Search - consideration

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)]. ...

By virtue of an agreement between the subsidiary and its employees, the subsidiary subsequently transfers the shares to them for no monetary consideration. ... " An issuance of shares has a specific meaning and refers to the delivery of unissued shares by a corporation including the issuance of unissued shares for no monetary consideration. ... …[T]he fact that the employee acquires the shares without monetary consideration is not, in itself, a factor which prevents concluding that the Employer has agreed to issue or sell shares in accordance with section 7. ...

19 January 2017 External T.I. 2015-0576751E5 F- Trust, Disposition of depreciable property, Assumption-- summary under Personal Trust Summary Under Tax Topics- Income Tax Act- Section 248- Subsection 248(1)- Personal Trust non-commital as to whether assumption of debt could constitute tainting consideration CRA indicated that the assumption by the beneficiary of debt of a personal trust owing to a bank would not preclude s. 107(2) applying to the distribution provided that such assumption did not result in the trust ceasing to be a personal trust (having regard to the question, not discussed by CRA, of whether such assumption constituted consideration for the acquisition of a beneficial interest in the trust). On this latter point, CRA stated: Under subsection 248(1), a personal trust is defined, among other things, as a trust in which no beneficial interest was acquired for consideration payable directly or indirectly to the trust or to any person or partnership that has made a contribution to the trust by way of transfer, assignment or other disposition of property. The question of whether the assumption by the beneficiary of the debt of the trust constitutes consideration for the acquisition of a beneficial interest in the trust is a question of fact which cannot be determined until after a review of all the facts and of the relevant documentation. ...

1 March 2002 External T.I. 2002-0118215 F- ACTIONS EMISES GRATUITES AUX EMPLOYES-- summary under Paragraph 7(1)(a) Summary Under Tax Topics- Income Tax Act- Section 7- Subsection 7(1)- Paragraph 7(1)(a) s. 7 rules applicable to shares issued for no consideration to employees Before going on to describe the application of the ss. 7(1.1) and 110(1)(d.1) rules to shares issued for no consideration by a CCPC to employees, CCRA stated: [T]he provisions of section 7 … which deem a benefit to have been received by an employee by reason of employment, are applicable where a corporation has issued shares of its capital stock to its employees for no consideration. ...

In 2010, Parent sold his shares of Parentco to his child for FMV cash consideration (thereby realizing gain at which time the marketable securities were the only assets of Parentco.) The child shortly thereafter transferred the shares of Parentco to a newly incorporated corporation ("Childco") in consideration for a demand promissory note, and wound-up Parentco. ... What if Parent owned the marketable securities, and acquired the shares of Parentco as consideration for the transfer to Parentco of the securities? ...

After noting that under s. 248(3)(a) "the property which is transferred to the son is an interest in a deemed trust," CRA stated (TaxInterpretations translation): By reason of the consideration which the bare owner must pay to the Usufruct Grantor [father], the trust is not a personal trust. Subparagraph (b)(ii) of the definition of personal trust in subsection 248(1) indicates, among other things, that a personal trust is an inter vivos trust in which no beneficial interest was acquired for consideration payable directly or indirectly to any person who has made a contribution to the trust by way of transfer, assignment or other disposition of property. Furthermore, as the bare owner did not transfer, assign or dispose of any property to the deemed trust, we are of the view that paragraph 108(7)(b) cannot apply to deem the beneficial interest of the bare owner to have been acquired for nil consideration. ...

9 January 2004 External T.I. 2003-003742-- summary under Section 96 Summary Under Tax Topics- Income Tax Act- Section 96 validity of holding partnership questioned A farming partnership between a husband and wife transfers its business to a newly-incorporated corporation ("Opco") whose common shares are held by the husband and wife and which issued promissory notes and preferred shares in consideration for the acquired business. Later, the husband and wife transfer their partnership interests in the partnership to a Newco for consideration that includes a note with a principal amount that is in excess of the adjusted cost base of the transferred partnership interest by $500,000 each, and receives redeemable retractable preferred shares for the balance of the consideration. ...

9 January 2004 External T.I. 2003-0037425- Application of Section 84.1-- summary under Subsection 84.1(1) Summary Under Tax Topics- Income Tax Act- Section 84.1- Subsection 84.1(1) A farming partnership between a husband and wife transfers its business to a newly-incorporated corporation ("Opco") whose common shares are held by the husband and wife and which issued promissory notes and preferred shares in consideration for the acquired business. Later, the husband and wife transfer their partnership interests in the partnership to a Newco for consideration that includes a note with a principal amount that is in excess of the adjusted cost base of the transferred partnership interest by $500,000 each, and receives redeemable retractable preferred shares for the balance of the consideration. ...

27 September 2000 External T.I. 2000-0039335- Change in CCRA's position re 85(1)(b)-- summary under Paragraph 85(1)(b) Summary Under Tax Topics- Income Tax Act- Section 85- Subsection 85(1)- Paragraph 85(1)(b) total debt assumed is treated as boot (irrespective of note issuance of transferor) but such assumed debt can be allocated between properties The Agency has now reversed its position on the assumption of excess debt in an s. 85(1) rollover transaction (for example, the purchaser assuming the excess debt in consideration for a note of the vendor) and now treats the total debt assumed as being consideration for the properties initially transferred. The Agency also confirmed its view "that paragraph 85(1)(b) does not apply to increase proceeds if the fair market value of the non-share consideration given (including the assumption of debt by the purchaser) is allocated among several properties transferred to and retained by the purchaser and the amount allocated to each asset is not greater than the amount elected in respect of each asset". ...

17 February 2021 External T.I. 2018-0768051E5 F- Contrat de crédit-bail-- summary under Subsection 49(3) Summary Under Tax Topics- Income Tax Act- Section 49- Subsection 49(3) a portion of the lease payments under a lease with a bargain purchase option recharacterized as consideration for the option Regarding a lease to “Aco” of a truck tractor (the “Vehicle”) with a term of 48 months and a bargain purchase option at maturity, CRA indicated that the bargain purchase option would not cause it to recharacterize the lease as a purchase by the lessee of a depreciable asset under a secured loan. Furthermore, the monthly rental payments should be allocated between deductible rental payments for the use of the vehicle and consideration for the option. ... It stated: To the extent that Aco exercises its purchase option … Aco's cost of the Vehicle pursuant to subsection 49(3) will be the sum … paid in accordance with the exercise price … plus the adjusted cost base of the option, which will be the portion of the consideration paid that is attributable to the acquisition of that option. ...