 1986 Income Tax Severed Letter RCT 5-0227 Unedited CRA Tags 85.1(1), 85.1(2) Dear Sirs: In your letter of December 6, 1985 you requested confirmation of our views on the application of paragraph 85.1(2)(d) of the Act in a takeover bid situation where the purchaser corporation offers to the holders of shares (the "exchanged shares") of the target company consideration such as: $10 each for 50% of a share of the target company owned and 1/3 of a share of the purchaser's capital stock for the remaining 50% of the same single share of the target company held by the vendor. Provided that the vendor can clearly demonstrate which target company shares or portions thereof were sold for cash or other non-share consideration, and which target company shares or portions thereof were sold for consideration that was shares or portions of shares of the purchaser, subsection 85.1(1) may be utilized in respect of the portions of the exchanged shares for which portions of shares were received. ...