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Paragraph 110.6(14)(f) provides that shares issued after June 13, 1988 by a corporation to a taxpayer shall be deemed to be owned immediately before their issue by a person who was not related to the taxpayer unless the shares were issued as consideration for other shares or as part of a transaction or series of transactions involving  certain dispositions of property to the corporation. ... Will Revenue Canada comment on whether the "new" shares should be regarded as having been issued as consideration for the "old" shares and, as a result, will not be considered to have been owned by a person not related to the individual taxpayer? DEPARTMENT'S POSITION It is our view that, if shares are considered as a matter of the relevant corporate law to be issued when shares are "changed" in the manner described above, the "new" shares are issued as consideration for other shares for purposes of subparagraph 110.6(14)(f)(i) of the Act.  ...

La considération convenue est un pourcentage des honoraires que l'acheteur percevra de la clientèle ainsi acquise pendant une période de cinq ans. 4. Une considération maximale est fixée. 5. Aucun montant minimal n'est prévu. ... De plus, si ce doit être l'article 14, vous nous demandez de préciser de quelle manière cet article sera appliqué compte tenu qu'au moment de la vente la considération à recevoir par le vendeur n'est pas connue. ...

Question 2 "Will the taxpayer be able to claim a capital gains deduction to the extent that the agreed amount exceeds his adjustment cost base and a taxable capital gain arises, or will s.110(7)(b) deny the capital gains deduction on the basis that the shares of Holdco were, before the exchange, consideration that was significantly less than the fair market value of the property acquired at the time of acquisition?" Response In our view, the provisions of paragraph 110.6(7)(b) of the Act would only apply if the corporation acquired the shares of Opco for consideration which was significantly less than the fair market value of the shares of Opco. Whether the consideration is significantly less than the fair market value is a question of fact, however, in your example we would no consider the difference significant and the provisions of paragraph 110.6(7)(b) of the Act would not be applicable. ...

Question 2 "Will the taxpayer be able to claim a capital gains deduction to the extent that the agreed amount exceeds his adjusted cost base and a taxable capital gain arises, or will s. 110(7)(b) deny the capital gains deduction on the basis that the shares of Holdco were, before the exchange, consideration that was significantly less than the fair market value of the property acquired at the time of acquisition?" Response In our view, the, provisions of paragraph 110.6(7)(b) of the Act would only apply if the corporation acquired the shares of Opco for consideration which was significantly less than the fair market value of the shares of Opco. Wether the consideration is significantly less than the fair market value is a question of fact, however, in your example we would not consider the difference significant and the provisions of paragraph 110.6(7)(b) of the Act would not be applicable. ...

However, in cases where there is no non-share consideration taken back, a single corporate resolution to the effect that the stated capital of each share or fraction thereof taken back on the transfer of a particular property is equal to the agreed amount for the particular property would be sufficient to obtain the desired result. Where there is non-share consideration taken back, allowance for this would have to be made on a property-by-property basis and a corporate resolution passed to the effect that the stated capital of each share or fraction thereof taken back on the transfer of a particular property is equal to the agreed amount for the particular property less the fair market value of the non-share consideration allocated to that particular property. ...

X transfer their shares of Opco to a holding company ("Holdco") receiving consideration consisting of preference shares of Holdco which are redeemable at the option of the holder for an aggregate amount of $460,000 and which have an aggregate paid-up capital of $20.00.-     valid elections are filed pursuant to subsection 85(1) of the Act in respect to these transfers.-     as part of the estate freeze common shares of Holdco are issued to Mr. ... X and their adult children for nominal consideration. You have asked that we confirm that proposed section 183.1 of the Act would not apply to the above hypothetical situation and that it would not apply even if Opco had significant amounts of liquid assets which it pays by way of dividend to Holdco who in turn pays those liquid assets to the individual shareholders of Holdco by way of dividend or deemed dividend. ... As you have noted, under proposed section 183.1 where the consideration for the acquisition of shares exceeds the paid-up capital of those shares immediately before the acquisition a distribution of corporate surplus is deemed to have occurred and therefore unless one of the specific exceptions contained in that section is met a tax may become payable in accordance with that section. ...

The consideration received by the transferor is one preferred share of the transferee having a nominal value which is below the fair market value of the transferred property. ... In each case it could reasonably be regarded that the value of the transferred property in excess of the consideration paid is a benefit that the transferor desired to have conferred on the transferee, a person related to the transferor. ...

There were no agreements, nor were any contemplated between the guarantor and the corporation respecting any consideration in exchange for the guarantee. ... The Department's position as stated in paragraph 3 of IT-239R2 is that a capital loss arising from honouring a guarantee given for inadequate or for no consideration is nil by virtue of subparagraph 40(2)(g)(ii) of the Act. ... The subsequent carrying charges respecting borrowed funds to discharge the loan would also not be deductible as the guarantor did not receive any consideration for the guarantee and therefore the expenditures would not be considered to be for the purpose of producing income. ...

Also, the proposed transactions described in your request involve your company, which is incorporated under the laws of Ontario, issuing shares for consideration consisting of a promissory note. As discussed, subsection 23(3) of the Business Corporations Act (Ontario) (the "OBCA") provides that a share of a company which is governed by the OBCA can not be issued until the consideration for the share is fully paid and, pursuant to subsection 23(6) of the OBCA, a promissory note or other indebtedness is not acceptable consideration for the issue of a share. ...

Where the only shares received as consideration for the transferred property is one preferred share, paragraph 85(1)(g) of the Act provides that the cost of the preferred share shall be deemed to be an amount equal to the lesser of (d) the fair market value of the preferred share after the disposition, and (e) the amount by which the Agreed Amount exceeds the fair market value of the consideration (other than shares or the right to receive shares) received by the transferor. ... Thus, the amount in (e) above would be $800, the amount by which the Agreed Amount of $2,800 exceeds the cash consideration of $2,000. ...