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6 March 2006 External T.I. 2005-0155271E5 F- Disposition d'une participation au capital Unedited CRA Tags 39 107(1) 107(1.1) 108(1) Principales Questions: Est-ce que la somme reçue en considération de la disposition des droits au capital d'un bénéficiaire d'une succession en faveur d'un autre bénéficiaire peut amener des conséquences fiscales? ... Pour régler le litige, vous avez accepté, en retour et en considération du paiement par XXXXXXXXXX d'une somme de XXXXXXXXXX dollars, de céder à XXXXXXXXXX tous vos droits, titres et avantages existant en votre faveur et découlant du testament de XXXXXXXXXX sous réserve de certains biens que vous désiriez recevoir. ...

Consequently, the Taxpayer may transfer it to a taxable Canadian corporation pursuant to subsection 85(1) in exchange for consideration that includes at least one share of the corporation. Generally, where the Taxpayer and the corporation agree upon an amount that does not exceed the fair market value of the property and that is not less than the fair market value of any non-share consideration that is received, the amount agreed upon becomes (subject to certain specific limitations) the Taxpayer’s proceeds of disposition and the corporation’s cost of the property. ...

In our view, the payment so received by the shareholder would be consideration for his or her right to compete. ... Moreover, this case is currently under appeal Finally, we wish to stress to you that under section 68 of the Act the parties must make a reasonable allocation of the consideration among the assets sold. ...

In addition, the definition of flow-through share indicates the corporation must incur qualifying expenses in an amount "not less than" the relevant consideration. ... X pays $100 as sole consideration for the issuance by Corporation A of a flow-through share;- not enter into any other such “agreement in writing”;- incur $125 of “Canadian exploration expense” (“CEE”; within the meaning assigned that term in subsection 66.1(1) of the Act) during the 24 month period commencing February 1, 1999 (being $25 from its own resources and $100 from the above issuance of flow-through shares);- claim $25 of METC but have no other “assistance” [within the meaning assigned that term in subsection 66(15) of the Act] for the purposes of paragraph 66(12.6)(a) of the Act with respect to the $125 of CEE. ...

Furthermore, the band transferred its rights to receive revenue to the trust without consideration. ... The establishment of the Trust was not at all motivated by tax considerations. ...

In our opinion, this will only occur where contributions have been made to the plan by or on behalf of an employer or former employer of an employee in consideration for services rendered by the employee or in some cases, where amounts have been contributed by a government. ... An annuity or other periodical payment made, esp. by a government, a company, or an employer of labour, in consideration of past services. ...

The determination of whether or not an object has become a fixture requires consideration of the degree of annexation and the purpose of annexation. ... In summary, for purposes of both the Income Tax Act and the Convention, as suggested above, the determination of whether or not an object has become a fixture to the land or building requires consideration of the degree of annexation and the purpose of annexation. ...

We have taken into consideration your comments but, after our review of information we received on the XXXXXXXXXX spin-off, we can confirm that the tax consequences for Canadian shareholders are identical to those in other spin-offs we have looked at. ... However, no other remission orders have been granted because the spin-offs under consideration were voluntary, as was the XXXXXXXXXX spin-off described above. ...

The remaining $2 dollars of foreign tax paid by Canco in respect of the profits of LLC would be taken into consideration for the purposes of computing any future deduction under 113(1)(c) when dividends are again distributed to Canco out of the taxable surplus by LLC. ... More complex structures involving tiers of foreign affiliates, would have to be assessed on their own merits.As a final comment, we note that since LLC is not a controlled foreign affiliate of Canco, in the above circumstances consideration should be given to whether Canco would be subject to the provisions of section 94.1 of the Act as a consequence of holding an interest in LLC. ...

In our view, the payment so received by the shareholder would be consideration for his or her right to compete. ... Moreover, this case is currently under appeal Finally, we wish to stress to you that under section 68 of the Act the parties must make a reasonable allocation of the consideration among the assets sold. ...