Search - consideration

24 January 2019 External T.I. 2018-0773301E5- Paragraph 69(1)(c) and Nominal Consideration-- summary under Paragraph 69(1)(c) Summary Under Tax Topics- Income Tax Act- Section 69- Subsection 69(1)- Paragraph 69(1)(c) a transfer structured as a sales agreement for nominal consideration may qualify as a gift $1 consideration is specified in the legal documentation for a gift of property by a parent to a child solely to ensure the agreement is legally binding. Would s. 69(1)(c) apply, notwithstanding that nominal consideration of $1 would be paid? ... For example, if the agreement governing the transfer provides for consideration of $1 merely to ensure that the agreement is legally binding, the CRA may consider the transfer to be a gift. … If it is determined that the transfer of property was a sale for inadequate consideration rather than a gift, paragraph 69(1)(c) would not apply. ...

13 October 1994 External T.I. 9425475- 7(1.5) APPLICATION WHIT NON SHARE CONSIDERATION-- summary under Subsection 7(1.5) Summary Under Tax Topics- Income Tax Act- Section 7- Subsection 7(1.5) RC intimated that it would be prepared to apply its position that s. 85.1(1) applies to some transfers where non-share consideration also is received, to s. 7(1.5). ...

13 May 2014 External T.I. 2014-0525491E5- Emigration to Poland- Various tax considerations-- summary under Article 18 Summary Under Tax Topics- Treaties- Income Tax Conventions- Article 18 lump sum RRSP commutation not eligible for reduced withholding under Polish Treaty As "pension" was not defined in the Canada-Poland Treaty, s. 5(a) of the Income Tax Conventions Interpretation Act applied, so that all of the RPP, RRSP, OAS, CPP and QPP payments made to the Taxpayer (a former Canadian who became a Polish resident) were to be considered "pensions" for the purposes of the Treaty. ...

Although the cash received for each share tendered was specified in the offer, the fraction of the total consideration that it represented could not be determined until the date of the exchange because the total exchange consideration was dependent upon the average trading price of Foreign Purchaser’s shares immediately before the exchange. Except respecting the treatment of the cash consideration, all the s. 85.1(5) conditions were satisfied. ... CRA quoted S4-F5-C: Subsection 85.1(1) may apply where a vendor receives newly issued shares of the purchaser and non-share consideration for each exchanged share. ...

Although the agreement does not attribute any amount of consideration to the acquisition of the purchase option, pursuant to section 68, the sum of the part of the periodic payment amounts of consideration that can reasonably be considered to relate to the acquisition of the purchase option will be deemed to be the proceeds of disposition of that option to the Lessor and the amount paid to acquire that option by the Lessee. The sum of the other part of the periodic payment amounts of the consideration will therefore relate to the amount paid by the Lessee for the use of the property, which may be considered to be in the nature of rent. Aco will be able to deduct the portion of the periodic amounts of the consideration relating to the use of the property …. ...

11 April 2005 External T.I. 2005-0112321E5 F- Price adjustment clause-- summary under Subsection 51(2) Summary Under Tax Topics- Income Tax Act- Section 51- Subsection 51(2) CRA may accept a price adjustment clause adjusting of share consideration on s. 51 exchange if genuine attempt to establish FMV and issue of intervening share cancellation is addressed An estate freeze entailed the exchange by Mr. A of his common shares of Opco by way of purchase for cancellation for Class A preferred shares with a redemption value of $1 million, followed by a common share subscription by his two adult children for nominal consideration. ... A as consideration, Mr. A and Opco would agree to exchange the those Class A preferred shares for an equal number of Class B preferred shares. ...

(Tax Window, No. 18, p. 2, ¶1831)-- summary under Paragraph 85(1)(b) Summary Under Tax Topics- Income Tax Act- Section 85- Subsection 85(1)- Paragraph 85(1)(b) Where, in connection with the transfer by Opco to its parent, Holdco, of property subject to debt in excess of the property's ACB, Holdco first assumes the excess debt in consideration for a promissory note of Opco, and then Holdco surrenders that promissory note to Opco in consideration for the redemption of preference shares issued by Holdco to Opco on the transfer, s. 85(1)(b) will not apply to alter the agreed amount (being the property's ACB), i.e., the allocation of the assumed debt as consideration for the promissory note of Opco rather than as consideration for the transfer of the property will be respected. ...

The dividend-in-kind of the life insurance policy by a corporation (Aco) to its shareholder is made for no consideration for purposes of s. 148(7)(a)(ii)(B), so that on the dividend-in-kind, the policy is deemed to be disposed of for the greatest of its ACB, CSV and the (nil) consideration received- or $150. However, where a trust transfers the policy to its beneficiary, the beneficiary (Xco) is regarded as giving consideration for the transfer that is all or any part of the beneficiary's income or capital interest in the trust, as applicable. Here, it would be reasonable to consider that such consideration had an FMV of $250. ...

.-- summary under Subsection 5907(2.01) Summary Under Tax Topics- Income Tax Regulations- Regulation 5907- Subsection 5907(2.01) "consideration received" includes assumed liabilities Does "consideration received" in Reg. 5907(2.01)(a) include any liabilities assumed by a foreign affiliate (the "Receiving Affiliate") on a transfer of property to it by another foreign affiliate (the "Disposing Affiliate") of the taxpayer? After citing Daishowa-Marubeni International Ltd. v The Queen, 2013 SCC 29, for the proposition that "'consideration received' by a taxpayer in respect of a particular disposition of assets includes the amount of any liabilities of the taxpayer that are assumed by a purchaser as part of the purchase of the disposed assets," CRA concluded: [T]he assumption by the Receiving FA of liabilities of the Disposing FA on a transfer of property to it, is "consideration received" by the Disposing FA for the property transferred…. ...

A of his common shares of Opco by way of purchase for cancellation for Class A preferred shares with a redemption value of $1 million, followed by a common share subscription by his two adult children for nominal consideration. ... A as consideration, Mr. A and Opco would agree to exchange the those Class A preferred shares for an equal number of Class B preferred shares. After noting that the price adjustment clause was not one described in IT-169 as it addressed adjusting the consideration received rather than the purchase price, and that the clause as described “would not be acceptable because … it did not provide for the necessary measures to settle any difference between the FMV of the consideration in relation to the transferred assets, should the preferred shares be redeemed before the CRA contests the FMV of the preferred shares,” CRA stated: The CRA would generally agree to recognize a clause for adjustment to the consideration and not apply subsection 51(2), where the facts (including the contract) evinced that the parties actually intended to deal in the shares at their FMV and established the FMV of the preferred shares for the purposes of the arrangement, by a fair and reasonable method, and the relevant adjustments provided for in the adjustment clause were effected by the parties where the FMV of the preferred shares was less than the FMV of the common shares. … Where there is a significant discrepancy between the FMV determined by the taxpayer for freeze preferred shares and the actual FMV, it usually demonstrates that the taxpayer had not made a genuine effort to determine the FMV of the shares [citing Guilder News and Wagner, 2001 DTC 5674 (FCA)]. ...