Search - consideration

2019 Ruling 2019-0793281R3 F- Post-mortem Hybrid Pipeline Unedited CRA Tags 84(2), 84.1, 245(2) Principales Questions: 1) Whether section 84.1 will apply to deem the Estate to have received a dividend upon the disposition of shares to the new company. 2) Whether subsection 84.1 will apply to reduce the PUC on the shares of the new company received as consideration for the disposition of the shares. 3) Whether subsection 84(2) applies to the proposed transactions. 4) Whether subsection 245(2) applies to the proposed transactions. ... Le contrat de vente contiendra une clause de rajustement de prix à l’effet que les parties ont effectué les transferts décrits aux paragraphes 55, 56 et 58 à la JVM et qu’elles ajusteront le prix de vente ainsi que la considération reçue si l’ARC évaluait les biens à une valeur différente convenable aux parties. 61. ...

Answer In order for the so-called 60 day "clawback" rule to apply in the above situation, the following requirements must be adhered to: 1)     the CEE must be incurred by Drillco within 60 days after the end of the calendar year (March 1, 1989); 2)     the CEE must be an expense described in subparagraph 66.1(6)(a)(i), (ii.1) or (iii); 3)     before the end of the 1988 calendar year, a flow-through share agreement providing for the flow-through of CEE was entered into between Drillco and a person, and the person paid the consideration for the flow-through shares in money before that time; 4)     Drillco and the person must deal with each other at arm's length throughout the 60 days; and 5)     Drillco renounces the CEE to the person in accordance with subsection 66(12.6) of the Act within 90 days after the end of the calendar year, i.e. by March 31, 1989. ... However, as this matter is presently under consideration by our Department, we are unable to comment further at this time. ...

Answer In order for the so-called 60 day "clawback" rule to apply in the above situation, the following requirements must be adhered to: 1) the CEE must be incurred by Drillco within 60 days after the end of the calendar year (March 1, 1989); 2) the CEE must be an expense described in subparagraph 66.1(6)(a)(i), (ii.1) or (iii); 3) before the end of the 1988 calendar year, a flow-through share agreement providing for the flow-through of CEE was entered into between Drillco and a person, and the person paid the consideration for the flow-through shares in money before that time; 4) Drillco and the person must deal with each other at arm's length throughout the 60 days; and 5) Drillco renounces the CEE to the person in accordance with subsection 66(12.6) of the Act within 90 days after the end of the calendar year, i.e. by March 31, 1989. ... However, as this matter is presently under consideration by our Department, we are unable to comment further at this time. ...

The trust will enter into a pipeline type transaction by transferring the shares of the capital-stock of the CCPC to a newly created corporation in consideration for shares of the capital stock of the new corporation. ... The newly created corporation will gradually reduce the paid-up capital of the shares of its capital stock held by the trust. 1) Whether section 84.1 applies to reduce the PUC of the shares of the capital stock of the new corporation received by the trust as consideration for the disposition of the shares of the capital stock of the CCPC. 2) Whether subsection 84(2) will apply to the proposed transactions. 3) Whether subsection 245(2) will apply to the proposed transactions. ...